Please ensure Javascript is enabled for purposes of website accessibility

Why Sleep Number Stock Pulled Back Today

By Jon Quast - Updated Apr 22, 2021 at 11:10AM

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

Record profits and raised guidance weren't enough to help the market overlook supply chain issues.

What happened

Shares of mattress company Sleep Number (SNBR 0.65%) pulled back on Thursday after the company reported financial results for the first quarter of 2021. It had record earnings and raised full-year guidance. But it seems the market is concerned about ongoing supply chain issues that caused Q1 revenue to miss expectations. As of 10:30 a.m. EDT, Sleep Number stock was down 14%.

So what

In Q1, Sleep Number's sales were up 20% year over year to $568 million. This number could have been about 9% higher, but the company is experiencing a two-week delay in deliveries because of supply-chain issues. Specifically, there's a lack of foam in the supply chain because of high demand for mattresses in general and low supply of foam because of the COVID-19 pandemic. However, it's a problem management expects will be over in the second quarter.

A rising red arrow breaks near the top resulting in the tip of the arrow pointing down.

Image source: Getty Images.

Now what

There was a lot to like with Sleep Number in Q1. Its revenue missed expectations, yes. But it grew Q1 earnings per share (EPS) to a record $2.51, which was far more than consensus EPS estimates of $1.83. Furthermore, going back to revenue, it only missed expectations by about $12 million -- roughly 2%. Without the problems in the supply chain, it would have beaten revenue expectations by a wide margin. Therefore, you could say that business for this consumer-goods business is continuing to thrive. 

Indeed, Sleep Number's management believes the business is doing well. Because of this, it raised its EPS guidance for 2021 to $6.50. Previously it had guided for EPS of $6. For these reasons, it looks like Sleep Number just reported a solid quarter, even if the market isn't reacting positively today.

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
$31.15 (0.65%) $0.20

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

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.