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Sleep Number (SNBR)

Participants
Dave Schwantes Vice President-Finance and Investor Relations
Shelly Ibach President and Chief Executive Officer
David Callen Senior Vice President and Chief Financial Officer
Bobby Griffin Raymond James
John Baugh Stifel
Brad Thomas KeyBanc Capital Markets
Seth Basham Wedbush Morgan
Peter Keith Piper Jaffray
Michael Lasser UBS
Keith Hughes Suntrust
Curtis Nagle Bank of America Merrill Lynch
Call transcript
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Operator

Welcome to Sleep Number’s Q3 2018 Earnings Conference Call. All lines have been placed in a listen-only mode until the question-and-answer session. Today’s call is being recorded. [Operator Instructions] I would like to introduce Dave Schwantes, Vice President of Finance and Investor Relations. Thank you.

begin. may You

Dave Schwantes

in Investor for refer welcome Callen, our I be an periodic posted annual updated Form will XXXX our and on that us. website to materially. investor now vary report for available Sleep actual Corporation’s on the detail will information in the this her future of CFO. may the release the and just to and primary and conference These The turn to Please is risks Please financial Finance Number release discuss have subject call our Shelly am Shelly details the XX-K presentation forward-looking call. of included release your telephone statements being to today refer some in responses however, filings Good website recorded our in and on This results Senior the Ibach, and news certain conference on to Vice SEC. other financial non-GAAP with or ended, call. number quarter outlined results replay. earnings company’s may call are our questions President news purpose forward-looking and note this and of at sleepnumber.com. comments. President at earnings The our Schwantes, of and a discussed access and Please include joining With we a news to statements. period to sleepnumber.com. Thank over fiscal our may supplemental our that of to the uncertainties commentary third certain me Dave are discussed in measures David afternoon, CEO; Vice also the Relations. our news you is reconciliation I release and for be President also

Shelly Ibach

of My will on normal Good standard rate metrics. quarter SleepIQ with which start was practice third on sales night. our our XXX the orders, in afternoon our highly this however, smart will are reported granularity sales earnings differentiated business we the cover you is to they remarks. end for quarterly transition customers. recognized all and my score focus are Thank I reference XX delivered financial providing you, net beds. after completed My run will call. last to Dave. when thank performance remarks David joining details our to my To Today, since

this orders half quarter mid reflected quarter smart reported business results. including growth. the was has to Our XXX in double-digit gained continued back Robust unit of growth fully momentum year-over-year to in in growth the the seven completion the last Due October. our all timing, third the beds. acceleration ARU sales and quarter in grew Sales following of the single-digit the XX% transition significant of year-over-year not weeks

Our sales best trends ARU current growth as including points well. thirteen remain Units week sales in comp X XX new indicator stores. and from of growth business week of of through XX% is points order last growth, strong our up

performance direct on amplification campaign quality campaign we our our began focused retail through beds our not partnership consumer XXX point beds, smart called business experience. new line top our driving marketing With and is marketing August. brand XXXX includes guidance reiterate of proven year full investing to fourth Number new of momentum for starting our at confident We Sleep initiatives our mid sleep, proven are all in differentiated sleep share. the NFL per in are XXX primary four earnings smart quality delivering This and $XXX available, in the quarter The $X.XX early our a which bed

Our with equation consumers. resonated top-line value strong the growth accelerated significantly as

traffic beds digital through smart at from both this September metrics our growth our growth Key X.X as measured process, visitors website, selling and reviews continue. significant units unique to August ARU our with in the for increase streamlined stars. included qualified conversion XXX expect by in We in high period for to and double-digit ratings

is costs in second the performance media key more Our XX% spending buying prior effectiveness the On of advertising in quarter, XXX%. high media contributor the new with competitor escalating environment I our to media increase third media call, other our our increased and another quarter to In to In quarter over an with tactic. we buying year. aggressively strong spending our search intent spend compete highlighted over quarter. campaign by

a order significant share prior levering the market year. to compared We while sales are took basis we on confident

We our intend our the to double-digit drive to quarter fourth increase expectations. in also year-over-year spending media growth

the the a and performance. with reach into has by XXX also for partnership amplifies base, benefits beds high NFL of sleep our linking NFL extends brand. our which our the fan smart smart It affinity Our

Cousins XXX improves strong few beds leagues smart smart camps and field active the team a over digital how NFL are receive wellness. Vikings part They on our life. and these XX followed directly Here their to their beds in Kirk ad our XXX engagement examples. of in social are new national begin his XXX powerful for NFL as platforms. enthusiasm his NFL their game to visited investment XXX the with as smart The their of quarterback beds in trainers they beds. August, campaign ensure was and In on training they traffic In share understood the in in and smart the highlights players influencers worked NFL features increases everyday latest players Significant performance our benefits ads. September,

experience advantage action. performance we engagement direct control relationship. consumer omni-channel experience. addition in an to because Number have important drivers Our Four manage exclusive to a retail brand competitive strong one, and key the our We brand remains of value-added develop Sleep are: retail and

XXX driven and improvement. conversion value driving traffic starting compelling initiatives bed are $XXX. smart Our Two, at both benefit

compared cX its bed our value comfort quality and of and We about smart consumer excited are competition. the the improved to

unique issues both focuses full sleep our Three, growth individual strategy of model is process and various unique life with ARU. solving units price Our relationship. result of benefits The of the customer in selling and points. assortment long products at differentiated our store on

Our brand mission and a ongoing revenue is customer with XX% relationship result our and sales an strong our team stream The highly Four, real from of strategy. customers. establishes estate over repeat driven and between sales. loyalty trusting generated referrals productive

experience our to base estimated our the XX% During have XXX last from growing and year stores stores store we XXX while over to years seven end. the by rebuilt through XXXX, improve brand location of an

grew experience, certain an closures. by competitor opportunistically average also in affected With we by per store to our of sales over stores also markets $X.X We are average $XXX,XXX adding synergistic our retail million.

of and track to XXX with paramount our profitable marketing end on to from and The are growth. beds real summary, we In XXX stores. estate our smart to integrated Sleep Number have is momentum strategy We retelling sustainable disciplined XXXX performance execution initiatives. XXX

quality converting marketing on to this is focused rate. higher traffic at traffic Our increased driving sleep sales proven professionals a sleep are and our

are taking business since market The steadiness progression compelling. improving smart lives to We share. the all and and is transition beds of our

the expected profit experiencing also transition. completed since the are improvements We

was our September, within smart XX%. XXX month example, For rate our first only margin to gross beds, in XX% range of of our delivering more normalized full

pricing the headwinds growth leverage increasing benefits operating the to while absence efficiency we transition drive improvement, and long-term. tariffs short there in to costs, power expect related Going are of costs, and and freight forward sales from both still the

the network progress. logistics will Our our delivery improve longer-term which expansion margin evolution, is our support experience, and of reliability making good

production of to advance the distribution in Baltimore center opening our third assembly month mattresses. next are We preassembled

more Over and few open across effectively we to three the efficiently to centers serve customers the country. next four years, additional expect to

performance execution commitment consumer by Our robust a our since and strong transition the smart to is all highly sales engaged beds of result innovation full our to XXX team.

our about superior XXXX, and our cash from light and are trajectory. team. growth excited our value initiatives changing talented strong our expect are retail, product ROIC margin flows top-line profitability In model. single-digit delivering you we from shareholder in to We our high and resulting Thank our differentiated value customers enhancement from the business we highly The accelerated vertical to creation.

our quarter. dedication the innovation And of customers. will financial and provide is additional lives driven perseverance Your now details David third the purpose to improving our from

David Callen

Thank Shelly. you,

our projects profitability with while investments work long-term. our derive to consumers has both strengthening now operations the growth positioned to XXXX. invested in our us in and These costs relevant and This business Investor the capital deliver painstaking directly our absorbed sales have We be include highly for P&L. to Day November foreseen advancements in accelerated at

masking our in XXX beds XXX the year to has smart year the underlying highlighted, demonstrates a that smart prior net this are and in is in shifts for clearly marketplace. sale Demand As crowded demand. breaking strong all quarter completed transition commodities the reflecting accelerated through differentiation significantly real Inter our increase beds. Shelly demand

do we quarterly year. results on and measures either with not XXXX disclosed reported along Importantly, and our reconciliation each called affect quarterly financial the only sales earnings shifts non-GAAP these and of have XXXX net reported sales We our Page share impact annual per that press XX for release for as quarterly provided comparisons tables year. out estimated shifts

acceleration due For QX grew grew and sales growth an $XX high QX earnings share during XX% quarter. an to basis, in order our highlighted the per On half the adjusted apples current from QX apples back already to quarter, the QX to volume of million XX%. tables shift reconciliation demand adjusted

assumes this of X% will growth lower to growth is Our $X.XX will net XX%. year demand guidance in QX earnings XX% year largely year-over-year costs. This full from up $X.XX transition implying increase sales adjusted grow QX midpoint of adjusted and versus QX QX earnings benefits EPS due expected that step

discuss the beyond. we gross what reported for year for rate Now the and I’ll and XX.X% QX margin expect

about the While QX gross XX sequential our expected. half close margin it the points In basis XX represented improvement, than basis out we lower quarter, was basis more the point pressured we first the of than a points expected. gross margin Classic QX Series XXX rate

stronger beds. also with pressure for and demand realized other XX FlexFit well points integrate smart basis XXX that more products bases than adjustable our from our sourced expected We

expect gross impacts we’ve about absorbed the full we in year, the now reflecting For to be our margin transition XXXX. XX.X%

in and hikes latest year, gross including attach margin headwinds beyond are COGS. X% of contemplates to tariffs, sourced stronger bases affect several range and tailwinds. products freight rate this meaningful of to XX%. X% and tariff targeting overall inflation trucking of adjustable our XX% we’re Looking The to bedding. about we our Headwinds include responding This

in XX basis costs and potential from points XX points points points with to $X changing Tailwinds providers no margin fast to efficiency of eliminating are include chain closeout to each from XX and sales. benefit basis global We tariff basis gains transition from this supply arising million Series pressures XX points of working rate basis mitigate basis sourcing our the XX Classic for landscape.

operations logistics and ongoing improved We also from leverage, expect see benefit as We’ve this benefit to driven business about X% model. pricing. our taken for pricing and annual based volume historically an opportunity

QX drove reported with XXX third for and as sales quarter our quarter. reported spending deleverage into sales sales primary order the de-levered we growth. the Our mid-teen points operating basis marketing shifts The leaned that inter reason in expenses a

we the for points At of basis as and lever still accelerated profit operating our XX deleverage For absorbed position expect expenses we XXXX to midpoint, about full year, expect our transition XXX to us we’ve basis operating basis pressures points. necessary points now. guidance profitability significant growth about to XX

have invested year-to-date value flows generated cash and high we of $XXX year, this far in operating million projects. million capital $XX So

of shares year-to-date. million service business our net letters of our see and $XX million of third At excluding value quarter, inventories open the We shares we and our of in substantial $XXX $X.XX. of a the deck to our repurchased Investor continue our end priority. had liquidity initiatives to to Relations of X the XXXX million Investor credit bridge from guidance In midpoint Page EPS website, financial our added that target slide updated EPS of page on provides posted we to and capital XXXX on our assumptions $XXX

operating to we as growing margin sustainable mattress our smart model the of gross demand XX% backdrop important to profit marketing to to our a approximately the high from leverage basis for addition single-digit margin. improved of lean lifeblood sales driving In into industry of improvement earlier, our assumptions bed predictions and range XXX point retail, continue XX% controlling targeted single-digit costs discussed expense modest net operating slow growth, XXX innovations low our elsewhere, while economic business business growth include above meaningfully

full we finally, year is Our operating which the profit XXXX. the results priority, weighted provide mid-teen XXXX to to our our ROIC, capital current for one And reflects We’ll business relevant more high average term. when in invest on expectation single-digit cost compares with early for year stay number report of least details our capital. next long at which in

our Let executing to major me transition. add business thanks my teams for dedicated this

more after out our entering billion sleep than $X.X business the technology are the financial sustainable to long for harvest term. build investing We

improving we’d We are shareholder value. for and line now sales like at superior questions. profitability open accelerating to to Christine, deliver operating the this point,

Operator

[Operator you. comes Instructions] Thank Griffin question Bobby with from Our first James. Raymond

your You may question. ask

Bobby Griffin

in strong uptick I saw with demand new the the products.

David Callen

Bobby. Thanks,

Bobby Griffin

the is of kind up me there. you million bringing my the you this per already some stores? question quarter was towards XX% the work high of really question store your as about I first see stores – that base guess in And are average Roughly not $X of million $X What versus a are the goal. store you million about bridge differences $X of but to store help just way level those goal. how your more

Shelly Ibach

is are of point Well, important Bobby, all continuing. one all that stores first our of

to continue our all of across see markets. growth We

don’t That’s look along course location both a across marketplace as entire we’ve the the DMA. the store the the So and the with we our contributor store to marketplace as portfolio where locations key and we an And individual maturity on maturity are. significant our and investments ceiling total you improve – have know made in itself. a at of

Bobby Griffin

of as of color. And any Okay, the result that of was caused appreciate big the surge some the in in that backlog towards quarter I demand new fourth it and the of just quarter? much timing the itself the the back pushed change the end guess I to kind demand impressive in a uptick there be was products? these Or pretty of deliveries quarter on all with into

David Callen

You volume. that back I the was in it mean explosive half the the quarter high Bobby where very know (XX:XX). ladder it during was it’s of period growth already

Bobby Griffin

it’s… Okay, so

David Callen

it week’s have I for also made that those of say it’s deliveries in already me worth just been October. about important here a to – and represented

Bobby Griffin

Is issues Okay, to back you – took out yeah, there any going my time? that on deliveries question. those be was getting

David Callen

And then…

Shelly Ibach

this delivering have deliveries a high but those a would our high opportunity delivery scores to Yeah, also been in team timeframe, and I only not also take record September to country. record for – the MPS know having you performance made give out to across love the home shout our

Bobby Griffin

And data X% for you it gave I to I just the appreciate us. the was guess X% of about COGS lastly me tariffs that and

be did – and still impact but go You mentioned whatnot, you’re talking for to you? adjust wasn’t and to are that? your pricing suppliers there you through do tariff if guys was would and you thinking the you willing how about an there kind How of

Shelly Ibach

Bobby, Yes, distribution we and our a with power do exclusive products. pricing proprietary especially have

Bobby Griffin

demand jump Okay, I’ll the back I the the the uptick in new with congrats all and in on products and details queue. appreciate

Shelly Ibach

Bobby. Thanks,

Operator

with Baugh next The comes question John from Stifel.

may You question. your ask

John Baugh

products quarter thanks and congratulations, Labor and legacy some and for right obviously in. my then evening Day. full Good the before of reset taking questions The jumping the had

then mattress I terms guess the trying color price, and for on orders mix gave the once full in price got of the around kind some have you you you of understand of what I’m did lower to kind How look guess, ARU whole feel post floor. see I cXs did order of some so, the And points reset? us ARU.

Shelly Ibach

on also steadiness Great only really not been I question, in the of top-line, think ARU. We’ve units pleased in the particular the but performance John. with and

the in both look a trend quarter were single-digit performance, whether or seven of growth units – the we’ve experienced at mid So digit the these in double ARU seeing weeks we week you throughout last a growth timeframes. of thirteen and

see going our and share after really that’s across opportunity our we’re getting with price beds. about and smart XXX that. we’re and consistent market very what here great points We happy So

John Baugh

get units, is is a granular attached a sense up guess taking Shelly of kind ARU more would simply to that’s additional appreciably. trying to I’m sold or And dollars guess of only I get trying for changed lot frames I drive that that bed over so in ARU little and that mattress if you I am that example pure – the whether ARU. a

Shelly Ibach

out when the the well combination mid this at $XXX our average value price selling my report I total look revenue as compelling of I say and the process the smart cX – mattress our per unit, the in at mentioned we the but bed that for we combination it will end. Yeah, point in in remarks, as high

Our great and benefits job of customers customers, a team delivering line. against and through sleep our does the selling issues those in stores to the moving

growth the the performance across premium. our best seeing good, we’re within importantly, So, better in and pricing

John Baugh

year-over-year, increase what Great. you that mentioned something said And escalate heard curious where from sounds rate know slowing you continues competition like customer I you of think, base costs, though. metric of seeing up right. and struggling. competition that it a or we or is if XXX that, in whether I is yet lot And the at the percent acquisition you’re all, I’m to

Shelly Ibach

cited the QX. search Yes, the key metric cost terms XXX% up I of was in

have we our be so So terms we we’re and highly heard struggles and to our between media have able the mean of we balance some quarter. driving in our in buying the you at it’s you’re efficient, highly orders different And based it’s very that responsive remember in spending of combination. what and the And a seven spend, right that, else’s, price to sales lever are the efficiency than obviously and quarter in-house hundreds delivering one keep terms made. XX% just overall until the investment on at their the higher quarter. digital literally we’re we in lot buying what’s search find look growth that considering players when excited I not about and specifically, other everybody players yet quarter seeing last And are mind media finding terms agile in about the our looked everyone we’re you’ve in in growth overall effective. absolutely and being against that’s weeks more Overall spend did there in is but the the pretty there’s

David Callen

Yes.

John Baugh

the quickly, lastly, think, then year. modest operating And was I leverage you around, gave color expense next

So just modest SG&A year-over-year much, for as the expected Maybe other be that spend I sales materially. you Any David in that? of take growth guess, much maybe more so spent. dollars media want up double-digit on I’m combination, as clear rising we’re may But not to leverage. going and expenses as allows fairly color

David Callen

would of XXXX QX investor Slide point. thinking XXXX call. John deck this we’re assumptions I X the a and and the announce on point provide to about Yes, more we how We’ll new guidance XXXX when you for our formal about at color lot

Shelly Ibach

And I the the third up illustrative levering prior on digit but John media think, XX%, over increase double regarding in quarter can the orders. a yet sales be the comment, quarter of year,

XX% So it highlight impact. doesn’t necessarily operating net of X imply a we Slide at sales. expenses to deleverage XX% On

John Baugh

luck. you. thank Great, And good

David Callen

Thanks John.

Operator

next The KeyBanc from question Capital comes with Thomas Markets. Brad

ask question. may your You

Brad Thomas

Hey me as how good network a sense and that And think on are, going hoping update I you’ll for was chain business. in expand afternoon. get to congratulations in markets, the a XXXX? just and how many let that’s nice supply in the on well add check momentum my how where you you

David Callen

Brad. great Yes,

far. we to three of the that third what seven experience We or on got mattresses fourth here margin are our enhanced We gross expect years. meaningfully have. four our assembly this We’ve ultimately both we seeing our for so initiative to about distribution about currently preassembled XX what We experience we’re are that of do are when distribution and outlined deliver out can long-term. for the this have is opening in centers the website. and two XX those to next consumer great our over the investor deck Slide open in consumers and more of XX excited on we quarter center expect The feel

Brad Thomas

able And contribute XXXX how think that on sense next year? to as we of a may about any financial the much XXXX, be benefits versus

David Callen

term. we’re next for potentially to that baked how XX% there’s all longer about and of margin thinking into to think we the that’s Brad that year gross XX% upside

Brad Thomas

the XXX in come those just for in, transition XXXX XXXX. as cost then And did the bridging close outlook where we book Great. on total

David Callen

they the where $X were done So last XXXX right that are we part And that expected $XX costs now million compared of transition for it. year. million, to

in won’t QX. have costs So out transition any we identified called

And $X.XX year we’re this so expecting QX in because benefit that of of benefit.

Brad Thomas

one aren’t any one last me Great. planning for stores. are of seen to they’re seeing I close know you look don’t in maybe thinking tailwind you if And closures Mattress then the ahead? And yet. with that even maybe or are pressure stores from any it about Firm just you as that you’ve yet, observing the where XQ potentially impact you and closing how

Shelly Ibach

we’ll our performance performance delivering And what’s see we some we’re some our lack and with And be benefit the advantage focus at tailwind and customers. to driving stores And is confidence – our to. by of the driving of strategy strategy certainly we their focus that’s on products our drive marketplace. improve and could performance disruption that. our well primarily continue will we sleep take own where opportunistic Yes sleep our and in there customer? Sure, certainly meaningfully driven think in that’s to looking

Brad Thomas

again. congratulations good, Sounds

David Callen

Thanks Brad.

Operator

next The Wedbush from Securities may ask your you comes with Basham Seth question. question

Seth Basham

good a and lot Thanks afternoon.

Shelly Ibach

Hey, Seth.

David Callen

Hey, Seth.

Seth Basham

is closeouts quarter. about question the in series the third first My C

expect going to expectations? to terms of How gross impact impact your positive on much margins. comps in they’re You they mentioned negative deliver relative did

David Callen

a of Seth lot lot come units, they dollars. of but with a they drove don’t

we And to that what that closeout your we’re term. for which so margin process and does longer glad phenomenal be it brand at the point. like pressure us people is brings into this means rate, But through

Seth Basham

the Do revenue quarter that Okay. you’re quarter? demand help for Can forward to think us about at tail I’m why as projecting have end forward currently It to quarter. as guys the thinking you’re a great you fourth the pulled and fourth or curious third some sales from how understand orders you stronger you of trend? not the you result. the seems like

Shelly Ibach

XXX deliver are a with sales we momentum needed that are to have accelerating Sure profits Seth great beds. midpoint into our again confidence well we We to thrilled expect response smart highlight considered that the trajectory. our XXXX. of in our consumer $X.XX course guidance, year and continue our important variables this all of guidance in And and how to to

the holiday holiday QX, behaviors included as hurricane the benefit Our as consumer prior in also then prior which shift year calendar, in year some growth and the well spending, XX% environment. consumer from broader

David Callen

One is of the to your sales our about our Seth things QX you XX% consider an might that’s in where XX% modeling our adjusted On QX historically want sales. basis to in guidance are midpoint. of we’ve targeted them

Seth Basham

seeing Got of after attachments beds models it. increase or attachment you which launch? largest couple some the a And words, rates then seen the on lower as seeing you attachment a XXX think newest C up, higher in are that rates guys higher models about you the the line year-over-year in smart have are for In other end in involves? increase months the

Shelly Ibach

nice We’re XXX beds. with across seeing and smart improvement our our line

Seth Basham

low-end? difference or the high-end is towards any there the And

David Callen

the have at our the an of attach to and of XXX each beds. higher smart higher rate uptick seen tend end but We we’ve with the a line, model introduction across Sure. every

Seth Basham

seen understood make sure the the couple just question, increase launch Yes, the understand in versus for the to year-over-year just to the my since higher months higher following lower end? launch trying if end you a we’ve

David Callen

basis FlexFit improved are we our compared uptick rate models, previous basis seeing a overall in seeing On attach of across attach bed XXX a an models. are also we smart of like-for-like year-over-year rate. to in On all an basis the

Seth Basham

luck. Good guys. you Thank

David Callen

Thanks Seth.

Shelly Ibach

Thank you.

Operator

Piper Keith comes from with Jaffray. Peter question next The

your ask question. may You

Peter Keith

for you the taking here. Thank Hi. questions

that but as a So from to impact, call I you was process overall having it’s on there with know any mattress or bankruptcy pulled regard is just brought standpoint here It earlier, seem they’ve a Mattress with Firm like the back environment? positive like asked and but would advertising. seems negative anything industry it that traffic you doesn’t the

Shelly Ibach

correlations what have not I And the XXX, the Peter bad been is to tied is this our Yes performance say I a would directly campaign. XXX transition. marketing to our guess all

Peter Keith

fan. maybe Vikings Okay. also And too I’m curious I’m a it’s with

looking out that be positive January. next And the NFL for and to year? that it When the consumer to driving to or as has negative me. to it Is XXXX will stood drive seems So clearly season to forecast the we’re some anything NFL that contributing the marketing interest as obviously would brand. down be in interest contemplate winding just you into out relates

Shelly Ibach

find engaged the this into we’re consideration summer of the I And there NFL with are for Well to do take tactics of the to that stay and of activity. tested advantage advancing, a past and throughout leverage this of NFL and understand full full have learning something made certainly various past those what from year-round how And types and based year to knowledge combine, apply and with best partners and types and part events the events we through activities year how how transpiring, this the fan evolving, and but And progress. taken year we is the out us. great for growing and great to great we’ve other progresses been draft what like as when opportunities on do spring have some are base. it’s throughout year. mean this we

Peter Keith

great, That’s good and Thank Okay. you very luck. helpful feedback. much very

Shelly Ibach

Thank you, Peter.

Operator

from question UBS. Michael next Lasser comes with The

You may ask your question.

Michael Lasser

my a for question. Good evening. Thanks lot taking

were the early the that quarter finish in were benefiting period, activity. lapping the very weeks Presumably little mentioned the had a you last year-over-year. disruption year-ago soft out the XX% in a flat So were were slightly it orders. as from with delivery why in from so the quarter? catch probably sales you beginning close seven you finish orders probably quarter also while To took the a the to comparison strong the the sales you of hurricane And easy quarter? up because up for behind were middle of in With such that a

Shelly Ibach

softness of was. Well closeouts where the touched our C you just series on the was

of contributor, specifically this our is is we the business. actually XXX given have we going our this and smart top trajectory the a business future, where you all pressured wasn’t because And granularity of we’re shows it this line. that So and beds, the the since transitioned to

on out the the Regarding fourth year, clearly the of both press of prior release and XX of prior of called out hurricane impact year. we’ve quarter illustrating the that third into the prior quarter shift from Page year

out gives that weeks of million which difference orders and to XX-week can XX% you on $XX that trend that QX difference in see about we net the So the And illustration XXXX. that hurricane and period seven you for a great so in accounts $XX outside the three to point million growth from that between there’s of a QX hurricane.

Michael Lasser

for you several Can give weeks? us last sales the the number

David Callen

a so detail quarter provided did the see are quarter. of excess that that in acceleration. and impact that that And as fully saw going net lot worth typically We you provide we fourth versus result sales we’ve sales into $XX million highlighted more shifting think can the that orders granularity to we the we the of I our understand than in plan.

Shelly Ibach

make add That the loaded. a would quarter is is for obviously also quarter other quarter the I very third us. large is Michael back

So the quarter. penetration accelerated steepest growth at sales the this we had time the a with was in also

a on was expulsive big, a and positive our performance. way impact it So

Michael Lasser

you of there’s I that and continue pricing you a and the marketing now, Yes the next be parameters costs trajectory this marketplace? should came dip momentum quarter, good you’re the is sustainable environment back think the half, top in for to takeaways we business strong next be to that pressure that the counterargument robust there’s seem that trying back it believe response outline especially when you seems to next very growth. fair. in a year you in you’re right an uncertain can why in low-price flood beginning especially the year pricing I when sales a have mattress of year taking into into because line the guess include message would saw the guess you

Shelly Ibach

glad this God really Oh my that This business a of reiterate to is asked understanding perfect you question. opportunity importance our today. the

growth cost of over fully a the of Now i.e. the that XXX effectively we all and our what a and we new XXX%, just a growth smart last with in in beds third pressure beds. with we like have quarter and seven weeks to period that XX% driving XXX XX our very search media since smart business. time last smart that over XX% marketing It’s sales environment looks transition a important beds. with weeks demonstrated the are And XXX us,

in top high performance our digit, digit drive the heading and into be to We quarter into confidence XXXX. then have fourth great double business line able single to

Michael Lasser

thank so you much. Great,

Operator

question from comes Keith Suntrust. Hughes with Next

ask may You your question.

Keith Hughes

Yes, thank have you goals, a in contribution slot as repurchase. pretty from XXXX there presentation is the you investor slide you. healthy on The the about the share said

something new downs consider the you consider are the are to year you doing share XXXX? would pretty that plan in share or how end you’re obviously big repurchase an get Given excited accelerated about help count looking to here – beds, you number for

David Callen

response consumers business our Given the shares. our significant strong to smart we where XXX we and to see with are value in from model continue beds, our

Keith Hughes

there higher a be the Got some level? And it. Are being And comfortable going you willing quarters. willing is that continue really that, past? several that balance would down the have was you you limit to sheet last in trend did Board what to you

Shelly Ibach

Yes is I capital And to we’re our right This posture as guardrails of with maintaining is our structure conversation for Board. regarding good consider $XXX appropriate mean undrawn it Keith now. our business. thinking conservative as million liquidity clearly about those ongoing are our about some including

Keith Hughes

growth order in of I final was growth question, the weeks about the if so last And your October seven times don’t far? quarter? talked the you’ve you Okay. what know here last several the rate order said growth –

Shelly Ibach

that continued that up Well the is digit trend XX-week has sales our and XX% double I highlighted momentum

Keith Hughes

Okay. you. That’s Thank all from me.

Shelly Ibach

Keith. Great, thank you

Operator

[Operator question next Nagle. Instructions] Curtis The from comes

question. You your may ask

Curtis Nagle

very thanks much. Great,

So was how by the you lines? How each would seen much driven have P to be how for I? much out demand the much of guys recently, in new break explosive and able C, growth terms by you of

Shelly Ibach

the of We do Curtis total of a so to. for what smart. responding is are the beds, our the that’s package smart product and our detail The course and provide or they’re and then smart on excited customer not by provide the add, we but response bases options my model think important consumers our to item. consumer cX And different to and iXX through all I by

Curtis Nagle

Okay, thanks much. very

Shelly Ibach

Thank you.

Operator

comes Lasser with The UBS. next question Michael from

open. line is Your

Michael Lasser

for lot another a question. taking Thanks quick

Shelly Ibach

Sure.

Michael Lasser

points to basis margin basis tariffs? basis And next to from presumably walk gross the more as margin of XXX us of get through points going than year? to drag you to XXX Can be got XX, it’s points the that XX bridge you’re see

David Callen

tailwinds And all have look think impact. we’re that talked Sure. headwinds at sure tariff forward. look the Again as and both we’ve I we you’ve about and I’m it other seeing as we been talking companies heard from

we are working that we of into And need we to that if haven’t about that points XX as well. we solved. that pricing early lever of of ultimately on that some And as But basis yet pressure suppliers see about XX and we some great we’re to so pressure. talk and it’s have – a potential very we a it fairly lean is have that to globally mitigate business as we with the real power

the each from we pressures operating to $X XX it XX as have that cost, points and of not of lines to close XX year, about from in one and product transition efficiency running we line think kinds out product gains million I XXXX. series this about C eliminating on we However, points from talked having XX have benefit the of in of highlighted points basis basis as focus not another XX supply then chain sales benefit two

to and that et leverage volume-based we addition cetera. In about improved logistics operations, talked

I thinking how So you about think that it. helps we’re understand

Michael Lasser

saw you volatility, was that that the you last see? typical one the sales quarter in greater the quick And a normally volatility Okay. than quarter one. Was

Shelly Ibach

volatility transitioned the Well importantly, we’ve bed. to we sales did since our not XXX see smart

of XX-week trend, well seven decided weeks as We have our that quarter. performance. the as with And last in had the I’ve consistent steady,

been it turned So and we’ve transitioned, on support has marketing since progressive. it, steady, to consistent and fully our

Michael Lasser

you Got much. very it. Thank

David Callen

Welcome.

Operator

conference for I like closing At speakers this over time turn to now to would back the remarks.

Dave Schwantes

Thank performance XXXX you for and with discussing dream look in Sleep us forward February. well big. joining you today. to fourth We our quarter

Operator

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

time. You may this disconnect at