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Bedding Stocks Sleepless; Electronics Retailers Without Spark

Brian Nelson, CFA
January 20, 2014

Maker of the Sleep Number bed Select Comfort (NASDAQ: SCSS) recently sent shudders through the furniture and bedding manufacturing industry when it warned that fourth-quarter sales would miss the mark and that the challenging times would continue into 2014:

Select Comfort Corp...reported that preliminary fourth-quarter 2013 total net sales grew 5% year-over-year to $231 million, with flat company-controlled comparable sales growth. The mid-point of the company's fourth-quarter EPS guidance range of $0.18 to $0.26 assumed low-double-digit growth in total net sales and mid-single-digit growth in company-controlled comparable sales. Through November, company performance was trending consistent with the EPS guidance range, with solid sales results and expense controls. From Cyber Monday through the end of December, however, sales trends fell below internal goals. As a result, the company now expects fourth-quarter EPS to be below the low end of its guidance range.

The sales slowdown following the Thanksgiving holiday reflected a tepid retail holiday shopping season. We expect this challenging environment to continue in 2014 and are planning accordingly," said Shelly Ibach, president and CEO, Select Comfort.

Shares of Select Comfort trade at the low end of Valuentum's fair value range (at the time of this writing), but the research firm is not ready to pull the trigger. Instead of as a price target, Valuentum likes to think of valuation as a range of probable valuation outcomes. As is customary in their