Select Comfort's 4Q and forecast disappoints

Select Comfort shares sink after hours on weak earnings and outlook

Associated Press

MINNEAPOLIS (AP) -- Select Comfort Corp.'s shares sank in after-hours trading Thursday after fourth-quarter results missed Wall Street forecasts and the company issued a disappointing full-year outlook.

Mattress makers overall have been struggling with intense competition as they battle to get consumers to make big-ticket purchases.

Select Comfort, based in Minneapolis, makes specialty mattresses such as Sleep Number. It said that it suffered a significant slowdown in sales during the last two weeks of its fiscal fourth quarter, but sales trends have since improved. It also felt the impact of increased investments in marketing and testing products during the fourth quarter.

Net income fell to $12.5 million, or 22 cents per share, for the period ended Dec. 29. That compares with $15.4 million, or 27 cents per share, in the same quarter last year. The prior year's quarter included a 3 cent-per-share expense tied to resolution of tax matters.

Select Comfort's total revenue increased 17 percent to $220.6 million. Sales from stores open at least a year, considered a key indicator of retail performance because it strips away the impact of recently opened or closed stores, increased by 11 percent.

Analysts polled by FactSet expected the company to earn 32 cents per share on revenue of $229.8 million.

Select Comfort expects to earn between $1.65 and $1.80 in fiscal 2013 fiscal. Analysts forecast $1.89 per share.

The company said its outlook is based on sales at its established stores increasing at least 10 percent and the addition of 25 to 35 new stores.

Select Comfort also announced Thursday that it has bought privately held mattress maker Comfortaire from Park Place Corp. for $15.5 million. Comfortaire, based in Greenville, S.C., makes adjustable air-supported sleep systems and generated revenue of $10.5 million last year.

Select Comfort expects to spend $70 million to $80 million on capital projects in 2013, including new, relocated and remodeled stores. It also plans to continue to buy back shares during the year.

The company also committed $4.5 million for a minority equity investment in one of its strategic product-development partners, saying it complements its current research and design efforts. The investment is associated with products it expects to launch during the next two months.

Select Comfort's shares sank $5.21, or 18.5 percent, to $22.99 in after-hours trading.

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