MINNEAPOLIS-A weak mattress industry environment led to a fourth-quarter downturn of 48.6 percent for Select Comfort’s net income, which totaled $6.4 million for the period.
For the fiscal year ending on Dec. 28, net income was $60.1 million, down 23.1 percent from the prior fiscal year. Net sales in the quarter rose 4.7 percent to $230.9 million, bringing net sales for the year to $960.2 million, up 2.7 percent.
While sales did gain for both periods, the retail environment in the quarter led to aggressive discounting among many retailers that sell mattresses, according to Shelly Ibach, Select Comfort’s president and CEO. Speaking yesterday on a conference call to financial analysts, Ibach also cited a dropoff in retail traffic after Cyber Monday. “Our traffic trends were consistent with ShopperTrak’s report of an approximate 18 percent decrease in mall traffic in December,” she said, citing as reasons December’s compressed consumer calendar, reduced marketing effectiveness and bad weather in two of the company’s four regions.
The promotion mix and more generous return policies led to a 260 basis-point drop in gross margin, to 60.9 percent, according to Ibach. Operating expenses increased 8.6 percent in dollars and 210 basis points as a percentage of sales, to 56.7 percent.
For 2014, Ibach said Select Comfort would seek to improve its results through increased brand awareness. The company has just launched an advertising campaign called “No Better Sleep,” which, Ibach said, was the most tested creative the company has ever tried.
Product innovation will also be a key to greater brand awareness, according to Ibach. She told the analysts that Select Comfort will be introducing some of the most significant advancements in the product portfolio in its history. These will include the all-new Classic Series beds, with an edge-to-edge design for increased comfort and support, priced beginning at $999, an expanded FlexFit adjustable-base series with new consumer benefits such as the Partner Snore feature and the new FlexTop mattress design, whose design enables individuals to independently adjust the top half of their side of the bed while still sleeping together on one mattress.
Ibach also said Select Comfort is expecting the mixed consumer outlook to continue in 2014. Revenue for this year are projected for mid- to high single-digit growth, she said.