Two-thirds of the way through the firm's third quarter 2006, airbed maker Select Comfort (NASDAQ:SCSS) issued a pre-recorded update -- not "quarterly guidance," mind you; they're very particular about the terminology these days -- on how it's doing relative to its long-term goals.

As longtime shareholders of the company, and any-time members of Motley Fool Hidden Gems (which has recommended the stock) know, Select Comfort has three objectives it aims to achieve every year for the foreseeable future, and I quote:

  • Revenue growth of between 15% and 20%;
  • Same-store sales growth of between 7% and 12%; and
  • Earnings growth of between 20% and 25%, excluding stock option expenses.

In yesterday's update, CFO Jim Raabe confirmed that the company (1) is on track to meet or exceed these targets for the year; (2) hit its previous annual earnings guidance of $0.93 to $0.97 per share, inclusive of stock options expense; and (3) bolstered its chances of achieving that earnings guidance by buying back its stock. (Because when you reduce shares outstanding, you by definition increase the amount of profits accruing to the shares that remain.) So far this quarter, the company has bought back 1.2 million shares, which should reduce its shares outstanding by about 2.2% and add about $0.02 to its per-share profits.

Does any of this sound familiar to you yet? It should. One year ago today, I found myself writing "Select Short Squeeze" (the titles are not a coincidence). The major difference between then and now: Back on Sept. 14, 2005, 14% of Select Comfort's shares were "sold short." Today, that figure stands at 23%.

And what happened next? 41 days after I warned the short sellers that they were setting themselves up for a fall, Select Comfort reported its third-quarter 2005 results -- 22% sales growth and 50% EPS growth, for those who don't recall -- and the stock leapt 11% in a day.

Much has changed since the bleak days of 2005, when Select Comfort suffered a series of earnings forecast mishaps, overpromising only to underdeliver. Since then, the company has followed the example of more successful furniture peers like Ethan Allen (NYSE:ETH) and Furniture Brands (NYSE:FBN), and archrival Tempur-Pedic (NYSE:TPX), in putting together a string of four sequential quarterly "earnings beats." When -- not if -- Select Comfort tops expectations again in October 2006, shorts will have only themselves to blame for not heeding the lessons of history.

For further Foolishness:

Since first being recommended in Hidden Gems two years ago, Select Comfort has doubled the broader market's return, outperforming the S&P 500 31% to 16% -- and it's not even our best pick! To learn more, take the newsletter for a free 30-day trial.

Fool contributor Rich Smith has no interest, short or long, in any company named above. The Fool's disclosure policy would help anyone rest easy.