Please ensure Javascript is enabled for purposes of website accessibility

Why Sleep Number Shares Are Soaring 30% Thursday

By Daniel Miller – Apr 23, 2020 at 1:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Amid a COVID-19 coronavirus pandemic, Sleep Number posts a fantastic first-quarter result.

What happened

Shares of Sleep Number Corporation (SNBR 0.66%), a sleep services and solutions company offering bedding, furniture, pillows, and other products, were soaring more than 30% Thursday morning after the company released strong first-quarter 2020 results.

So what

Sleep Number shares jumped in the extended session Wednesday when the company released first-quarter sales and earnings that topped analysts' estimates and then went higher Thursday when markets opened. Sales increased 11% to $473 million during the first quarter, topping analysts' estimates of $433 million. Earnings per share soared 70% to a record $1.36, far above the prior year's $0.80 per share and well ahead of analysts' estimates calling for $0.72 per share. It was a strong first quarter in just about every metric, including a 7% gain in comparable store sales and a 240-basis-point improvement in gross profit to 63.9% of net sales.

Woman lying on a mattress.

Image source: Getty Images.

"Our record first quarter performance reflects the exceptional consumer demand for our life-changing 360® smart beds, our significant competitive advantages and strong business fundamentals. We are effectively managing the near-term challenges caused by the pandemic," said Shelly Ibach, president and CEO, in a press release.

Now what

Now the question most businesses are facing: Is the company prepared for the full financial impact of the COVID-19 coronavirus? Management believes it can navigate the challenges from the outbreak in part thanks to actions to quickly preserve cash by suspending share repurchases for the year; reducing capital expenditures, compensation, and benefits; and furloughing 40% of its team members. Its collective actions are expected to reduce cash spending by roughly $250 million compared to its original 2020 plan, and the company has $239 million of cash at the end of the first quarter, with an additional funding of $75 million on April 3. All in all, it was a strong quarter by any metric, and management seems well positioned to weather the economic impact from COVID-19.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sleep Comfort Corporation Stock Quote
Sleep Comfort Corporation
SNBR
$33.81 (0.66%) $0.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.