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Sleep Number (SNBR) Reports Narrower-Than-Expected Q2 Loss

Sleep Number Corporation SNBR reported impressive results for second-quarter fiscal 2020 (ended Jun 27, 2020), wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Following the earnings release, the company’s shares grew 3.7% on Jul 15.

It did not provide its fiscal 2020 guidance due to coronavirus-led uncertainty but informed that more than 95% of its 600 stores are open now.

Quarter in Details

The company reported loss of 45 cents per share, narrower than the consensus estimate of a loss of 60 cents by 25%. It recorded earnings of 14 cents per share in the year-ago quarter. The year-over-year deterioration was due to COVID-19 impacts.

Sleep Number Corporation Price, Consensus and EPS Surprise

Sleep Number Corporation Price, Consensus and EPS Surprise

Sleep Number Corporation price-consensus-eps-surprise-chart | Sleep Number Corporation Quote

Net trade sales totaled $285 million, which topped the consensus mark of $255 million by 11.7% but decreased 20% from the prior-year level. The downside was mainly due to coronavirus-led shutdown. In April, only 23% of the total stores were operating, followed by 47% in May and 81% in June.

Retail accounted for 72.2% of total net sales, while Online and phone, and Wholesale/other contributed 27.5% and 0.3%, respectively.

Gross margin during the quarter contracted 380 basis points (bps) due to product mix changes and sales deleverage as a result of the COVID-19 pandemic. Operating expenses, as a percentage of net sales, increased 250 bps year over year.

Adjusted EBITDA declined 68.4% year over year to $8.5 million.

Financials

As of Jun 27, 2020, the company had $1.65 million cash and cash equivalents compared with 1.59 million on Dec 28, 2019. Cash and liquidity available under the credit facility at the end of the reported quarter was $295 million.

Net cash provided by operating activities was $87 million in the past six months, up 24% from $70.3 million in the comparable year-ago period. Free cash flow totaled negative $9.3 million compared with negative $11.9 million.

Long-term debt was $227.9 million, down from $282.3 million at the end of the year-ago quarter. Return on invested capital (ROIC) came in at 17.2%, up from 16.8% on Jun 29.

Stores at second quarter-end were 598 compared with 594 in the prior year.

Zacks Rank

Sleep Number — which shares space with Masonite International Corporation DOOR, American Woodmark Corporation AMWD and WillScot Corporation WSC in the Furniture industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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