Select Comfort Corporation (SCSS)

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Select Comfort (SCSS)

Q4 2011 Earnings Call

February 08, 2012 5:00 pm ET


Mark A. Kimball - Chief Administrative Officer, Senior Vice President of Legal, Secretary and General Counsel

William R. McLaughlin - Chief Executive Officer, President and Executive Director

Shelly R. Ibach - Chief Operating Officer

Wendy L. Schoppert - Chief Financial Officer


Budd Bugatch - Raymond James & Associates, Inc., Research Division

Leah Villalobos - Longbow Research LLC

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Peter J. Keith - Piper Jaffray Companies, Research Division

Todd A. Schwartzman - Sidoti & Company, LLC

Eric Hollowaty - Stephens Inc., Research Division

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Joan L. Bogucki-Storms - Wedbush Securities Inc., Research Division



Welcome to the Comfort's Fourth Quarter and Full Year of 2011 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. [Operator Instructions] I would like to introduce Mr. Mark Kimball, General Counsel. Sir, you may begin.

Mark A. Kimball

Thank you, Tamara. Good afternoon, and welcome to the Select Comfort Corporation Fourth Quarter and Full Year 2011 Earnings Conference Call. Thank you for joining us. I'm Mark Kimball, Senior Vice President and General Counsel. With me on the call today are Bill McLaughlin, our President and Chief Executive Officer; as well as Shelly Ibach, Executive Vice President and Chief Operating Officer; and Wendy Schoppert, Executive Vice President and Chief Financial Officer.

This telephone conference is being recorded and will be available on our website at Please refer to the details set forth in our news release to access the replay on our website. Please also refer to our news release for a reconciliation of certain non-GAAP financial measures included in the news release or that may be discussed on this call. The primary purpose of this call is to discuss the results of the fiscal period just ended; however, our commentary and responses to your questions may include certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties outlined in our earnings news release and discussed in some detail in our annual report on Form 10-K and other periodic filings with the SEC. The company's actual future results may vary materially.

I will now turn the call over to Bill for his comments.

William R. McLaughlin

Thanks, Mark. And to those on the call, thank you for joining us to learn more about Select Comfort and the SLEEP NUMBER brand. There is always a lot of ground to cover in a year-end earnings call, performance during the past quarter, full year insights and outlook for the current year. The key takeaway from the information that we'll provide today is that Select Comfort and the SLEEP NUMBER brand are confidently entering a new chapter of sustained profitable growth. We'll divide today's call into 3 parts. I'll cover our strategic opportunity; Shelly Ibach will review key initiatives that are driving and sustaining growth; and Wendy Schoppert will follow with more in-depth financial insight. We then look forward to your questions and comments.

Before I start, let me extend my congratulations to the SLEEP NUMBER team and our partners for an outstanding close to last year. Let me provide some perspective on what this team has accomplished.

Fourth quarter comp sales growth was the strongest of the year and our highest since fourth quarter of 2003. Our rate of sales growth in the quarter outpaced our key competitors, both manufacturers and retailers. Fourth quarter capped the year of record profit, both in dollars and operating profit margin. And after funding a significant step-up in CapEx, our cash balance exceeded our goal and we remain debt-free.

Beyond the financials, 2011 programs and performance give us confidence to increase targeted investments in our unique products, brand and business model to sustain profitable growth and leadership. Over the next few years, we will remain focused on our core business providing the best individualized sleep solutions to our target consumers in the United States. We are focused on at least doubling our share to 10% to 15% of the $12 billion mattress industry, targeting approximately $1.5 billion in revenue by 2015 and increasing profit margin to at least 15%.

Our focus is on organic growth, providing unmatched individualized customer experiences through our company-controlled channels and partners. We are encouraged by consumer-led changes within the sleep industry that favor our unique products and business model. Consumers are responding to the idea of better sleep through better mattresses. In just 10 years, the non-innerspring mattress segment has increased from a 5% share to nearly a 30% share of the industry and this growth does not appear to be slowing.

SLEEP NUMBER's 3-part formula for sustained growth is unique to our opportunity. It includes awareness, increasing brand and store awareness among our target consumer base. Distribution, accelerating local market development and expanding availability, convenience and quality of experience. End product, advancing individualize comfort in the sleep surface, foundations and the company bedding. Our focus has been on optimizing the integration of these 3 elements, both on a national and local basis. The past year has involved deliberate testing, learning and then applying of programs to profitably accelerate growth. And the consistency of our performance over the past 2 years demonstrates this learning and is the source of confidence going forward.

The opportunity to accelerate investment behind proven growth drivers coincides with our financial readiness. Increasing operating profit margin both accelerates earnings growth and increases operating flexibility over time. And a strong balance sheet also enables accelerated investment, as well as the flexibility to take advantage of opportunities in a wide range of economic conditions.

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