What happened
Shares of Sleep Number (SNBR -0.35%) were crashing today after the mattress maker posted disappointing results in its second-quarter earnings report.
As of 10:07 a.m. ET, the stock was down 30.6%.
So what
Sleep Number said revenue in the quarter fell 16% to $459 million, missing estimates at $471.4 million. Demand was down mid-single digits in the quarter, but improved throughout the second quarter, implying a change in inventory contributed to the revenue decline.
Gross margin fell from 59.2% to 57.6% as the company benefited from a higher-than-normal backlog in the quarter a year ago, and operating expenses were also up as a percentage of revenue.
As a result, bottom-line profits evaporated, falling from $1.54 per share to $0.03, though that actually topped the consensus at a loss of $0.01.
CEO Shelly Ibach called the macro environment challenging, but said, "Demand has steadily improved year-to-date, and we expect this trend to continue in the back half of the year as we benefit from the launch of our entire next-generation smart bed portfolio."
Now what
Sleep Number also slashed its earnings guidance, now calling for full-year earnings per share (EPS) of $1.25 to $1.75, down from a prior range of $1.25 to $2. It also sees revenue down low- to mid-single digits but called for a gross margin improvement of 150 basis points, showing confidence in new cost control efforts and its upcoming launch of the Climate360 smart bed.
Still, given the overall decline in revenue and the EPS guidance cut, today's sell-off isn't surprising.
