Sleep Number reported a mixed earnings release with better-than-expected earnings but lower revenue, indicating successful cost management.
Sleep Number (SNBR 1.07%), known for its customizable mattresses with integrated smart technology, released its fourth-quarter 2024 earnings on March 5, 2025. The company reported a notable improvement in earnings per share (EPS), with actual results showing a smaller loss of -$0.21 per share compared to forecasts of -$0.23. Meanwhile, the company’s revenue fell short, registering $377 million against an expectation of $389 million, owing to subdued consumer demand. Despite these challenges, the quarter showcased resilience in gross margin expansion, reflecting a focus on efficiency and cost reduction.
| Metric | Q4 2024 | Q4 Estimate | Q4 2023 | Y/Y Change |
|---|---|---|---|---|
| EPS | $(0.21) | $(0.23) | $(1.12) | +81.3% |
| Revenue ($M) | 377 | 389 | 429.5 | -12.2% |
| Gross Margin | 59.9% | N/A | 56.6% | +3.3 pp |
| Adjusted EBITDA ($M) | 26 | N/A | 18.3 | +42.9% |
Source: Analyst estimates for the quarter provided by FactSet.
About Sleep Number
Recognized for its bedding products, Sleep Number focuses on smart bed technology that customizes user comfort using adaptive adjustments and health insights. This transformation into a wellness tech company has differentiated it from traditional mattress sellers. Sleep Number’s business model heavily leans on integrating technological advancements such as AI and machine learning into its product lineup, which helps maintain its market competitiveness.
The company’s recent strategy prioritizes innovation within its smart bed technology and a direct-to-consumer distribution model. Maintaining financial resilience alongside these initiatives is crucial, especially amid declining consumer demand in the bedding industry.
Q4 Achievements and Challenges
During the fourth quarter, Sleep Number’s gross margin for the quarter improved significantly to 59.9%, up from 56.6% the previous year. This margin boost comes from strategic cost reductions, including $28 million in operating expense cuts year-over-year for the quarter. These adjustments cushioned the effect of revenue declines.
However, the company faced a decline in net sales, which totaled $377 million, a 12.2% decrease from Q4 2023. This was largely due to a drop in retail store sales, which accounted for 86.6% of total sales — a slight increase in contribution from last year despite fewer sales.
Despite these market pressures, Sleep Number saw improvements in financial health, reporting a $36 million boost in net cash from operating activities. The reduction in its leverage ratio to 4.2x EBITDAR indicates sustained focus on financial stability, despite a challenging consumer environment.
In terms of product innovation, the company’s investment initiatives, such as the ClimateCool™ smart beds, align strategically with its core business drive — offering advanced wellness technology to consumers.
On leadership, a significant transition is on the horizon with Linda Findley’s appointment as CEO in April 2025. This change might herald a reevaluation of strategy, as indicated by the new outlook not being announced until further business review under her leadership takes place.
Looking Ahead
The outlook for Sleep Number remains cautiously optimistic. Given it expects to tackle ongoing industry challenges such as high interest rates and lower consumer spending, strategic adjustments are in the works. Although new financial projections have not been provided, the leadership transition suggests a reappraisal of its strategies.
Investors should pay close attention to the company’s ability to sustain gross margin improvements and cost efficiencies under evolving market conditions. Additionally, the forthcoming vision from the new CEO could provide pivotal direction for Sleep Number’s future trajectory.
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