Lower sales and increased promotional expenses took a toll on
Select Comfort Corporation
) first-quarter fiscal 2013 results. The mattress retailer posted
adjusted quarterly earnings of 41 cents a share that missed the
Zacks Consensus Estimate by a penny and decreased 9% year over
year. Including one time items, earnings came in at 42 cents
compared with 39 cents earned in the year-ago quarter.
Net sales for this Zacks Rank #5 (Strong Sell) stock waned 2%
year over year to $258 million and came well below the Zacks
Consensus Estimate of $291 million. Moreover, comparable store
sales plunged 9% year over year at company-controlled stores.
Change in its advertising strategy backfired for the company,
leading to reduced traffic and in turn lower sales.
Gross profit inched down 0.5% to $163.4 million, while gross
margin expanded 70 basis points to 63.3%. The improvement was
attributable to contraction in cost of goods sold as a percentage
Select Comfort's adjusted operating income decreased 12.7%
year over year to $34.8 million, whereas the company's adjusted
operating margin decreased 170 basis points to 13.5%, reflecting
rise in sales and marketing expenses coupled with an increase in
research and development costs.
Select Comfort ended the quarter with cash and cash
equivalents of $84.8 million and generated cash flow from
operating activities of $45 million. Moreover, the company
incurred capital expenditures of $14.3 million during the first
quarter and repurchased $10 million worth of shares. The company
had no borrowings under its revolving credit facility.
During the quarter, the company opened 10 stores and closed 9,
bringing the total store count to 411.
Following sluggish results, Select Comfort trimmed its fiscal
2013 outlook. The company now forecasts GAAP earnings per share
to be in the range of $1.30 - $1.45, down from the previous
guidance range of $1.65-$1.80. It expects company-controlled
comparable store sales to increase in the low to mid single
Moreover, the company is anticipating capital expenditure in
the range of $70.0 million - $80.0 million, mainly for new store
openings, renovations and remodels along with improvement in IT
systems. Further, Select Comfort is likely to continue with its
share repurchase activity.
Other Stocks to Consider
Until any further upward revision in Select Comfort's rating,
other stocks in the home furnishings & fixtures industry
worth considering include
American Woodmark Corp
Tempur-Pedic International Inc
), all carrying a favorable Zacks Rank #1 (Strong Buy).
AMER WOODMARK (AMWD): Free Stock Analysis
LA-Z-BOY INC (LZB): Free Stock Analysis
SELECT COMFORT (SCSS): Free Stock Analysis
TEMPUR-PEDIC (TPX): Free Stock Analysis
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