Select Comfort Net Dives 41.5 Percent in Q2

MINNEAPOLIS-Rising expenses and tepid sales combined to sink Select Comfort’s bottom line in its fiscal second quarter, ending on June 29.

Net income dropped 41.5 percent to $9.9 million. The ramp-up in costs led to a gain of 8.9 percent in selling, marketing, general and administrative expenses in dollars, and an increase of 440 basis points as a percentage of sales. In addition, gross margin was down 70 basis points to 63.4 percent.

In a conference call to financial analysts yesterday, Wendy Schoppert, Select Comfort’s executive vice president and chief financial officer, explained that the expense increases stemmed from the company’s investments in product innovation, infrastructure and media spend. Gross margin fell because of a higher level of lower-margin mattress sales, including a special-edition product offering of lower margin mattresses during Memorial Day.

Net sales edged up 1 percent to $207.4 million, in what Schoppert said is Select Comfort’s seasonally slowest quarter. This included a 6 percent falloff in sales at company-controlled sales channels.

On the conference call, Shelly Ibach, president and CEO, said the second quarter produced “important progress” in Select Comfort’s effort to position itself for future growth. “With our media formula back on track, the introduction of meaningful new products and local market development advancements, we are increasing our media spend in the back half to build continued awareness for Sleep Number (the company’s signature mattress brand) and to support our planned growth,” Ibach said.