Buoyed by constant focus on product innovation,
Select Comfort Corp.
) posted second-quarter 2014 earnings of 16 cents per share, which
came ahead of the Zacks Consensus Estimate of 14 cents. However,
earnings declined 11.1% year over year.
Select Comfort Corporation - Quarterly EPS
(BNRI) | FindTheBest
Quarter in Detail
Investors seemed bullish on the company exceeding expectations as
the shares jumped 10.4% in the post-market trading session.
Net sales advanced 13.2% year over year to $234.8 million, cruising
ahead of the Zacks Consensus Estimate of $224.0 million. Moreover,
comparable-store sales in the quarter ascended 7% on a
The company's results mainly benefitted from its strategy
concentrated on product innovations. Select Comfort gained majorly
from the favorable response of customers to its latest SleepIQ
Driven by robust sales, the company's gross profit climbed 8.4% to
$142.4 million. However, Select Comfort's gross profit margin
contracted 270 basis points (bps) to 60.7%, as it was adversely
affected by greater-than-expected demand leading to supply chain
Total operational expenses rose 11.5% to $275.3 million in the
quarter, mainly due to increase in sales and marketing costs as
well as general and administrative expenses. This led Select
Comfort's operating income to plunge 23.5% to $38.5 million with
the operating margin contracting 330 bps to 7.5%.
Balance Sheet and Cash Flow
Select Comfort, which competes with
Leggett & Platt, Inc.
Hooker Furniture Corp.
) ended the quarter with cash, cash equivalents and marketable-debt
securities of $120.8 million, inventories of $43.2 million and
total shareholders' equity standing at nearly $233.0 million. At
the quarter end, the company had no loans under its revolving
During the second quarter of 2014, Select Comfort generated $49.6
million in cash from operations. Additionally, capital expenditures
during the first half of 2014 increased to $40.0 million as against
$37.0 million recorded last year. The rise was due to increased
investment in stores, technology and product innovation.
Further, during the quarter, the company bought back 0.5 million of
shares for about $10 million.
Select Comfort opened 16 stores, relocated 16 outlets and shuttered
8 outlets during the second quarter, taking the total store count
to 451 by the end of the quarter.
Going forward, the company plans to introduce 20-30 net new outlets
and take its store count to 460-470 by the end of 2014.
Following the second quarter and considering sustained
technological investments coupled with a sluggish macroeconomic
recovery, Select Comfort reiterated its outlook for 2014. The
company continues to expect earnings for the year to be $1.07 per
share. The Zacks Consensus Estimate for full-year 2014 currently
stands at $1.08 per share.
The company anticipates margins to remain affected by unfavorable
product mix for the back half of the year. However, with the
expectation of some relief from improved volumes and efficiency,
the company projects gross margin near 62% in the second half of
Furthermore, Select Comfort still intends to make a capital
expenditure of $70-$80 million in 2014, allocated towards market
development, further innovations and infrastructure enhancements.
Overall, management aims to maintain its focus on undertaking
growth initiatives in order to drive customer value, which in turn
will facilitate the company to boost shareholder returns.
Other Stocks to Consider
Currently, Select Comfort carries a Zacks Rank #3 (Hold). Another
stock worth investment is
Virco Mfg. Corporation
), which has a Zacks Rank #2 (Buy).
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