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Sleep Number (SNBR)

Participants
Dave Schwantes Vice President, Finance & Investor Relations
Shelly Ibach President & Chief Executive Officer
David Callen Senior Vice President & Chief Financial Officer
John Baugh Stifel
Bobby Griffin Raymond James
Brad Thomas KeyBanc
Peter Keith Piper
Seth Basham Wedbush
Matthew McClintock Barclays
Keith Hughes SunTrust
Michael Lasser UBS
Curtis Nagle Bank of America
Call transcript
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Operator

Welcome to Sleep Number’s Q4 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

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

your and on also periodic call her commentary comments. detail at our with website the number may uncertainties responses Please annual have Shelly results in and that, for note the now investor our materially. filings on of to news will to other These vary we presentation and questions are an SEC. to future The actual sleepnumber.com. some may our However, company’s statements. risks include over certain a earnings turn our posted I Form XX-K outlined discussed forward-looking statements in and release forward-looking subject report in updated

Shelly Ibach

XXXX to is and sales included. Consumers beds. The you the engaged Results our has to share are understand XX. SleepIQ My innovation XXX% brand to execution relevance as our earnings Thank growing net average million including strategy call. their broadened sleep Dave. $XX well-being. increasing quarter smart individuals the earnings you, increasingly purpose-driven consumer $XXX XXX our fourth overall XX% of for XX% per growth; our Net to highly million; with joining strongly revolutionary importance for to responding our profit and Thank $X.XX. comps score quality of increasing operating

increased positive year, XXXX. sales sales for over earnings $X.X Net billion to $XX the absorbing year. $X.XX For with X% approximately profit and fifth $XX consecutive transition full of to increased net comp million million, including $X.XX per the operating while for impacts increased share compared XX% to

and smart $X.XX half sales between to in performance momentum record generate diluted in and continues XXX of Our the In by grew acceleration net full and of we per grew business sales our our EPS per XXXX, second and our share adjusted The from beds. adjusted earnings XX%. XXXX. XX% reflects the share year earnings expect by $X.XX

and consistency, the sleep strategic proprietary relationships six to over innovations, drive which focused exclusive work investments customer our Our years and results. together advantages, past have competitive fortitude on lifelong distribution, strengthening

in competitive changed We of be excited in broader position are a the consumer much and landscape. relevance to

are which and creating driving to capital three beyond. We EPS committed deliver efficiently. demand, remain these through drivers XXXX all in performance and initiatives of EPS drivers leverage Our three deploying using

industry. smart heart with at highlights, strategy sleep beds remain demand. XXX differentiated one, of our highly innovations Number new disrupted starting our have the are proprietary the and commoditized Here our the

quarter. our is selling average consumers is driving X% and process Our increased growth the quality complemented value per X% unit by smart of sleep which quarter. the fourth starting resonating ARU at driving our bed with unit proven in revenue $X.XX which for The increased fourth

metrics increases initiatives in in of both growth drive our expect XXXX. We these to again

bed growth. future key smart Our is of our XXX a enabler

connected artificial smart, improve night detect the to with comfort setting innovation In every biometric billion customers uses to we is X.X points sleep wellness. future platform will sleep fast-changing data over data leader, the disturbances, the movements pace relevant proven use their adopting, The remain SleepIQ her and the of to health biometric intelligence to a consumer, experiences captures to automatically changes. data which sleep. life. technology the smart quality are for our bed As high-quality to Today likely manage bed is this used enable their and who adjust

the metrics life-changing as initiatives XXX smart competitive in awareness. beds, and quality we doctor Some our disease traffic amplifying two, examples onset conditions the biometric we launch data Number increase of front for fierce are marketing environment will of or through of an medical sharing share. diagnosis us, home full innovations. pipeline and early exciting risk benefits monitoring by With of to taking procedures. diabetes, recovery following integrated ad and media brand and investments driven our Since R&D. heart drive record in of health at we to our spending breaking traffic such consumer's include; detecting breakthrough In the increases, brand support double-digit an innovation and attention, purpose-driven with have our

emotionally this sleep amplifying continue integrated, storytelling NFL partnership. analytical between not this and our initiatives the driven as bed brand is leveraging buying momentum now are engaging X,XXX XXXX NFL of performance. With three. to our smart on over a expect beds, tools XXX we in players campaign, through and effective by including and quality length Number consumers We sleeping our groundbreaking our we digital internal media advance buying,

converts exclusive professionals, Our traffic driven rates. fleet with at high distribution mission

include on that in simplification the portfolio market Key simplification strategy. stores. real smart growth conversion, and comp continued high research XXXX, of of XXX deliver our growth expect of the our our we to initiatives sales purchase back from half and stores disciplined area and of stores, In we both strong initiatives drove estate beds, online this the in outpace retail our sales new record we development, levels website With conversion XXXX. experience as the execute and in our

market sustainable manner. as delivers location, profits customer approach a and in a experience, Our relevant sales, share we optimize

expect with year end to Number four. XXX this XXX stores. We to

we Our higher waking digital is not of in only of of but activation brand hours. result at have with now With words brand In advantage ago brand and sustainable of generated XX% competitive with are with XXX our and the bought week core profitable this a passionate purchases. already technology sales our through are our customers benefiting our growth. change customer sleep, our customer And our and lifelong loyalty digital the interactions smart a engagement life-changing from complete and advocacy. interact program beds, individualized noticed the our smart from everyday the of as our relationships drive bed key amplifying in value. SleepIQ we These repeat referral quality a one customers, the over brand

also on stiff, beds one sore our and of high grumpy. review XXX J.D. energetic advocacy Satisfaction and and rested more both star level and is number also ranking reflected smart This Mattress X.X are rating less less annual Powers in We in our Report.

We six categories also comfort warranty. top and number support, value one ranked including in the features, durability,

Moving our to business leveraging model.

inventory platforms practices for and initiatives are visibility fulfillment executed across the realized technology efficiency associated network. with the lean processes. is gains improvement In we our Our broadly robust fourth through our quarter, important of Continuous order the progression and organization. methodologies

to XX% cost also the net discipline points Our quarter. and fourth to growth for of led sales strong basis expense of XXX quarter leverage operating

from freight we costs, there absence tariffs cost, and net power still to benefits pricing of while increasing improvements, growth operating headwinds are XXXX, the profit rate the and to For expect expansion. related sales support transition efficiency operating

our network of with assembly Baltimore we continue and supply the center recent our opening distribution chain Importantly, to evolution, in two delivery make progress distribution centers.

key over and with strategy. with of balance multi-year frequently EPS we scale We and reliability digitally-enabled optimize driver, model capital this business our shareholder sheet to cash our expect differentiated and long Along our improved our progressive the advance a returns And generation outcome flow, with finally, is board, network capital operating deployment. evolution. structure and assembly assess Strong efficient term. a third

deployment to return invested growth share XX% capital. capital on per strategy XXXX Our XX% contributed our and in earnings

priority continues be Our to high return high investing top in growth deployment drivers. confidence,

complete over our $XXX transformation. have We and capital acquisitions million in to invested

are demands per modest internal Our $XX more approximately at capital now year. million

to discipline is our continuous experience we addition relevance time. over projects, customer our This and products, primary consumer capabilities. evolution innovate capital ensure In continue our to a to go-to-market

favorable priority our in second position, revolving our is credit amended liquidity. have financial markets facility. we business Our financial With

our Our larger executive $XXX million of revolver strategy. ongoing provides liquidity support to the

priority share is to returned we to return third excess up repurchases, prior shareholders. year. Our through the In XXXX, shareholders cash million over to XX% $XXX

inception million of Our value Sleep of since in our XXXX. very and to they Number our reflects continued about bullish purpose-driven million momentum. double-digit guidance internal our share we are mission return of and approximately on $XXX shares. to our the our we dedication its $XXX In In XXXX, and purchase summary, expect is culture. repurchase strategy proud their to the team, generating I business place brand am strong rates

life consumers. delivering our is lives. performance. every delivering advantages consumer Our and competitive strategy changing on to customers execution have this from of people's day of it innovation strengthening and The this to and extremely is team level rewarding and is our our driving We accelerated sleep impact hear growth

In David I value expect potential to are the to provide getting per We will long who XXX well-being. more share. and turn of of guidance on we generate quarter, our established value to creation have XXXX with which top-tier company In over will the tremendous smart the beds, XXXX, just over shareholder $X.XX to range guidance. now many our term. add year long started ways, purpose-driven it our increasing earnings we details consumers'

David Callen

enable XXXX, Since Shelly. you, growth. long-term Thank have profitable completely to Sleep transformed sustainable Number we

XXXX which capital, We increasing addition build X% work that net to in new of R&D from to the rollout sales completed the spending drove our XX% required increase reported net In XXXX. to led, or adjusted reported about recently, of of or capacity. adoption adjusted led platforms. most backbone capabilities. we security, innovation, Consumer integrated of back our X% to vital implemented X.X% XXX for significant XXXX. growth ARU beds smart since of our investments sales We've painstaking growth our built This our is and revolutionary our prioritized system today. and has XX% EPS the innovations two the of ERP half and providing a operations growth scale, XX% One, technology in game-changing XX% this

customers shifted overhauled with stores artificial SleepIQ brand. healthy XX% XXXX. more non-mall second Sleep ago. a The We and technology portfolio direct-to-consumer of six the a the Number for provides XXXX XX% locations ending We've years with portal our at with distribution XX% of our end daily intelligence than from strategy adjustable interaction combines XXX comfort to

growth. for we designs, more operate we delivering stores than retail in-store award-winning about With investments, states created an technology are stores average. best XXX strong experience meaningful through that enhancements, XX Today, on and XX% economics with these exclusive capacity in larger in

physical online advancing our we search, shopping cart comparisons, product While retail also to our and streamlined convenience. improve experience

Our provides integrated vertically for strategy our go-to-market omnichannel experience customers. a true

XX% Our compete in mattress low online years. changed a average sales $X.X in exceeding Today, with sales the annual brands. interest in XXXX. has we now significantly million per category including six with is stores $X our of annually, The up store nearly from XX% also last million chaotic industry in XXX

We marketing are proprietary our the environment in of strengthening we've share because this market actions capabilities. taking taken including

Our and econometric sleep. proven brand and NFL Number marketing, amplify agile the the like competitive partnerships breakthrough clutter and digital the with Sleep model, quality

at our environment. effectiveness far spend complex sales of capabilities demonstrates competitive XXXX in XX.X% more media the of Our a net marketing

XXXX. investments, since now and we've the benefiting structure, strategic from are capabilities We built that

XX% invested on cost the through leverage capital capital breaking the a decisions. consumers. the is of Number, our infrastructure Sleep has premium efficiency brand return the XX% with while company sustainable and capital in demonstrating of Sleep to we XXXX is can Number, reemployed investment Our X% now

X% We QX including superior well-poised future. growth are sales for growth new value unit of are quarter. ARU contributed stores $XXX Comp were delivering X% XX% net X% up and was for the and and growth. in the million shareholder today Reported XX%

than stores growth. sales new For each of the record three unit year. year ARU the Comps and growth net growth contributed for more X% grew billion X% $X.X points of and X% with

full to refer timing that sales release either please XX year affected XXXX For XXXX, results for a the reconciliation had no the earnings additional clarity, but and shifts year. of within EPS quarterly of on Page performance impact both and of

transition point as in XX% XX million while the XX we and quarter, margin sequentially inefficiencies last basis gross year-over-year expected. by new In cost QX a Our million of versus tariff $X.X rate a absorbed reflects step-up point year. and basis pressures, reducing improvement QX $X.X

media tailwind transition versus of Key Eliminating, opportunity Our expenses that provides full those margin moment. points to XX.X% included gross drivers impacts XXX included, XXX absorbed net in lower as incentive the XX% $XX of smart Net expenses beds. de-levered in and volume year basis year points. $XX basis On to prior the growth, more basis top line percent pressures operating million basis leverage prior basis of of all approximately lift full fourth versus XX reported the in XXX costs. leverage, points a gross quarter XXXX point on million leverage operating I'll in a of QX, a a transition profit operating year We compensation discuss quarter. reflects year a profit XXX sales.

in Record increased $X.XX $XX X% net profit comp sales. of full and growth, of in $X.XX each Together, For nine Continuing our net rate XXX% XX% XX% XX% and earnings XXXX. income earlier. full included absorbed of of to million on transition using operating grew approximately months net tax our approximately cost, or deliver the net EPS of of gains year transition noted impacts year, increased QX XX% drivers while performance during impacts from adjusted growth. share offset times share first per adjusted net reported $X.XX growth the increased reported EPS and per benefits. X%, three earnings XXXX four interest all absorbing reduction, while sales share sales these

full million including of invested in and million in generated cash stores operations $XXX For the from high-value $XX projects opened XX capital year, XXXX. new we

repurchased year remaining of outstanding share also our shares authorization. We the our a and $XXX million million ended repurchase with under $XXX

covenant expanded with to to we increased $XXX to as EBITDA. February continue times $XXX share reflecting XXXX debt, XXXX million shares. in value X.X and continued of We We million, million capital our million are our see recently ended strong the leverage of extended of our of $XXX XXXX, execution $XXX repurchases methodical net the We expiration revolver planning strategy. to to

an providing changes of Our partnership of as of benchmarking liquidity ratio X in scenarios. are these times board, X.X to downside range possible, conditions. with market and average several our companies After we is liquidity leading analysis our on and as relevant targeting with well banks discussion made varying ongoing alignment This forecast EBITDAR. leverage based

to operate as investments or from to XXXX, profitable that time plan we range time In to execute growth. while above to We for prioritize we slightly harvest below expect sustainable continuing strategy. returns our long-term

range is earnings decile XX% EPS range top $X.XX to of growth deliver midpoint. at to represents of expected quartile EPS year-over-year guidance $X.XX and XX% XX% XXXX to Our the top to performance. This

ARU. X% Our growth full half growth XXXX. we the consumer EPS from guidance units net when see the half to assumes for a opportunity first confident and in XXXX. half in adjusted lap XX% in back growth with back growth We higher The EPS the of from range the year assumes both sales XX% than

which in store to expect includes we As the XXXX. new million to quarter. growth always This low this $XX new from in million will quarter invest We sales to XXXX, our XX single-digit to for to vary planned stores XX plan year. contribute open capital an $XX projects to acceleration in to

improve to XXX the lift to our pressures through expected operations benefit-driven XX basis of gross basis in expect XXXX, headwinds. managing meaningful rate logistics tailwinds to tailwinds. and while Volume-based in are to improved absorbed We be points. also leverage, XXX points XXXX Eliminating transition provides XXXX and XX pricing margin

to points mitigate to $X million in to to and basis operating gross growth, by but million side, of XX and sales contribute to and improve pressure diligently the Executing plans incremental or profit to business attach headwinds products work is our freight margin XXX margin continue XXXX. On net in approximately delivery points. basis bedding of rate. profit other Stronger adjustable expected $XX also XX our to we basis expected XX tariffs are to XXXX dollar

We reach profit continue prioritizing longer position. to expand to margin while leadership operating see term, opportunities and consumers our to investments sleep improve more growth

is a Higher tax to XX.X% be offset headwinds versus XXXX in share will tailwinds also income manage expense a lower XX.X% XXXX. headwind rate from XXXX. plan rate, interest We tailwinds count. deployment which assume in in capital more than We and by a

in at of capital are or XXXX performance XXXX strategy the in with our closing, mid-teen of high of our cost the back half leading In deliver execution to versus thrilled the we expect our acceleration momentum of into least and We deployed. single-digit ROIC XXXX the XXXX.

to the continue questions. and line point, with results teams life-improving creation vigor Michelle, passion like for dedicated execute to delivering Our customer’s our our open superior shareholders. value to this we'd value for in at

Operator

come will first John Instructions] [Operator Our Baugh you. from Thank Stifel. question from

Your line is now open.

David Callen

John, are you there?

John Baugh

I’m Yes, here.

David Callen

Okay.

John Baugh

Can you hear me?

David Callen

you. thank Yes,

John Baugh

I curious tone… Okay. the bit on I was little a guess

David Callen

John. Sorry,

lost we think us? is still John you. with I Operator,

Operator

looks It lost apologize. do John. like we've I

me give can moment. you one If

Bobby Our next Griffin. from question come will

Your open. line is now

Bobby Griffin

Thank quarter year. end to my question and and taking afternoon, the a great for Good a you contracts everyone. on great

David Callen

Thanks, Bobby.

Bobby Griffin

know just of I what think ask out quarter. November double and color him was how know I that maybe give carried as I digits October business spoke, ahead tone on and any so the orders up my time December from but unfold? I'll through and help go first John the the how asking, did quarter? last were you the Can us we

Shelly Ibach

Yeah, very bullish our Bobby, we're business. about

guidance and indicated continues driving to that smart Our since time we've momentum moved we've that since the reflects momentum XXX into strong a we the double-digit beds. experienced been XXXX. I increase that that new

Bobby Griffin

flow operations was then there if David give accounts capital of the two working maybe and color you for for Can outlook XX%. drivers flow that the then Okay. questions the maybe any It cash XXXX? about cash And this within some is you. look timing like some down modeling of maybe on One, on year. the issues from

David Callen

also had had pressure million some cash pressures with payable complete accounts We go grow can compensation you that about associated directions. programs There’s from list sheet our basis and our we were year-over-year, benefits had we but Bobby. We of that flow list. the both and had Sure, we can with year-over-year some an upswing from through in changes we balance going incentive inventory through $XX off-line.

as a guidance on that expect next just model a we've we both guidepost for use line. slide the far for at. as XXXX. website growth bottom IR There top I forward provided eight can look flows out you is and our collar EBITDA lot of the As year, page on updated deck going cash around a for and in that would

Bobby Griffin

then on expect And kind we Should I per next I me that to run tune bit a Okay. help guess $XX about rate should How that? appreciate just more quarter the That's think it. guess this model. million up from lastly is I little helpful. of year G&A or we type higher?

David Callen

for provide the lot line on of not XXXX of overall XX% you total to individual Variable of of XXXX. our XX% expenses on items. to we've a is a slide done operating We're tailwind give going the comp net color that What was in sales. rates

expect spending to prioritize a we a headwind We marketing as and drivers. be our it of to well as our in support innovations, growth bit XXXX retail

Bobby Griffin

helpful. That's Okay.

can with leverage, sales a the inside maybe it G&A have headwind as line tailwinds other line a other of expenses operating standpoint that from then is think items within and inside percentage -- of the and percentage maybe then is operating little a G&A sorry, items tailwind fair? from a I So from sales of I’m you could

David Callen

necessarily. Not

overall, points to points basis you out rate expected XX basis gross that calling look improvement. points. it to the is increase at basis how Bobby, operating our profit XX called to If points out expect of just we XXX I And XXX basis from modeling we're margin

our result mentioned. leverage expecting that ton things we're XXXX a expenses just implies the not of as that of So of operating out in a I

Bobby Griffin

again, of that appreciate the XXXX, to growth the up pickup. in going EBIT and Best see nice here on Really to I clean once congrats and right. forward XQ. luck in All that helpful model.

David Callen

Great. Thanks Bobby. a lot,

Operator

John next with question Stifel. Our Baugh will come from

Your now open. line is

John Baugh

you me Can now? hear

Shelly Ibach

Yes, John.

David Callen

you There are.

Dave Schwantes

Hi, John

John Baugh

Okay.

digital the on lot you have noise. concern you're Sorry, sounds sounds through all the market, a marketing, it held recovery did have but mall-based markets and because Obviously, was fair with stores, a macro Christmas around about et you that. Is you're big stock drop like big steady of see off -- characterization? various still some with the fairly doing recovered? I since things cetera. guess I of the things products like cutting then the of some that consumer, it a Shelly, and a Or

Shelly Ibach

the momentum smart since and consistent in growth description we Year. new your into characterization. that is XXX introduced seen No, beginning double-digit we're fair the caring a beds the We've New

John Baugh

six Now, just it Okay. this we've thought? you And on or is Shelly, months the where unit had worse? a on I mix for curious XXX full the mix the better thank about how been you months, floor. about I where mix? tracking the seven about But Is is guess, bed thought smart you all the guide. it's basis

Shelly Ibach

messaging, breaking when topic. look important Again, $X.XX. This quality on clearly at is great question. And sleep our proven is an it through we brand at

then for process Now our and that product finding that traffic And selling drives line to traffic quality the our best our brand. team the our throughout customers. convert mission-driven

So we're the really we're results that happy seeing. with

had a prior see the as as we similar can bringing ARU mix customers into have series to more result growth and brand a unit XXX, overall. but the of yet you the We

John Baugh

Okay. question a And record rate. conversion my mentioned you is final

conversion always high. Your has been rate

Shelly Ibach

Yes.

John Baugh

out there that any give call But you Maybe want drove secret like you on to us don't is to can think you color a improvement? the as give sauce. this what

Shelly Ibach

factors. Yes, a number of

talk First traffic. about of quality we all, driving

to all to not the through important and conversion. able so also is right traffic higher stronger traffic to now equal, traffic and and is have such cut with marketplace an in be spend area high-quality this So, quality leads media the much

certainly it's a So, factor.

they were for a is smart as smart some sale as bed. the models in old our past our both simpler much when Another selling of the you well It's sleep And professionals. important factor that line the especially, consider year, for bed. XXX

have and how sell proven their advocacy that converts you a are X.X a consumer We've on equation has we strong strong driven and learned and is band that incredible of on based so and streamlined. product the that about a it's that mission bed the traffic, very as conversion to get Now, customers' offering kind sleep high-quality our testimonials we lot a can quality marketplace. having it their commoditized in When rating balance. value and

John Baugh

Great. Thanks. fourth luck. on took share so in we're Based quarter it significant what seeing, the good

Shelly Ibach

so think too. you. Thank We Absolutely.

Operator

Thomas question next with KeyBanc. come will Our from Brad

Brad Thomas

on good year Hi, well add let as here. and solid afternoon me my congratulations

David Callen

Brad. Thanks

Brad Thomas

first ask sense I product as these a about that and want you're get marketing level to up new about year the appetite of reset how a and sales advertising to doing stores thinking out this you're advertising your been there of all you the maybe partnerships have and given crank percentage of new with like NFL. a have

Shelly Ibach

as media our years XXXX, few Yes, for sales to similar We've to expected a as about we of think XX%. a around set XXXX. percent in be that we

are the and continue XXXX. in XX.X% We we media half at in back drive hear in did We increase an will XXXX. in to

Brad Thomas

should the Great. And States long-term stores, of for outlook still on Shelly I latest number what for respect what model? Sleep or United then The thoughts repositioning stores and for you the Number how for a candidates today relocation a with your sense the are to give guess, of in be could us many

Shelly Ibach

great. Yes

is us. strategy of execution opportunity is profitable of here. with of that's this We're not front and the stores backdrop we're we necessarily clearly we of growth opening manner number great Our are a our not in distribution significant and element where excited a such sustainable our that in about where evolutionary continue And case. in growth retail year discipline key

shopping you're of are relocations but were to of there more been markets new about few on opening the too. time right great performances and making This of local really take great growth estate more marketplace, constantly we much store had us and the a improving our have that a and it's profitable count. leaving how real right and just based top further liked we're of in out to gates, and the a that not line now at our bottom is developing, market. seeing and out -- sustainable portfolio relocations and when importantly, phenomenal about sit mature particularly driving each continuing some we on focused over just we consumer that there can markets healthy sell where just only evolving We location it the last in some of and that number sure weeks in store For have in

for also XXX haven't we put stores. We there still are that target and to that continue XXXX percentage coming. potential we would and many just obviously be are growth store number to small a in growth we between outpace signaling we and So, see that's XXX where had are it out how overall, a but important We stated a on, growth us sales online of to is online to sales and our our expect very base. and

Brad Thomas

you Great. very much, Thank

Operator

Keith with Our question come from next Peter Piper. will

line Your now open. is

Peter Keith

the midpoint $X.XX. of $X.XX and I'll Hi. to call $X.XX at everyone. Thanks a year guidance lot. Good afternoon, I just just want look at full the to

$X.XX the So from telling could the The bottom like changes frame-up you have of ago guess, ago? three the I a good couple sales about of us $X.XX. months percent It sound range months sounds help and you about what couple And into down too. New momentum some down you you came is us targeting a what good were for it Year. end

Shelly Ibach

Yeah, is Peter, as I performing business stated, well. our really

Our new continued into guidance that reflects those strong our that we've and beds XXX momentum smart with XXXX. experienced has

XX% just the versus finally, execution strengthened we represent of quartile top would that And add represents top And performance. EPS $X.XX a range our our the to XX% XXXX. that innovation will our growth to decile Our $X.XX I strategy EPS has believe consumer guidance to for advantages. $X.XX of competitive

performing. our and are business confidence is in We how accelerated driving performance

David Callen

and versus then Peter we in lap the XX% on the front as the given about half. add of growth of half a first color from XXXX. half that the back also in I'll growth single-digit mid expecting bit we kind half we're stronger little growth back growth adjusted And

Peter Keith

now is for most the That in And thinking looking potentially the on headwinds transportation headwinds logistics guess tailwind And are the companies that XXXX, front saw helpful. very then I now? tariff that Okay. are slight certainly but as a XXXX. right there What and that are understandable.

Shelly Ibach

still we there saw last pressure. in and year highlighted that deck the certainly We the a also too, and is there it. It and labor tailwinds slide headwinds is it outlines exists IR

We have in as home too. is delivery in that business arena our pressure there well model labor and

David Callen

continues for Yeah. we drivers a headwind enough trucking Peter, industry be the challenges pressure a that to for to to XXXX. that anticipate hire point continued in be the

We while the recently are favorable high. gas have also been been labor -- has rates

people hiring into lot or You see a issuing of just attract to jobs. bonuses bonuses people these

in So we expect us that for headwind XXXX. to be a

Peter Keith

actually enough. David, all Okay, fair you. question one last for that's And quick

framing for the targeted at end you up thanks Where stand guys debt-to-EBITDAR range. So XXXX? of the do

David Callen

it's X.X. X.X. to I want I look just it think up

Peter Keith

very Okay. you Good Thank luck. much.

David Callen

Thanks. X.X.

Okay.

Operator

Our Seth will Basham Wedbush. next come from question with

now open. is line Your

Seth Basham

Thanks afternoon. a and lot good

Shelly Ibach

Hi, Seth.

Seth Basham

there. Hi,

some comparable quarter talked in If in you've growth the So of terms expectations the unit backlog as well ARU at look $XX million store units we out as the from XXXX. we results fourth at we both saw implied about declines. shift looking and back growth, actually

for is? you store declines Are gives understand you confidence thinking things in are trying I'm So why unit that growth just XXXX? And reverse? expecting what comparable to you or will

Shelly Ibach

XXXX. we both to ARU expect do all of and from growth I'll metrics unit and overall first speak in growth Well,

David Callen

the really try delivering XXXX back comp. I both Seth growth and in impressive to slide that from blemish hard a line XX% fourth half, basis and units impacts provided think included adjusted in the XX XXXX quarter Yeah. on a and ARU these highlights in pretty had XX% you're top We we results. all the and that in shifts Frankly find on the page growth. an reaching both you

Seth Basham

and that But we anything double Understood. the first effect, business. certainly have it digit ex-the order momentum growth weeks in away strong for shifts spoke the like I'm not balance of quarter. time Shelly take to few to trying last about of results quarter. results suggest a there you you the talked is some backlog your from seems for your slowdown the the

into all have of correct? is that XXXX? an we First seen And improvement

Shelly Ibach

we have in and introduced had the smart had business has and units in that continued both we growth XXXX we and XXX Since ARU. double-digit bed, have growth from Seth our

XXXX. in that expect We

the fluctuations will We on ARU. quarterly and have units

series, closeout. we on full there. lower we will quarterly on C both year. again that we we'll lot in fluctuation growth the drove have the We'll a But talk out often closing that of see margin but against because last a up we're units when basis about some year from So at always

David Callen

longer to saying, back the period double-digit year going highlight into we're and of over again of XXXX strong just half time, a had Again growth. we've

of So of I stretch time -- a be about. long mean period there very talking us that's for to has

to want to there that's performance or fluctuations really at If be long are time. strong period a always look month-to-month a you over of going but day-to-day

Shelly Ibach

consistent. been it's And

Seth Basham

Thank good. you Very guys.

David Callen

Thanks.

Shelly Ibach

you. Thank Yes.

Operator

question will Barclays. next from come McClintock from Our Matthew

Your line now open. is

Matthew McClintock

enter us overview Presidents' Hi, see your especially the afternoon environment yes. far give you industry today an I chaotic everyone. year, standpoint you to competitive Earlier this could as Thanks. pretty you solid. referenced from Day industry just standpoint. Good what wondering across we maybe the from performance so if a all the promotional important appears a and was or clearly weekend of just

Shelly Ibach

would been our message first and the yes, the the And and speaking to environment to the terms of I continuing time we've with the with spending smart the of for quality end, breaking speaking $X.XX well. marketplace sleep the it of XXX first of number continues quarter at we're lot search clutter beds. what same this through and variety as here the Sleep been of year year with amount that we've proven this a around consumer particularly Number a the and in primarily a say There environment different that heavy in strong the messages. at sort momentum type driving media in continues dollars brands through. of operating we In is are to Sure. of is I'm this in starting

Matthew McClintock

get And if for one I Thanks could follow-up. that. then

around four-wall you and how you Just in head uplift were was talked any perform. about could sales uplift pretty performs that. wondering I if I give so a you toward or about and the relos terms our you those -- us give we was typically wondering or of maybe get just how can metrics relo us anything if could optimistic

Shelly Ibach

a There distribution how execute based a profit go fair we on of XX that detail in that provide our XX on against pages strategy four-wall deck are that the couple amount it some illustrate too. and slides detail revenue on average store fair of and amount and into does of per

Matthew McClintock

Okay. Thanks.

Operator

with will SunTrust. question Keith Hughes Our come next from

open. is now line Your

Keith Hughes

Based of like you. that on you seems numbers. contributor. missing it be earlier, XXXX of year It be and for on terms biggest revenue have said just to be only heavy it I'm Thank how a like is in on it this to guidance looks we've more will of low you think the going the going than What would work? a opening what store is units based single-digit one kind And said seen. this I the

Shelly Ibach

a Yes than year it's last heavier year.

net are beds. line includes introduction smart half closures recent well in a focused that past combination been first had other full have of this always We've the of new stores the year with so it along of we years and large of last some on and The the relocations. as

David Callen

open opened year the when in weeks on store that base year your is it's the to number depends store contributes course the of results on actually that of gets overall. the also the It during largest course and the the store of

Keith Hughes

No, it your increase net the from stores going to year. X% looks this you're like about

would about I that normally of would half So contribute. assume

is that, than that less right? it's saying You're

David Callen

at you're If yes. range to we X% it's the the that splitting X%, growth difference in provided X%

Keith Hughes

be would or…? That half

David Callen

in single-digit that's in than Yes. stores. growth X% we're We low XXXX from saying new higher got said, and we've new a little stores a growth from that and XXXX

Keith Hughes

Okay.

Shelly Ibach

heavier half And in little XXX back post we stores were -- the we implementation. our opening opened a in

Keith Hughes

correct? between And of the be the certainly think ticket should remainder split I and units organic it growth

Shelly Ibach

that Yes. annual Again, look yes. yes, an way fluctuations, fair basis. it at to on quarterly It's

Keith Hughes

number, but the impact there so that positive I missing, higher unit within worked numbers thing given its you've mix side, whole I'm expected just And to consumer based the refranched that's on calculation? something you it or on when Is be raw else numbers would that the like the those anything down, there line.

David Callen

we've in units up X%. and for Well, beds. we when we as-reported an me, X% were excuse adjusted XXX were X% the half, shifts or, saw up back the highlighting been not that's basis, about. in the that the from that talked fourth acceleration smart But on quarter That's the they

Keith Hughes

you. Thank Okay.

David Callen

a lot. Thanks

Operator

next from Michael come Lasser with will Our UBS. Instructions] question [Operator

Your line is now open.

Michael Lasser

Thanks my a taking lot for evening. Good question.

Shelly Ibach

Hi, Yes. Michael.

Michael Lasser

Hi, Shelly.

business. you're confident really of to back XX half. the And So days going have you and seem be ago you knew about in the excited comparison the to tenor a tough

what's points be XX be and down in basis end XXX that to the by in to points? XXX by last resulted guidance down of your ratcheted has So the line midpoint changed XXXX basis low ratcheted top the days

Shelly Ibach

a XX% we're for Michael, experienced it It Yes. XXXX growth reflects EPS in our providing XX% a guidance the growth performance we've reflects today midpoint. since at and beds. with also introduced XX% to the we've momentum the XXX

David Callen

haven't just that, on this for I'll before we call. Michael, guidance XXXX add detailed provided

we how and guidance provided about that that bridging we going is So walk a thinking from target. XXXX our providing you a thinking about for we're the were the had helps understand Today XXXX this XXXX detailed business. performance, you to how actually the $X.XX of first $X.XX that midpoint and which is we're time guidance

Michael Lasser

similar. provided are you -- quarter guidance, of they're for when the your Okay. you at path I third guess the that look past back and very slide the slides

like that fair? see change interpreted I that's necessarily So guys it sounds as but change, that where don't is guess being is the you a

David Callen

deliver guidance we've help thinking guide just provided. business how It's the to about and how understand the Yes. map a we're you against we can

Shelly Ibach

and tailwinds some the well. $X.XX mentioned year guidance last on quarter we And have includes then providing we that headwinds XXXX for slide and that as now, closer detailed And out today that in, Yes. the on target. was this the illustrative, we

Michael Lasser

year drive past $X.XX It's follow-up typically been outcomes for wider my you've year. Is is of Okay. and Understood. range wider? dependent in $X.XX than the And it much earnings that's terms is of last $X.XX could $X.XX sales? what on as this your a what could range. provided case it in the the And downside all maybe range upside drive of case? Why

Shelly Ibach

about well We growth. said guidance Yes spread with sales And as X% different our we've associated as the first is the of that EPS variables points. far all I to four XX% a and give is a can there in to come of think headwinds varying good good and you degrees think that's looking way at the tailwinds about where they it. will illustration;

Michael Lasser

Okay.

David Callen

weigh basis a reduction that in incremental bit * guidance our tax little also talking not more. actual we've of that a let got is as on and of much benefits count much It's And percentage that rate This about it's difference. EPS we're from the both me impacts dollars just an make too. share

guidance taken the also thinking on about have into those So, account range. we're be how

Michael Lasser

committing can the ratio one assume in. I If XXXX? reversible higher that continue are of the leverage that the we least fourth light sneak should into drain again in is Understood. quarter capital one fact heavy In you going not last Dave, to or at occurred very working to that the from

David Callen

change based et I -- the earlier swing on compensation of -- our and of called on compensation impact million media that do those XX% cetera. -- the a happens year-over-year our timing lot or going did programs We flows out but media inventory, amount those AP Yes, to incentive $XX was from mean I certainly things are fluctuate the of in cash that and amount the from of impact year-to-year. the accrued things

will those fluctuate. So, always

Michael Lasser

very answers. Okay. you These are helpful much. Thank

David Callen

you. Thank

Operator

come America. will with of question last Bank from Nagle Our Curtis

open. now is line Your

Curtis Nagle

Good evening and questions. thanks my taking very much for

one let's the little So, pricing talk is I a guess, about bit. first

think or you've how this some six does a ago. Just in kind of maybe wondering it months looks price that have back just about bit looking stance at perhaps a taken? just materially And so relative the to models a to you three then is know be if guys but have guys How of your I made year? at the like case. commentary seem for should some pricing on power number of about it taken past pricing a we least year much and fairly change you

Shelly Ibach

our about growth Yes, that Curtis, with additional always X% is the true. and number it still over consumer ARU approximately associated almost stands talked represents we have that for that and benefits time pricing

but falls think to we growth. ARU price So, it's a i increase take about overall series good Overall, it. that the and on way still into X% $XXX that in of p did October,

Curtis Nagle

I to a bit of most thoughts just to, indices guess, curious kind reference just behind of made softening an rates, little when confidence what still enough. assumption of a confident or lapping the tax then I'm to year? more happens for it but recent guess through is your you we're I levels at Okay. knows looking Fair guess, consumer. assumption declining. is the high I We're consumer gives who trade. strong housing what what at that you going a start with And

Shelly Ibach

what's perform XXX overall to with a of bed double-digit hasn't and smart smart value performed been people's confident. starting growth are throughout at a as the – and and this and we've correlated our and our When that's that full XXX with environment smart we able generally, most beds. I'm we what experienced same that's with but sure with industry we've guidance XXX the is line we've since business and on confident $X.XX. that characterize been minds, strong equation at Clearly, confidence the the beds, consumer consumer our level And at like environment in introduced would consumer look operating we we the

with We them our are convert those quality beds. give take customers share and smart a in confident night ability to and sleep our

Curtis Nagle

very it. Thanks much. Appreciate it. Got

David Callen

Curtis. Thanks,

Operator

like would for to remarks. you. closing the call now Thank over I turn

Dave Schwantes

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

Operator

joining for today's again you Thank conference. today's call. concludes conference This