Select Comfort Corp
) first-quarter 2014 earnings of 31 cents per share came in line
with the Zacks Consensus Estimate, but declined 24.4% year over
year. Investors' seemed bullish with the company meeting the
expectations as the shares rose 3.3% in the post-market trading
session. Today's trading will give a better sense about
investors' acceptance of the results.
The year-over-year decline was primarily due to unfavorable
weather and challenging macroeconomic environment. However,
management continues to focus on its three growth strategies
namely product innovation, marketing effectiveness and local
market development to drive its momentum.
Quarter in Detail
Net sales rose 7% year over year to $276.4 million, ahead of the
Zacks Consensus Estimate of $275 million, primarily driven by
product innovation and pricing action. Comparable-store sales in
the quarter rose 2%.
Gross profit came in at $171.3 million up 4.9% from the year-ago
period. However, Select Comfort's gross profit margin contracted
130 basis points (bps) to 62.0%, primarily due to comparatively
generous return policies.
Total operational expenses rose 13.6% to $145.6 million in the
quarter, mainly due to increase in sales and marketing costs as
well as general and administrative expenses.
Select Comfort's operating income decreased 25.9% from the
prior-year period to $25.8 million, while operating margin as a
percentage of net sales contracted 420 bps to 9.3%.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter was $34.7 million,
decreasing 17.6% year over year, while adjusted EBITDA margin as
a percentage of net sales fell 380 bps to 12.6%.
Balance Sheet and Cash Flow
Select Comfort, which competes with
Leggett & Platt, Inc.
Hooker Furniture Corp.
) ended the year with cash, cash equivalents and marketable-debt
securities of $60.4 million. During the first quarter of 2014,
Select Comfort generated $38.9 million in cash from operations.
Capital expenditures for the period were $16.7 million as against
$14.3 million recorded in the first quarter of 2013. The rise was
due to increased investment in stores, technology and product
innovation. During the quarter, the company bought back 0.6
million of shares for about $10 million.
Select Comfort opened 17 stores while shuttering 14 outlets
during the first quarter. As of Mar 29, 2014, the company had 443
Select Comfort reiterated its outlook for 2014. Anticipating
revenue growth in the range of mid-to-high single-digits range
and 20-30 additional net new stores by the end of 2014, the
company expects earnings for the year to be at par with 2013
adjusted earnings of $1.07 per share. The Zacks Consensus
Estimate for the full year 2014 stands at $1.07 per share.
Furthermore, Select Comfort intends to make a capital expenditure
of $70-$80 million in 2014 toward opening stores, relocating and
remodeling outlets and enhancing information technology.
Other Stocks to Consider
Currently, Select Comfort carries a Zacks Rank #3 (Hold). Another
stock worth investment is
Norcraft Companies, Inc.
), which has a Zacks Rank #2 (Buy).
HOOKER FURNITUR (HOFT): Free Stock Analysis
LEGGETT & PLATT (LEG): Free Stock Analysis
NORCRAFT COS (NCFT): Free Stock Analysis
SELECT COMFORT (SCSS): Free Stock Analysis
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