On Wednesday, Select Comfort (Nasdaq: SCSS) reported a quarter that should give shareholders at least a few decent nights' sleep. Both top- and bottom-line numbers beat Wall Street's expectations, and the market rewarded investors by bidding the stock up nearly 20% on Thursday.
Revenue was up 9%, to $160 million in the third quarter, and beat estimates of $155.8 million. The company is closing some of its underperforming branded stores but at remaining locations, same-store sales were up an impressive 16% from a year ago. Net income also improved to $10.5 million or $0.19 per share, from $0.15 last year.
As sales increase, it was good to see the company becoming more efficient, improving operating margins to 10.5% from 8.1% last year. Guidance for the full year was also raised to between $0.52 and $0.55.
Select Comfort's stock has gone on a tear since bottoming out at $0.19 two years ago, but it looks like there's more room to run. With Sealy (NYSE: ZZ) struggling, Select Comfort is keeping up with Tempur-Pedic (NYSE: TPX) in the mattress business. Tempur-Pedic also upped full-year guidance, from $2.05 to $2.10, after reporting a great third quarter earlier in the week.
Select Comfort is experimenting with some out-of-mall locations in high-traffic areas, a strategy that could be a foundation of its new retail footprint. A total of six such stores will be open by the end of the year, so investors should watch this development that could fuel future growth.
At the end of the day, Select Comfort has everything to help this Fool sleep well at night. I love it when companies beat estimates on revenue and earnings, increase operating margins, and increase earnings estimates. That's what I call a good bedtime story.
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