Sleep Number Stock Tanks. Its Earnings Were a Nightmare.

“We estimate that industry demand was down double digits in the quarter,” Ibach said, adding that overall industry mattress sales are down nearly 20% from prepandemic levels. On a 12-month trailing basis, mattress unit sales are under 25 million units, the lowest level since 2015, the CEO noted.

Sleep Number
stock plummeted 27% to $11.77 at 12:25 p.m. Wednesday, and were on pace for their lowest close since March 2011, according to Dow Jones Market Data. The stock has now fallen 54% this year.

Such lackluster demand was evident in the company’s third-quarter results. After Tuesday’s market close, Sleep Number reported a surprise loss of 10 cents a share, when analysts surveyed by FactSet were expecting earnings of 6 cents a share for the period. In the same quarter last year, Sleep Number earned 22 cents a share.

Sales fell 13% year over year to $473 million, missing analysts’ estimates of $497.1 million.

Ibach said on the call that customers’ purchasing power has reached its lowest level on record. The results reflect a challenging macroeconomic backdrop for consumers: Inflation remains historically hot, interest rates are elevated, and unemployment is ticking up.

Piper Sandler analyst Peter Keith lowered his price target on Sleep Number stock to $12 from $32, while maintaining his Hold rating on Tuesday. Keith says industry growth can return by 2025 which could help the company, but “SNBR actions – such as closing stores – will limit sales growth potential over the coming years.”

Management said Tuesday that it is planning to close between 40 and 50 stores by the end of 2024 to cut costs, and that it is implementing head count reductions across the entire business.

The company also cut its fiscal 2023 earnings outlook to a loss of 70 cents per share, after previously guiding for earnings between $1.25 and $1.75 a share.

Write to Angela Palumbo at [email protected]