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Sleep Number (SNBR)

Participants
David Schwantes Vice President of Finance and Investor Relations
Shelly Ibach President and Chief Executive Officer
David Callen Senior Vice President and Chief Financial Officer
John Baugh Stifel
Peter Keith Piper Jaffray
Budd Bugatch Raymond James
Brad Thomas KeyBanc
Seth Basham Wedbush
Keith Hughes SunTrust
Curtis Nagle Bank of America
Jim Larkins Wasatch
Call transcript
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Operator

Welcome to Select Comfort’s Q3 2017 Earnings Conference Call. All lines have been placed in a listen-only mode until the question-and-answer session of today’s conference. Today’s call is being recorded. If anyone has any objection, you may disconnect at this time. I would now like to introduce Mr. of Investor President Vice Schwantes, Finance Relations. and David you. Thank

You may begin.

David Schwantes

be that I recorded welcome sleepnumber.com. Good President Thank telephone discuss Comfort us. me just Vice release today to non-GAAP Please President Relations. call. Corporation’s this Vice release Ibach, Please CEO; and the and and period to of our supplemental you ended. website news Dave at to is available Finance refer to President conference purpose third may joining are primary call. certain call Select the fiscal Senior The With or is on included news measures conference financial and This the details results also be this afternoon to in our David and Investor news information our Schwantes, discussed for will CFO. earnings quarter for our the of being the financial replay. on access reconciliation our Shelly am of and XXXX Callen, of and a the in refer release

However, forward-looking our Shelly our to and are on detail in responses commentary number will may comments. outlined a statements uncertainties risks I her materially. periodic some filings of call in now and Company’s subject earnings and forward-looking statements. news for your XX-K include results in turn Report our vary to questions may with certain over actual Annual and other release Form the future These discussed SEC. the The to

Shelly Ibach

SleepIQ was score thank you for night Good our XX. joining today. and afternoon My call everyone last

generation. investments made in our reach a competitive strengthen strategy dynamic to flow and innovation continues resulting traction advantages consumer to and retail environment. growth are cash in The we’ve strong Our expand profitable brand our gain

our to we’ve is world’s will ticker sleep of appropriate November also change SCSS this At time from we effective by NASDAQ vision the Number Sleep SNBR. becoming beloved towards With name our most an unparalleled to our experiences. corporate years Corporation past to the It change of Xst. few made time, brands progress one symbol that delivering

$XXX weekend, to week reported growth quarter exception performance quarter reflects million with our The including sales Our and the Day consistent Day Labor net each Harvey the week weekend. in which the and third the hurricane, About directly surrounding throughout hurricane before after of steady by store were of Irma. portfolio Labor our Florida, by impacted the Texas affected stores states. including and XX% was

the million affected distraction or Traffic We two in the these country that to this resulted in stores plan on also after now estimate million are and during all consumer $XX in $XX timeframe. and sales before experienced open. the hurricanes across were lost and quarter. We specific weeks sales delayed

safe they thankful and very how and of supported are are team their proud Florida one in Texas have that members another and We our we’re community.

our products the Sleep quarter share the and than sales effort, communities. individual donation and XX% EBITDA made In the offset XX% the Number year. has per gained versus addition hurricanes to X% team’s we impact affected Year-to-date in in up expected with earnings gross were share per $X.XX share with to up market over million Earnings support We of increase from controls. expense stronger recovery with margin most $X XX%. year prior sales up the an prior of

bed and contribute XXX our consumers smart nearly will expectation. Sleep ahead increasingly XXXX. the technology provide midpoint to between deliver per and Number building the growth. conversion I $X.XX $X.XX range which for more our $X.XX of and the revolutionary update sales on ARU $X.XX. are XXXX track linkage maintaining in With of in We to understanding EPS XXX share of in and our sleep, resulting now We in to on remain consistent to are growth, broadly remains an relevant earnings drivers traffic, smart guidance brand. our bed high Demand our of wellness,

Our and customers are comfort enthusiastic about the effortless adjustability smart integrates that design. seamlessly connectivity,

said, it’s customers love beautiful. One the the in love and comfort Georgia technology, of our

launch As adoption the planned and in XXX resulting models of the from XXX line, beds our we beginning increased for of year, the deployed second We mix and higher FlexFit plan models of our at is in the a we outlined XXX implementation end quarter. Strong iX bed attach of in November. the smart two model favorable ARU the growth to consumer we two bed a both third rate. phase smart smart pX iXX, these

the transition through XXX continue growth both portfolio all we year, units next of fully of first to we our ARU. to and drive by As half to smart beds expect

generating XXX significant beds In driven smart demand addition have to our the organization. throughout change also

phase learnings the we continue approach deliver allowing Our is launch to rollout. build us on as efficiencies and

two are Here examples.

more First to our damage supply levels of that new design modern to points it home. customer’s through new discovered adjustable moved our We the a makes base broadly surround our appealing. multiple touch route design in and base has and proprietary elevated chain this sleek

to Our and this teams implemented rapidly packaging handling mitigate process changes issue.

our chain accept we simplify additional supply benefits. we As

adjustable foot popular our feature with our X with sold XXX people warmer Number base. smart feature sleep helped our Second, new when fall another foot-warmer, faster. – proprietary is Sleep is feature popular FlexFit which our bed The available

defect some During mid-August. we now been And quarter with our in result. from the abundance an manufacturing a Consumer caution supplier prior fully resulted working component Safety This identified defect delivered that are of voluntarily Product foot-warmers has a we to the Commission.

in quarter. improvement. to in a financial result. this on effect supplier leverage our and to will the replace expect resources stronger material to have chain proactive We’ve potentially actions difference strengthened our management profit. addition lead now processes We and expect a components We recall fourth are affected other supply making and the not do to and These

of will look pX excited bed smart forward remaining to models. are their we is the improving And XXX therefore launch people’s and wellbeing. how we about We the strong and the bed the with value, the smart sleep overall deliver

let other update drivers. you Now on me growth our

our our activating we with We loyal insiders. significant a First, experienced our for brand Advancements competitive reach to are plan continue and effectiveness. and increase quarter. more we this we’ve our ongoing XXXX. optimize this In expand media media in media environment implemented and remained efficiently mix highest delivering in connecting strategy efficiency traffic our alive XX spending plan for customers higher quarter. effectively our quality and media media we’re and of econometric since unique the delivered to model in on the we are leverage at levels achieved points visitors in basis Qualified website

the want to engage points today’s with digital those consumers XX than and more leverage full brands expect world In We is basis at year. inspire Number them, directly of that brands. one for media Sleep

strategy. We in-stored buying make continue optimize media digital We our social real our on strong to our to recently digital mix media further progress time. in

search, experience and easier We also online improved transaction. navigation our for

engagement, quarter higher to qualified strong online actions these and Over contributed conversion. the well traffic

loyal continue be Our the most sales. insiders to new efficient of source

business redemption, in Our referral of our strong XX% standing growing. was repeat over our than And driving loyalty in quarter at referral. and recently higher expected sales the program digital very is launched

in retail to our continue we and direct-to-consumer Finally, strategy, high which result productivity. conversion advance

contributed are clear point of in retail. quarter growth planned. delivering a X stores as the is differentiation and points stores experience new store positive Existing of overall sales comp Our in

all to this with in XXXX on states. track We X% to XXX year and expect end remain to by grow XXX base X% our stores XX to store

on second drivers the our that again quarter gross track bed business are is Turning half pilot with successfully strong to manufacturing for delivered a we to our the of multi-year margins mix and of due leverage site. completed higher we in our fully primarily and plan We’ve assembly now assembly product productivity. and

and We Year-to-date leverage we in complete bed efficient more cash our have we shares. network operations, invested repurchased $XXX of of business million reconfiguration. our million opportunity our have still XXX in generated become $XXX significant smart our from we as ahead support $XX and with million initiatives

the the XX-months share in we of trailing XX.X% excess continued generation, of as confidence beginning and quarter. ROIC plans Our With $XXX capital. our weighted for cost of increased cash average have million our fourth was to our authorization progress repurchase of in well

continue our to in cash flexibility priorities repurchases. and growth, share three will We investing financial execute against our

value track We are on shareholders. our to to deliver superior

proving how in dynamic bed XXX With differentiate be this are environment. our Number Sleep to are people smart think one changing to changing, value. sleep delivering about investments Our the we right Sleep life Number and

relationship connected lifelong building our are customers. with We

Our cohesive driven improving mission retail while also brand which culture, to is be strengthening experience continues And convenience. differentiator. our accessibility our innovation a real inspires and

corporate in will headquarters our Minneapolis. downtown Next week new be we in

start with work. and makes for is designed for coordinate environment sleep. connected whenever work new and place or wherever innovative that workplace it It easy fostered home that how a wellbeing is is in an a today individuality, with collaborate Our to you inspires great people

want expect every this day to improving creativity makes to experiences. another for individualizing and improved for our benefit life Their from an of one sleep retention I mission is thank so it for and ways. team productivity, our different amazing dedication it care their with We in by and recruitment, customers many to our strength, move.

more Now our third quarter the details and for outlook David our the of about will provide year. performance remainder

David Callen

Thank you, Shelly.

shareholder the value. on deliver to sleep we superior leader, a innovation path right As are

innovations in consumer So and far X% include in bed, a drivers, our in retail led demand XXX noisy the environment. our latest growth net XXXX which sales smart to changing

X% with year-to-date our XX% beginning gross XXX an and differentiated margin of earnings than of a initiatives capital we expected diluted have than more estimated acceleration is cost our free delivered a a have increase led the average per drivers combined model. This increase share our rate basis improvements. XX% our and building leverage Our capital. in in expected when XX% drivers flows of nearly cash cash higher the business year-to-date to These XX% ROIC point than profit stronger weighted

sales third $XXX quarter, net million. increased the to X% For

the $XX deliveries delayed million over QX. results Our include from carried of

the Irma in week were during remarks seasonally by the and following noted Harvey this before weekend. sales largest prepared affected hurricanes business and negatively our Labor As Day week the Shelly’s quarter

sales prior plan and Our and steady was on the Day storms, weekend. these after Labor to for we’re performance

across gross the by these low operate equates disruptions said, of were through We and sales That hurricanes. we a us stronger that than which estimate million cost damage offset $X.XX the I’ll concerned to and in expected of weeks, $X.XX EPS. the moment. those two these a $XX the to in extensive margin discuss controls category of sales However, from we quarter, the $XX net earnings in in further country expense impact lost most temporary million interest during to consumers

QX. continue sales We metrics. of expect our in in to high to sales for our QX reflected growth single digit effectiveness growth is The demand mid drivers single high digit XXXX and

equal benefiting FlextFit Deliveries bringing to the and continued SleepIQ beds in smart our ARU QX in to of a Our were XX% technology. in from company-controlled growth growth units X%. unit XXX and mix year of year-to-date prior grew QX our strong bases

net X% X% XXX Our stores quarter. quarter growth sales year-over-year grew stores year ended new contributed the versus of with up comp third X%. We prior the store while

trailing XX average Our were store month million the up X% prior comp versus year. $X.X sales

gross Our XX.X% delivered quarter. the demand drivers a stronger leverage margin our expected with rate than in concert initiatives in third

Our initiatives smart freight, than favorable margin mix XXX excess our transition and handling and operating from more lean beds pressures supplier of offset costs.

in of prior our a from incentive remember As margin quarter reversal benefit compensation year the included fourth you accruals. basis gross about XX the think point that QX,

deliver in of margin of point For now to XX in top basis XXXX basis XX points basis XXXX. we on to increase points XX expect the gross improved total,

both global how to sourcing On profit innovation call, efforts and our are achieving the second our critical quarter our detailed goals. we

hubs third We our multi-year on the two beds, outbound successful supply go the locations. element at of also which XXX now in-hub focuses assembly Today partner of smart chain that the of company-operated our evolution we’ll our produced and being of deeper into logistics two operations. relocation discussed optimization are

inventory touch hub-and-spoke cross-docks XX Our our about which more includes serviced than we truckload spokes. country. requires This shipments spokes, multiple around and orders purely no than is the points stored. are and current through XXX XX% Today of network hubs where less

This now XX% customer with to fulfillment XX% reduce assembly square our XX of damage we’re effort business than handoffs. through multi-year our the spokes. will reliability, improve support two assembly efficiencies from release I operating fewer reduce total structure delivery XX handling more that and and mentioned delivery will across network hubs. by through footage to serviced realign in-transit warehouses Our XX% earlier

also Houston markets, We were through successfully service which previously to centers new distribution spokes. have delivery two and supported Austin established

were initiative in About in diluted expenses. this help share. $X.XX are it costs We are these pleased on and us the in of planned result confident deliver with COGS balance our of two-thirds so QX $X commitments. profitability per operating million Transition far with were as will or costs the

quarter costs million in of fourth We XXXX. continue to expect $X to the million transition $X of

Our largest were costs selling than committed. year, being were planned with the period lower QX overall fully expenses marketing of sales QX operating in and our our

discretionary However, related spending we help impacts are sales R&D very the in disciplined offset pressure G&A with the our from to and quarter. hurricane

and for $XX sales we to marketing be be about QX to in G&A year million. expenses the of For and modeling expect sales million purposes, net $XX XX% about to

$XX We deleverage $XX the in XX% combined delivered healthy last per up XX% of on our plans. delivered points the prior XX basis business QX which R&D our initiatives the our costs appropriate model. increase incentive due support share to XXXX higher top versus of EPS G&A power continue quarter a Year-to-date, our about In differentiated largely diluted and We’ve to transition in million, expect to earnings a we have to depreciation. in comp, from demonstrating rebuilt X% is $X.XX of and growth year. million inventories line

customer note $X about the QX. have have backlog You’ll higher QX also come from that our last in in-serviced normal million pre-payments down than quarter

cash up XX% there expected and were year-to-date $XXX million the prior record As is cash are initiatives is from versus accelerating a year-to-date. our and operations profits generation,

million So million accelerated to to strategy cash far invested generation as Diligent projects. of our to support has this our XX% $XXX flow free value $XX by deployment year, capital shareholders. year-to-date high of execution support confidence, our for high we’ve planned

our million third new bought our million plans $XXX supports the out midpoint guidance called the also year-to-date. through and QX worth at guidance remarks. the range. we $XX prepared continue repurchase EPS share see of We in authorization our The our to our throughout $X.XX I’ve and EPS XXXX delivering to This results $X.XX. the reflects drivers $XXX range We’ve quarter are of to expect, $X.XX the beginning With value capital we maintaining guidance assumptions in shares XXXX deployment my million narrowed EPS XXXX.

the for to share per we cash earnings like drivers open questions. Eljoe, opportunity. deliver advance continue in in Achieving to this We profits XXXX. commitments the and a investment accelerate our to on path to line at financial presents value generation our compelling point $X.XX

Operator

Thank you.

for will today’s coming Our Stifel. now session We begin the Instructions] conference. is first with [Operator John from question-and-answer Baugh question

Your open. line is

John Baugh

and curious Labor recall plan you mentioned, could you discern I know Day storms. it. number. up timing Good out. on of afternoon the don’t and hurricane thanks impacts was the during it Appreciate – exact that and two for came Could the little how the I taking parse just and But was after you my we just can wondering finer you and you you broke a so I on with for questions. if were

David Callen

And week in hurricane about exactly the prior Harvey. It’s weekend describing John. thanks estimated hurricane which we of weeks the QX. week the the two Irma then Labor the impact on week plan. sales to it our the saw net way came Day $XX our our I million we’ve was in then that Day and That’s a versus million the Yes, weekend to was for how Labor that it, after Those was triangulated are performance ashore. after $XX meaningful difference

John Baugh

And I timing? were noticed that significantly. there thanks. up something Okay, or just it’s Is payables driving

David Callen

continue including just we balance capital sheet largely all of working management to timing. though that’s elements John, our work on our

John Baugh

the of like but into trying bit what within annuals. XXXX some sounds there’s what’s there’s looking of for discern that And on turning it’s maybe DCs it XXXX, the going timing sounds I’m the sort benefits. and I’m and like and hubs-and-spokes the all happens, quarters, XXXX helping, on guess cost then to And not Okay. a what’s I and fair transition

David Callen

the to We will back investor to to we’ve goes they the conference. evolution This the benefits highlighted supply that conversation associated John. some have in well then pale our XXX transition costs at of gain. as of Both comparison which the chain. that going of November highlighted with ultimately our we’re launch as Yes, the that

that we again they QX our but transition some resolving highlight see high that of had rapidly when in $X.XX based product. very we’ll hiccups provide the we and in the the worth sure that XXXX yet And And seen XXX XXXX two customers love more supply our as I’m we’ve there is those of level and about couple on that models strong focus. highlighted, talked on to highlighted about be much we’ve we’ve with our call. already care we half very expect benefits ARU costs will chain there a consumers are haven’t we’ve XXXX, maybe on XXXX, guidance starting some you’ve but encountered We’re taking a of evolution, but demand that growth, those the launched

John Baugh

pricing Okay. out. been in I And Thank holiday any lastly, year-over-year but you. calling and changed pricing changes is any worth around changes there know events, you

David Callen

with that the felt about John, the the performance in demand what We promotions were we was than highlighted. Our weeks two our we’ve response largely other quarter Shelly those in run steady through consistent last year. and really highlighted then good

John Baugh

Good you. Thank luck.

David Callen

Thanks very much.

Operator

you. Thank

Peter next coming from Our is question with Piper Keith Jaffray.

is line open. Your

David Callen

are there? have Maybe line can… you his may he Peter, you Eljoe muted.

Operator

Yes, sir.

question is from next Bugatch James. Our coming Budd Raymond with

Budd Bugatch

Hi, I on operator calculated. the call But whatever bit the for just coming reason. the missed on my a way David as could if thank the the line taking comps you are you sales back little for issue was question. of

think you effect hurricane If some a to of I X% I X% back ceteris else about equal? X% being everything right of And a comp the positive $XX that. back paribus the the about take that is to out the in, the negative million comp again short get comp, in get way

David Callen

when fine. it from the new comp you’re I sounds that Yes. on impact to $XX – million the I it attributing and the That’s line you’re all that, it hurricane the so stores you goes bottom comp like but directionally and say both stores same thing is love from the but but was don’t okay, know directionally

Budd Bugatch

Okay.

Just to understand I’m parse the… out how trying to

David Callen

could is, Yes. it in total one were X% that for range. adjusting thing think growth to in the impacts highlight If about we those I two when we X.X%

Budd Bugatch

last flat look to if close XX% at I basis a fourth XX.X% year? And improvement or terms point to that. be of the to got for like flat I dollars in over me budget get advertising to XX looks year-over-year very advertising a like the it total quarter would versus which year-over-year

Shelly Ibach

That’s right, Yes. Budd. about

Budd Bugatch

I do to as then I Where the and math don’t expense, what think talk part includes script. – conversation and what that the what non-media transition? if quarter-over-quarter. – at grew much having the And sales and would you I of marketing missed get are Okay. – think also about take look comp. And I that at, about in look that Can of that then look of the I I that, much that’s is XX% I that’s how know you like during spending incentive not how your were call that’s

David Callen

– the cetera, financing got Yes, costs. the in included highlighted store We’ve the depreciation, the the embedded we’ve et that terms marketing there. that’s and costs staffing, also count, we have increase selling in all of in

seeing, flowing in With more the that of we’ve and marketing been ARU through that’s and being the sales stronger financed, being of that’s that – side. some is

with year we the maintaining sales, of to So net XX% pretty consistent to of that. we’re started XX% and guidance

year. of we’re net sales as the about We’re guidance it for ending XX% our talking today,

Budd Bugatch

can All afterwards, where catchup others got about Okay. I let I I right, That questions. in more hopefully out. is it come we have

David Callen

sounds Budd. good, That

Operator

Thank you.

next is Our Brad Thomas with question coming KeyBanc.

open. is line Your

Brad Thomas

Couple Yes, I of if everyone. good could. afternoon questions

The touch growth strong. very just to obviously on wanted First, there ARU.

in the years. that about to just you more units to was ARU, what the response is and couple or so you a there of hoping iXX opportunity much? I more ARU be the drive a referenced is relaunches. in growth iX And like driving perhaps You business solid talk up an you’d in if to that driving strongest bit little weren’t could

Shelly Ibach

with of consumer always question. to as we’ve years, having with strategy, innovation ARU with business appreciate the the And the we end thanks driving than on from of so phase, We, our XXXX last of benefits we an it out in as both growth, But Brad bed XXX unit in this the growth. annual expect basis. line, well. model and both more consistent number expect also business high expect and we course, growth communicated the continue first year. is growth deliver planned the we this of we both launched unit for and had ARU for both smart originally will our Well, of

year-to-date, So for sorry – and X% X% X% units growth or is growth both. is X%, X%, – our so and ARU

Brad Thomas

it. Got

just margin, think this Okay. for. was about driving just think chain up up you on what little than bit follow I years. Street the clocked as couple further just I XQ it broadly we margins follow higher better if hoping over confidence and to outperformance. was before I the to and for that some a to your is drive of into And more gross XQ the And I it, evolution, then was you’ve guess of for in supply talk was looking could continuing get about that in you more next

Shelly Ibach

Well, end as up and due beds mix. margin to look being you the of was to line largely drive the XXX able the improvement our gross at high smart at mix

also productivity. manufacturing the both and margin and to gross contributing ARU that’s So

expect of So contribute in also that we see business. it’s have chain. of again, our leverage. course, to aspects advancements additional ARU of which we the we coming, as in to and as move that forward, supply in important we well drivers EPS growth like XXX unit our And the then from as coming two And demand the to and models

a the right in potential high. of result we’re as expansion working it’s margin confidence the initiatives now, very on Regarding

we opportunity front have of of with us. in excited We’re the amount

and quite our the and efficient out we’re our initiatives. fun lean all been make desire able business. XXX in that our to see of continuous drive across network launch phased As it’s in this but of ways progress with more the throughout organization also And organization the the both of really, our to redesign, we become it with improvement to area find culture the grow

Brad Thomas

Shelly. That’s you much, Thank so helpful.

Operator

you. Thank

coming question next Our is Basham with Seth Wedbush. from

Your line is open.

Seth Basham

lot Thanks a good afternoon. and

Shelly Ibach

Hey Seth.

Seth Basham

I on provide don’t your and your is comp was is question up down ARU as sales units. for XX%, X% single not delayed hurricanes know know means in sale but going X% the to adjusted first the to your store what you an up if positive as were again? My well to I it get comp the digits. on high that’s plan, up to were comp improvement to basis your units that significant applied but levels is drive number,

Shelly Ibach

see when unit the stated, – we our Seth, the we series B the focused XXX P and series. of high out line very all with growth Right see as to C the of we the on smart significant will from with models. be – strong improvement the coming now, it first, we’re roll bed we I expect end the

Seth Basham

you cancellation rates Got because challenges operationally? of experiencing of so it. that level than guys more some Are normal high a faced you the of

David Callen

our guidance that’s performance and But our thinking how the into for we’re year. slightly. about Yes, baked

Seth Basham

the it input relates and we’ve for commodity commodities as How your inflation, significant of into margin looking are then in at the for And plans foam. pretty Understood. costs increases year to XXXX? balance seen gross you

David Callen

part Well, providers business contracts that increase can the quarter-by-quarter. we they of foam us that limit our amount have help model, pricing their that’s a the with and

were in clearly, impacted However Houston, the that pressures also there some region. and hurricanes

for course time. going of X% in term improvement, time short had be to a pricing Seth, We’ve price love over it the back improvements expect over again, five have and or but – we that benefit-driven with model, nature power this seven years. price we We

Shelly Ibach

would business add, of have a find The Seth, is very very us do. we that with is other in other working and more find suppliers lean view for with suppliers ways efficiency. similar kind helpful closely are and align as ways who thing we to partnership And working mindset productive to efficient long-term continuing together to I and do our in

Seth Basham

Got it.

be be price price to inflation? you to take able any to to clear, commodity Just expect offset

David Callen

want deliver saying No, manufacturing we that And lean operational customers to our but driving of I’m the efficiencies. capability, strong also initiatives, value just we propositions a as we’re including lot well. that have to

So we’ll encounter case-by-case basis it we take as on a it.

Seth Basham

as lastly, launch expect in All be it models? to Or as as expect the well do right. And XXXX, priced in at those be the as the level priced to units you higher? November you of same other prior the to would them relates

Shelly Ibach

Similar. We’ll because we in growth adjustable talk and a base price at the higher that’s pX ARU SleepIQ benefiting on FlexFit we Again, by pX. launching from attaching November, are similar to about level planning with our the a are technology. the along

Seth Basham

Thank it. you very much. Got

Shelly Ibach

you. Thank

Operator

Our Keith coming from next question is with SunTrust. Hughes

line open. Your is

Keith Hughes

Thank you.

back I on the to could just those that. of little earlier, you and again were adjustable talk talking where First question, are product about the you challenges the around of was bases? in some a quarter happened you confused fixing what

David Callen

Yes.

sure that consumers of understand not about. important, we’re to these love. strategy are trying you material in what’s we’re our So items are, case, it’s for during for and that, this sides packaging good both the feel entire to is make and Keith, that that with that that of going important talking about we that, surround we What FlexFit our they are that base, it’s and And We’ve new we encapsulates innovations consumer responded And a saw damage expected that quickly associated the and fixed launch, we the the the have initial where attractive. than part surround. we’re more headed that, forward. material very

Keith Hughes

at correct? Is the from? And costs, come $X.XX question, expenses next $X.XX Okay. is where all the year another looking around that that potentially you’re other the launch

David Callen

call. year. expecting what for year, detailed this QX out use that next haven’t I’ll more as guidance guidance half can a threw for specific provide our I you just when as we’re that your of We have directionally, XXXX. you for model benchmark we provided put together

Keith Hughes

of this done to midyear? will And Or Okay. say the will at XXX, for launches point? be you when remaining the they are the willing

David Callen

side be is the other launched We associated with of evolution, of transition to middle is the completely the effort. year. supply which chain And costs though expect by multiyear next a

Keith Hughes

Okay. That’s all I have. Thanks very much.

David Callen

Keith. you, Thank

Operator

Next from Keith coming Jaffray. with question Piper is Peter

is Your open. line

David Callen

Peter right, take All two.

Peter Keith

the going from create million do So how we sales just – think demand? last about All that Or you’ll for now hurricanes, view million sort that here That’s $XX that guys lap as go. it the right? Are you $XX next pent-up impact sales lost does to maybe of forward? we right, should of you year?

David Callen

our rebound mid a back QX. assume in Well, get high into sales that those guidance for coming doesn’t of growth QX we big single-digit to

would sales here customers. the back, us take – certainly our of some range should to it However, of take higher guidance we’re those care we’d end of those and to come

Peter Keith

your is guidance QX, Okay, at might the using on very where have would right your be underestimating pretty $X.XX. just looking you at Do Consensus now good. performance? the visibility about midpoint any Street delta. $X.XX, imply big of QX of EPS so And QX

David Callen

to a This how midpoint, take we the than the back is questions year, the was think had been guiding the where and can modeling at with the landing, We QX in after about midpoint, there basically consensus delta even was on at Peter. to call the in going when EPS line cost the the look I we’re the biggest our was structure. thinking calls, different

this take let’s So off-line.

Peter Keith

or one Maybe more. two it. got Okay,

you of I in with guess, higher cancellations. issues. Seth’s back had can are we were delivery some a it mentioned I that cancellation? why getting when then question, you And delivery experiencing some through that And are to issues? the normal a, maybe B, in you them? were social there to expect level level did you C, of earlier, the appear think media trends So the of quarter response experiencing a

David Callen

created cancellation related got and highlighted launch the talked we’d bit I worked talked, into just through, that about those couple modestly us. some noise XXX quarter, us. things we’ve taking some We those the had noise of We in care inventory coming resolved challenges a of being of little we customers that created that higher. that a the pretty and quickly rates for quarter, to for the

quarter. hurricane deliveries highlighted really were as well element also about delayed, are to in had the well of we excited I bases during out experience that. supply. next and some of We are I good that the with strong launch our Tampa impacted other the a in and FlexFit call November the we our month pX as about that and the coming customer And our impacted ability that feel very guess where deliver

Shelly Ibach

they FlexFits who not those all And Peter, affected the example, delivered in by hurricane. were an just at of homes customers’ coming being out as Florida, were

that would them. a that So that for some be those confusion not customers would delay that, impact created understanding

Peter Keith

one very here. good. One last Okay,

So the on two rollout, the seven believe models, you XXX I in of two had Sleep today. marketplace

XXXX have are of down tie coming by I sort – can year-end, pX more it when step the seems models November, transition rolling yet guess line the the there’s imply you I you You less so you’ll year? half of like this meaningfully. out in in than next expected costs have year it together would can guess converted, to that versus out

David Callen

seeing is And ramping is think were you transition Yes, glad before. to of that what maybe costs than do the that’s front-loaded. bigger thinking suppliers of about you’re up it. kind I a component And

Shelly Ibach

prior on we’re And to able to also and gave phased of we couple approach as we’ve talked that and examples phase. a the efficiencies improve next learnings you about of in the quarter this

can forward you that And we’ll expect we efficient. too as our with more be costs, transition move so

Peter Keith

for good very and All QX. luck right. good thank Very much you

Shelly Ibach

you. Thank

David Callen

Peter. Thanks,

Operator

from Lasser next is coming with Michael UBS. Our question

Your line is open.

Unidentified Analyst

calling a taking [indiscernible] for in Michael Lasser. Thanks questions. lot for my

So a we couple quarters – a total million is lost weeks for sorry? couple the you that that the hurricanes, that of in sorry little it on, if bit quarter, I’m $XX the recaptured on the you during couple you questions. of early so hurricane, quarter? assuming of a Or the But of bit I already had is it the final million a you to the of call that the these answered final net missed weeks mentioned $XX amount amount,

David Callen

impacting is Yes, were two the those they million weeks interest seeing impacting where and the that hurricanes devastation coming to in focused across consumers country to the country the low $XX hurricanes million $XX were ashore attributed we’re causing. as highlighting and broadly whole on category the the that were this

Shelly Ibach

And also that the specific stores XX% directly of were our impacted.

David Callen

sales, of XX-plus that – almost lost days impact indirect Yes, both then a for were and impact the on stores, about distracted. XXX the consumers the

Unidentified Analyst

Okay.

recapture So stabilized in seeing in two the of just when much were to you the clarify, weeks last those a not weather markets?

David Callen

we highlighted, were we steady. As

steady entire two quarter of Our outside those weeks. performance was the across

Unidentified Analyst

three as first of much of Okay, us launch just the as incurred quarters follow-up, how the to can year? that’s remind you in you fair. the my $X.XX already have costs And of

David Callen

$X.XX

Unidentified Analyst

Okay, great. Thank you very much.

Operator

Thank you.

Nagle Our of question is coming America. Curtis from Bank next from

Curtis Nagle

taking the questions. for Thank Great.

you one I I first the through confidence new doing foam feeling are guess think I this new issue potential you your guys issue and I with suppliers? issues is that guys the your are audits? I in guess what vendors is new – mean, of XQ level So you comfortable XX guess albeit and smaller the with going guess, the after how then another perhaps quarter? back

David Callen

reactive suppliers, that and are some And strategy out we on working suppliers implemented before to in quality homework from get our over we’ve both we’re they’re our us where with moving to innovation once as place the well with our suppliers on as of we’re identify our objective working controls already inspection focused more the stronger us. done a factories and side. and customers’ solid profit a coming preventive problems where homes their they side with of We’ve ever suppliers

Shelly Ibach

efficiency great time out a can reasons time much the striving as we’re we’ve with gain dive to confidence. next roll that great and phase aspects additional before our as And experience one deep this – do uncover as and speaks to doing It’s This to the of learnings customer this and all we we pX, phase. particular that taken the question. about the to we in in taking the why and do is

Curtis Nagle

a just then And it. follow-up. quick Got

could window? know, some three-year a buyback thinking perhaps, or you maybe give the longer? Or this the I shorter are sense would authorization, Is a new little On us be? something you on don’t $XXX perhaps million timing what

David Callen

that relevant we’ve important accelerate our that is and to accelerate really Yes, expect we strategy, Curtis, profits the we generation. been and this model will from highlighting our cash

We at the are that. seeing and that phases already, of we’re beginning

the all this the expect EPS us drivers, to through through do share repurchases. plans, to give leverage capacity demand, that XXXX. our capacity of that’s three And accretion our and our million execute will to commitments against that operations $XXX We gives us the

Curtis Nagle

Got it.

very much. thanks Okay,

Operator

you. Thank

coming question next is Wasatch. from with Larkins Our Jim

open. is Your line

Jim Larkins

Thank couple you the missed, number shares you. quarter? may back give review have if could bought the numbers, of Hey, Did I of you these. a in you

David Callen

have Did at Just you $XX that $XX bought a handy? We million Jim, share. Jim. about a second, worth,

Jim Larkins

give quarter me the Okay, and great. spent you media And you dollars on this last then quarter? could

David Callen

This was about quarter, X%. it up

just take me here. last $XX was and my million. million quarter was through Let notes Media spending QX in $XX about

Jim Larkins

give you’re with you like more Can sounds some on what’s It plan. the color above Great. XXX? working

some us give color on that? maybe more Just

Shelly Ibach

of couple a things. Yes,

the well strongly this consumer that consumers products well connecting other I improved great to are effortless understanding all, smart the about bed, is what’s product adjustability devices. so effortless responding to around smart and highlighted as as the connect, your interest of And of the the First as contributes nature to trends sleep the the wellness. and as XXX

the adjustable really sleep, to not will her, would bed do way So bed leads because highlight the and for higher-quality with a do anything improved does delivers base. the wellness. it that there, the the again, and is need and bed customers the it also I to works

that driving mattress with choosing selling is base were and experiencing process that both, designed FlexFit in stores a our they’re integrated XXX our Sleep way design the in Number and ARU. adjustable the customer our So together, that

Jim Larkins

to could expect great. of And those of would Okay, set-up you then have your and targets hitting delivery you kind kind times what kind about talk of when do targets? optimal And be?

Shelly Ibach

time delivery our as we’re on… far period, As

Jim Larkins

it’s to level those and set-up long levels? to the When a target what’s for you after do get it ordered how would been and you’ll times. your optimal guess, then think take I be bed

Shelly Ibach

a will where Well, our level is our on ERP vary move may this customer to love ability of continue optimal in the lives. we store. And about to a system the What based on customers new the system as result consumer. schedule depending

select a as So it live, what from Or more three into and go on could bed. you there depending days be area, first it’s have two you you and if soon that a rural before bed delivery as a today you could delivery. where may and now be available your if window store in weeks

evolution. last So through and our to network be there to move move forward will who This we won’t zone. there go as variation advance is delivery will every and we optimize as continue

Jim Larkins

is kind what there sales improve of And opportunity on those you a as metrics?

Shelly Ibach

as we’re about with being much and That’s number Jim, to. you’re we the not when our to focused going is say focus is sure first as it priority what on our customer. what’s staying time track for I’m business being our promised days you And our where there complete, time being if our most and it’s and customer. of on important

Jim Larkins

we’d then important good. by be mall Okay, And on kind there? any versus that off-mall? trends very color surprised of Any

Shelly Ibach

that other both strong continue have we you would than by mall I success trends surprised nonmall. would say no. important No be to in and that fact the

both, and that very the to – be customer a we’re heavier and think Our first strong mall, portfolio in was where have of nonmall we than happy built say us here end store change will And the we’re consider stores in so our that is that shopping. in the allows portfolio I you the malls portfolio now nonmall. we we’re malls. customer with the I XX% significant in really XXXX, about December significant still nonmall right driving and of thrilled allows at QX, it when is was of, are that

Jim Larkins

on out but on color markets give Okay. And of focused like, those this us I think you your pretty a kind sure I I’m And that then call not us what one or you to I – that, you exact update year. any the name you’re know quiet use on any it you’d rolled give new can just think of but strategy? look you

Shelly Ibach

the goals. strategy, achieve make and we expect progress On growth that to necessary our to and the continuing aggressive our progress continuing

David Callen

caller. to have to got to through going got Jim, We’ve Hey, more to yet. we I’m couple a the next go get

Jim Larkins

Thank you. Okay.

David Callen

All right. you. Thank

Operator

Our next question is Wedbush. coming Basham from Seth with

is Your open. line

Seth Basham

of gave well color further? terms the some Just break contribution Can as you components from as that follow-up XX% ARU down any in past, us us questions. mix In for you your two quick on attachments.

David Callen

ARU, but don’t I of breakdown I bulk of the a recall – stronger think providing don’t attach. it we was from our

Seth Basham

been have suggested there the that’s anything negative integration SleepIQ app. helpful. of lastly, that. any be issues an then that your seen XXX the beds if I’m in wondering the reviews that data Okay, And or driving of increase some we’ve else with might recently

David Callen

strong of some And participation and push. software remedied with Yes, XXX in Seth, we saw challenges customers enrollment very we’ve and SleepIQ. early bit with since deliveries, a seeing little the on our that we’re a

Operator

for the Since over we to call closing I the have turn queue, company no remarks. questions in

David Schwantes

We our year. look performance next you dream Sleep and quarter with XXXX discussing big. forward to fourth well

Operator

today’s concludes Thank you your That participation. for conference.

disconnect may this at You you, everyone. Thank time.