After five years of steady growth, business at the nontraditional mattress maker and retailer started to sag as the housing crisis worsened in 2007 and the economy tanked in 2008.
The slump caused cash-strapped consumers to cut spending on discretionary items like mattresses, sending its business into a tailspin along with the rest of the bedding industry.
Select Comfort was hit hardest in 2008, when it lost 55 cents a share and sales slid 24% from the prior year.
That same year, management at the Minneapolis-based firm began a sweeping overhaul to reverse its fortunes and assure more profitable growth. Select Comfort cut costs, laid off staff, stepped up marketing and closed stores. It also stopped distributing to third-party retailers.
Its strategy has paid off. The company moved back into the black in 2009, when it earned 21 cents a share. In 2010, profit popped 171% and sales rose 11% after two years of declines.
Back To The Core
"The crisis allowed us to get better focused and more fine-tuned in on core business, which has been helping us and will continue to help us as we go forward," said Chief Executive Bill McLaughlin.
Most recently, in the first quarter, profit climbed 114% over a year ago to 30 cents a share, smashing views. Sales rose 22% to $193.1 million. Same-store sales rose 26%.
McLaughlin says the company has moved past what management calls the "stabilized" phase into the "thrive" phase.
"We're writing the next chapter of our growth story right now," he said.
Watchers expect that growth story to continue when Select Comfort reports second-quarter results July 20. Analysts polled by Thomson Reuters see profit rising 55% to 17 cents a share. They forecast a 13% jump in sales to $156.9 million.
Select Comfort makes a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number bed, which can be adjusted on each side of the bed according to the user's personal preference. They sell for $699 to $3,999. Its stores also sell accessories such as pillows, mattress frames and sheets.
Stephens analyst Eric Hollowaty says the company has gotten a lift from a general recovery in demand for mattresses as consumers feel comfortable spending again on larger-ticket items.
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