Sleep Number (SNBR -2.73%), known for its smart beds and personalized sleep technology, released its most recent earnings on July 30, 2025, covering the second quarter of fiscal 2025. The company reported GAAP revenue of $327.9 million for Q2 2025, well below analyst expectations of $357.4 million (GAAP) and down 19.7% from $408.4 million in the prior-year period (GAAP net sales for Q2 2024). Sleep Number reported a net loss per share of $(1.09) (GAAP) for Q2 2025, compared to analyst loss expectations of $(0.11) and a loss of $(0.22) per share a year ago. Gross margin was 59.1%, consistent with Q2 2024, but the steep revenue miss and widening net loss signal a difficult and transitional quarter for the business.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | ($1.09) | ($0.11) | ($0.22) | (395.5%) |
| Revenue | $327.9 million | $357.4 million | $408.4 million | (19.7%) |
| Gross Profit Margin | 59.1% | 59.1% | 0.0 pp | |
| Adjusted EBITDA | $23.6 million | $28.3 million | (16.7%) | |
| Free Cash Flow | ($6.9 million) | $9.4 million | (-173.4%) |
Source: Analyst estimates for the quarter provided by FactSet.
The Business and Its Priorities
Sleep Number builds and sells smart beds with embedded technology that adjusts firmness, position, and temperature to the individual sleeper. Its beds also collect and use sleep data to give customers personalized insights through its Sleep Number app. The company manages its own direct-to-consumer network, with nearly 88% of sales still coming from its proprietary store footprint.
In recent years, Sleep Number has focused on advanced innovation (such as its "sense and do" technology and use of artificial intelligence), strong customer engagement, and cost control. As the bedding industry has slowed, the company has been concentrating on reducing expenses, optimizing its product lineup, and leveraging ongoing partnerships and data capabilities.
Key Quarterly Developments and Performance
The quarter was marked by a deep revenue decline, with sales dropping nearly one-fifth from the same period a year ago and coming in 8.2% below what analysts had forecasted (GAAP). Management attributed this slump to deliberate and aggressive reductions in marketing spending, saying, “We cut marketing spend dramatically in Q2 because the old marketing strategy was inefficient,” This reset in marketing remains a work in progress and has yet to yield stabilized sales trends.
Sleep Number’s gross profit margin, a measure of profits after production costs, was 59.1% (GAAP). Maintaining a gross margin of 59.1% while sales declined year-over-year is notable, and was supported by operational efficiencies and product mix. Adjusted EBITDA, which excludes one-time items to show the business’s underlying profit generation, fell 17% year-over-year to $23.6 million. The company saw an increase in negative free cash flow, using $6.9 million after having generated $9.4 million in Q2 2024.
Key metrics beyond the topline also deteriorated. Operating expenses before restructuring dropped by $48 million—or 21% year over year—outpacing the revenue decline, but net loss (GAAP) widened to $25 million, reflecting both a $13 million adjustment to the company’s deferred tax asset valuation and weaker sales volume. The expense reductions are part of a larger plan to remove $130 million in costs for FY2025, before restructuring and other non-recurring costs, exceeding earlier annualized cost savings targets.
Looking at the core business, retail stores remain the dominant channel. Sleep Number ended the period with 630 stores, down 16 from a year ago. Retail comparable-store sales fell 18%, while online and phone sales fell 19%. The average revenue per smart bed unit edged up to $5,880 from $5,802 in Q2 2024. Average sales per store dropped by 12% and per square foot by 12% compared to Q2 2024.
Outlook and What to Watch
Management issued full-year 2025 guidance forecasting net sales of $1.45 billion, representing an approximately 14% year-over-year decline, with an expectation that gross profit margin (GAAP) will slightly improve to 61% for the year. Operating expenses excluding restructuring are projected to be $830 million for the year. The company is targeting break-even free cash flow in the second half, and continued compliance with debt covenants. The leverage ratio now stands at 4.56 times EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring), approaching the maximum allowed by its banks. The company gave no additional detail on new product launches or major partnerships this quarter, making the next periods key for signs of real recovery.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
