Select Comfort sales rise 5.6% in fourth quarter, but earnings fall 30%

MINNEAPOLIS — Despite a difficult fourth quarter that saw comparable-store sales from

its company-owned stores fall 9%, airbed specialist Select Comfort recorded sales and earnings increases for 2016.
The company said last year’s sales totaled $806 million, up 16.9% from 2016. Net income, meanwhile, was 7.8% above 2016 at $47.2 million or 85 cents per share.
Fourth-quarter sales were up 5.6% from the same period in 2016, as sales from stores open less than a year more than offset the comparable-store sales drop. The company ended 2016 with 442 stores, compared with 396 at the end of 2016.
Fourth-quarter net income declined more than 30% from a year earlier, largely due to increased research and development expenses and a one-time charge of $4.2 million for a new computer system.
During a conference call with securities analysts, Chairman and CEO Bill McLaughlin said Select Comfort will debut a new national advertising campaign in April, and is pursuing quality control and cost-cutting initiatives.
The ad campaign will move away from the emotional appeals of the past and focus on explaining how its Sleep Number bed works and why it delivers a good night’s sleep, he said.
McLaughlin said the company was not satisfied with its incremental growth in existing markets last year. As a result, it will put more emphasis on its company-owned stores this year while slowing the expansion of its product placements in traditional furniture and bedding stores.
He said those moves include pulling the Sleep Number bed out of some 140 Sleepy’s stores in the New York area and aggressively expanding its own store network in that market.
“We’re not seeing as much incremental growth in that market as we think there can be,” he told analysts.
McLaughlin said 2017 sales should total $900 million to $925 million. He projected earnings per share at $1.02 to $1.09.
The company expects to open about 40 stores in 2017 and relocate or expand an additional 30 units.