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Why Sleep Number Stock Looks Tired This Week

By Howard Smith - Jul 22, 2021 at 3:19PM

Key Points

  • Sales remain strong, but the company is dealing with some headwinds.

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Even with the hit this week, shares are up almost 20% year to date.

What happened

The beds may be comfortable, but shareholders aren't feeling very rested right now as Sleep Number (SNBR 2.82%) shares are down double-digits for the week. As of Thursday afternoon, shares were 10.1% below last Friday's closing price. The story for the stock this week is Sleep Number's earnings report, which was released Tuesday evening. Shares dropped 13% the day after the financial update. 

So what

Sleep Number reported second-quarter net sales growth of 70% versus the pandemic-impacted 2020 Q2. But the quarterly sales results were also significantly higher than the comparable 2019 period, and year-to-date net sales are also 35% above the first half of 2019. The strong results prompted Sleep Number management to raise full-year 2021 earnings per share guidance to at least $7.25 versus the previous outlook of at least $6.50.

Person waking up and stretching in comfortable bed.

Image source: Getty Images.

But the good news was overshadowed by an earnings miss against analyst expectations, and word that supply chain issues remain. 

Now what

Sleep Number reported EPS of $0.88 while analysts on average expected $1.10 per share, according to data by MarketWatch. While growth was strong, the company missed estimates due to supply chain issues that continue to affect the company. Sleep Number President and CEO Shelly Ibach commented on the earnings conference call that "unprecedented demand growth combined with global supply chain disruption limited our Q2 deliveries."

Being unable to keep up with demand growth is a high-quality problem for any business. Though the stock took a hit, it is still up about 19% year to date. Investors should sleep well knowing demand is strong, and supply chain issues should be temporary. That's the thing to watch going into the next earnings call a few months from now.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Sleep Number Corp. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sleep Comfort Corporation Stock Quote
Sleep Comfort Corporation
$48.53 (2.82%) $1.33

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