A Lumpy Mattress Stock

As a Select Comfort (Nasdaq: SCSS) shareholder and mattress owner, I'm delighted with my bed but horrified by my investment.

Select Comfort shares sank by 31% to a new Sleep Number low on Thursday, after the company posted disappointing fourth-quarter results.

Net sales slipped by 4% to $190.7 million during the period, but profitability fell by 75% to $0.05 a share. Earnings aren't the only things that have shrunk to a quarter of what they used to be. Select Comfort's stock is also trading at a quarter of its 52-week high.

It's a grim report. It also comes two weeks after rival Tempur-Pedic (NYSE: TPX) disappointed the market with its quarterly report.

It's official, then. The high-end mattress market is in a rut. It doesn't matter if you're trying to sell beds that are dual-chambered air mattresses by Select Comfort or the pressure-relieving TEMPUR material that sets Tempur-Pedic apart from more mainstream manufacturers like Sealy (NYSE: ZZ). Folks just aren't upgrading their mattresses the way they used to.

Selling big-ticket items in a soft economy isn't helping. Housewear retailers like Bed Bath & Beyond (Nasdaq: BBBY), Cost Plus (Nasdaq: CPWM), Williams-Sonoma (NYSE: WSM), and Pier 1 (NYSE: PIR) have the luxury of moving cheaper trinkets. The same can't be said for the 470 company-owned Select Comfort namesake stores or the mattress merchants that sell the company's versatile beds.

This year won't get any better for Select Comfort. The company expects earnings to fall further in 2008 than they did in 2007. Store-level comps are likely to continue to diminish.

One can always hope that some of the stimulus package rebate checks will go to mattress upgrades, but that may be wishful thinking at this point.

Sleepers appear willing to lie in the beds they've already made. As a Select Comfort investor, I'm starting to feel the same way.

For related Foolishness:

• Select Comfort's Worst Nightmare
• World's Scariest Stock: Select Comfort
• Select Comfort Lets the Bed Bugs Bite