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Why Sleep Number Stock Pulled Back Today

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

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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.

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