Sleep Number’s first quarter saw lower-than-expected sales and profits, but the market responded positively as management outlined a sweeping set of structural changes. CEO Linda Findley, newly appointed, attributed the sales decline to weak consumer demand and acknowledged that the company had “got ahead of ourselves and the consumer” by focusing too far into future innovation. Gross margin improved due to operational efficiencies and a favorable product mix, particularly with the Climate Series beds. Management emphasized that immediate cost reduction and a shift toward efficiency in marketing and organizational structure were already underway.
Is now the time to buy SNBR? Find out in our full research report (it’s free).
Sleep Number (SNBR) Q1 CY2025 Highlights:
- Revenue: $393.3 million vs analyst estimates of $398 million (16.4% year-on-year decline, 1.2% miss)
- Adjusted EBITDA: $22.04 million vs analyst estimates of $31.7 million (5.6% margin, 30.5% miss)
- Operating Margin: 0.5%, in line with the same quarter last year
- Locations: 637 at quarter end, down from 661 in the same quarter last year
- Same-Store Sales fell 1% year on year (0% in the same quarter last year)
- Market Capitalization: $157.9 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Sleep Number’s Q1 Earnings Call
- Alessandra Jimenez (Raymond James) asked about the most immediate opportunities for improvement. CEO Linda Findley highlighted marketing efficiency, organizational restructuring, and refocusing R&D as key areas, aiming for lower costs and faster decision-making.
- Dan Silverstein (UBS) inquired about plans to strengthen brand messaging and partnerships. Findley discussed moving toward benefit-focused marketing and evaluating all partnerships, emphasizing Sleep Number’s unique data from its large user base.
- Dan Silverstein (UBS) also asked if wholesale distribution or other new growth levers are under consideration. Findley responded that “everything is on the table” as part of the strategy reset.
- Peter Keith (Piper Sandler) pressed for specifics on how the company lost focus on its core value proposition. Findley cited a drift toward futuristic innovation at the expense of clearly communicating core product benefits to customers.
- Bradley Thomas (KeyBanc Capital Markets) asked about the risks of reducing advertising and the potential impact on sales. Findley noted a pivot toward efficiency and digital channels to counterbalance lower spend, and stressed leveraging digital properties for improved return on marketing investment.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will watch (1) the pace and effectiveness of cost reductions and organizational changes, (2) the success of new marketing strategies in driving customer engagement and sales, and (3) management’s ability to offset tariff-related margin pressures. Additionally, progress in recalibrating the product portfolio and any moves toward new distribution or partnership models will be important signals.
Sleep Number currently trades at $6.97, down from $7.79 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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