Stock Story -
What Happened: Shares of bedding manufacturer and retailer Sleep Number (NASDAQ:SNBR) jumped 41.1% in the morning session after the company reported fourth-quarter results that exceeded analysts' revenue expectations. That likely relieved investors as the mattress industry remained in a downturn. Although Sleep Number missed analysts' EPS estimates from a GAAP perspective, its adjusted EPS beat by a wide margin (loss of $0.58 per share vs estimates of a $0.88 per share loss). The adjustment added back $16 million of restructuring costs the company recorded during the quarter, which was related to the planned cost-cutting initiatives management is executing; in 2024, the company expects to save $40-45 million in operating expenses.
Looking ahead, management expects the industry to remain pressured but shared free cash flow guidance that significantly beat Wall Street's estimates ($70 million vs estimates of $48 million).
Overall, this was a mixed quarter for Sleep Number, but its free cash flow guidance was impressive.
Is now the time to buy Sleep Number? Find out by reading the original article on StockStory.
What is the market telling us: Sleep Number's shares are very volatile and over the last year have had 59 moves greater than 5%. But moves this big are very rare even for Sleep Number and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 41.9% on the news that the company reported third-quarter results with revenue and EPS missing Wall Street's estimates, and it lowered its full-year guidance significantly for both metrics. Same-store sales also missed, and free cash flow turned negative. Management cited a downturn in demand for mattresses during the quarter, consistent with commentary we've heard from the broader consumer durables sector. As a reminder, bedding sales are highly correlated to home sales (you get a new bed when you move), and with high interest rates, the housing market has ground to a halt compared to years past. To adapt to the changing economic environment, Sleep Number initiated cost reductions that are expected to reduce 2024 operating expenses by approximately $50 million. This includes a reduction in workforce by around 10% or approximately 500 team members. Overall, this was a bad quarter for Sleep Number.
Sleep Number is up 1.8% since the beginning of the year, but at $14.50 per share it is still trading 63.6% below its 52-week high of $39.86 from February 2023. Investors who bought $1,000 worth of Sleep Number's shares 5 years ago would now be looking at an investment worth $332.03.
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