Shares of mattress maker Select Comfort Corp. rose sharply Tuesday, as a Morgan Keegan analyst upgraded the stock following a 60 percent decline in value in just the last six weeks.
Analyst Laura Champine lifted her rating to "Market Perform" from "Underperform," noting that the Minneapolis-based company's market cap has dwindled from over $1 billion at the start of 2007 to a paltry $150 million today, as the company routinely lowered guidance and delivered results below analysts' expectations.
Although she remains negative on the company's fundamentals _ especially its continued weak sales trends at stores open at least a year and the fact that it is highly leveraged to weak mall traffic trends _ but believes the market has priced much of the negative outlook into the current share price.
On Monday, activist investor Clinton Group Inc. urged the bedding maker to close stores and slash expenses to help reverse a steep decline in share price. The stock rose 61 cents, or 18 percent, to close at $4 Tuesday. A year ago however, shares traded at a high of $19.04.
Bedding makers have felt the pinch of a weakening consumer discretionary spending environment, as high gas and food prices, coupled with a declining housing market, have squeezed consumers' wallets.
(This version CORRECTS to remove reference to a 52-week low.)
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