Demand for Select Comfort's new smart bed technology exceeded the company's internal goals, but an inventory shortage meant the company didn't meet analysts' sales expectations for the second quarter.
"We are pleased with traffic and sales in the second quarter, including strong demand for our revolutionary new innovation, the Sleep Number 360 smart bed," Shelly Ibach, president and chief executive of Select Comfort, said Monday in a statement. "As we worked through an inventory shortage from one of our new suppliers during the quarter, about a week's worth of deliveries shifted into the third quarter."
The inventory issue has been resolved, and the company should have no problem fulfilling demand for the rest of the year, Ibach said during an analysts' conference call after second-quarter earnings were released.
The company had sales of $285 million for the quarter ended July 1, a 3 percent increase over the same period in 2016. Analysts expected sales for the quarter to exceed $300 million. The company said revenue would have been about $25 million more if the inventory shortage had not occurred.
Sales for the first half of the year were $678.6 million, a 7.7 percent increase over the first half of 2016.
The company lost $778,000, or 2 cents a share, in the second quarter, compared with a $1.4 million gain, or 3 cents per share, in the second quarter of 2016.
Analysts were expecting a 5-cent-per-share gain in the quarter. The company estimated the quarter included a 12-cent-per-share negative impact due to the orders that shifted to the third quarter.
Despite the inventory trouble, the company is expecting that its earnings per share for the year will remain in the $1.25 to $1.50 range.
After debuting the Sleep Number 360 Smart Bed in January at CES, the giant consumer electronics and technology trade show, the company began a phased rollout of the new bed in the second quarter by introducing two new models. More models will be released in the next three quarters.
The company also launched a new marketing campaign for its new products in June.
The bed has been getting good reviews, and Ibach said Sleep Number had a record sales conversion rate in the second quarter indicating consumer enthusiasm for the new technology.
The Plymouth-based company is busy prepping for a move to new headquarters in downtown Minneapolis this fall and announced in June that it would formally change its corporate name to Sleep Number Corp.
Shares of Plymouth-based Select Comfort were volatile in the second quarter. Shares spiked when the company announced stronger than expected first-quarter results in April and spiked again on rumors of a shake-up in the mattress industry in June.
Shares closed Monday at $31.81 per share, but earnings were announced after the market closed. Year-to-date shares are up 40.6 percent after peaking at $36.74 after the takeover rumors at the end of June.
Patrick Kennedy • 612-673-7926
