Select Comfort's Air Ball

When your Sleep Number mattress is too soft, you simply increase your setting by increments of five until you get to the desired firmness. But what do you do when Select Comfort (Nasdaq: SCSS), the maker of those mattresses, produces a soft quarter? Well, it's hard to tell, because we haven't seen one lately.

Yesterday's third-quarter report was about as close as you could get to a disappointing quarter -- with the stock trading 5% lower in after-hours trading -- and even that really wasn't all that shabby.

For the period, earnings per share grew 25% higher to $0.25 a share, and net sales rose 18% higher to hit $208.3 million. That was in line with Wall Street's bottom-line target and a bit light on the top line. After six consecutive quarters of blowing past analyst profit projections, Select Comfort did prove mortal, with weakness toward the end of the period tripping up its plans to provide its seventh straight quarterly surprise.

The company is still upping its guidance for 2006, though. It is now expecting to earn between $0.95 and $0.97 a share this year. Earnings will grow 22% to 32% higher next year, given the company's guidance of $1.18 to $1.25 a share come 2007. The problem is that Wall Street is already perched at the high end of those ranges.

Say it isn't so, Select Comfort. As an investor and Sleep Number bed owner, I wasn't sure whether I was sleeping so well because of the bed or because of the investment. Now I have to toss and turn as I sweat out the pivotal holiday quarter.

I'm still confident that I've bought into the right mattress maker. Sealy (NYSE: ZZ) recently went public, yet it had lost money in 2003 and 2004. Tempur-Pedic (NYSE: TPX) is a more attractive alternative than Sealy, yet the foam-mattress specialist has seen net income and net sales grow just 3% and 8% higher, respectively, through the first half of 2006.

Earlier this month, I argued in favor of Select Comfort during our weekly Dueling Fools debates. I still hold the same position. The company continues to show aggressive gains in comps at what will be 440 different namesake stores by the end of the year, and it has been selective in siding with different retail partners. I like its moves into new specialty areas, including convertible sofa beds and its deal with Winnebago (NYSE: WGO) for RV mattresses.

"Sleep well," the company's CEO said at the end of last night's conference call. Let's hope he means it.

For more on the sultans of slumber, check out:

• Select Short Squeeze Redux
• Sealy's No Sleeper Yet
• A Dreamy Quarter for Tempur-Pedic

Select Comfort has soundly beaten the market since being recommended to Motley Fool Hidden Gems subscribers in the spring of 2004.

Longtime Fool contributor Rick Munarriz thinks a good night's sleep is better than a balanced breakfast to start the day off right. He does own shares in Select Comfort. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.