Sleep Number Stock Earnings Reports

Sleep Number reported a disappointing Q3 (net sales $343M, down 19.6% YoY) driven largely by significant media spend reductions and an aggressive competitive Labor Day environment. Management characterizes the business as undergoing a comprehensive turnaround after the CEO's first six months. Key financial actions: an amendment and extension of the bank agreement to end of 2027 (giving breathing room to invest), and aggressive cost reductions (operating expenses down ~$115M year-to-date with an expectation to exceed a $130M cost-out target). Q3 adjusted EBITDA was $13.3M (down $14.4M YoY); the company recorded $41M of restructuring and other nonrecurring charges (about $30M noncash). Updated full-year guidance: net sales ~ $1.4B, gross profit margin ~60%, operating expenses of ~$825M (down ~$135M vs. 2024), adjusted EBITDA ~ $70M, and negative free cash flow ~ $50M. Management expects to stabilize sales and return to growth in 2026 by (1) simplifying and refreshing the product assortment (targeting early 2026 launches and value-driven price moderation within the premium segment), (2) modernizing and reallocation of marketing to more efficient channels (media was down ~32% in Q2–Q3), (3) expanding distribution (tests including HSN and other selective channel partnerships), (4) optimizing and rationalizing store footprint and other fixed costs. Q4 is expected to show modest improvement (media down only slightly vs. prior year) and benefit from the 53rd week, but recovery to targeted levels is planned for 2026. Management reiterated focus on generating free cash flow to pay down debt and compliance with the new covenants under the amended credit agreement.