Select Comfort Shares Down 8% As Q2 Results Miss View, Backs 2013 Outlook

(RTTNews) - Shares of Select Comfort Corp. (SCSS) plunged nearly eight percent in extended trade on Wednesday after the mattress maker reported results for the second quarter that missed analysts' expectations. The company also maintained earnings guidance for the full-year 2013.

However, the company reported a profit for the quarter that declined from last year, hurt by significantly lower operating margins amid higher sales and marketing costs.

"During the quarter, we experienced sequential monthly sales improvement and strengthened performance as we re-established our proven media-buying formula. We also made progress on our top priorities, product innovation and local-market development, as we position the company for short- and long-term growth," President and CEO Shelly Ibach said in a statement.

The Minneapolis, Minnesota-based company reported net income of $9.93 million or $0.18 per share for the second quarter, lower than $16.97 million or $0.30 per share in the prior-year quarter.

On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.24 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter edged up 1 percent to $207.39 million from $205.22 million in the same quarter last year, but missed eight Wall Street analysts' consensus estimate of $210.77 million.

Company-controlled comparable-store sales decreased 6 percent. Sales growth was driven by 32 net new stores opened during the past 12 months, including 17 new stores opened during the second quarter. The company also closed 15 stores during the quarter.

Operating margin for the quarter contracted 530 basis points to 7.3 percent from last year, primarily as sales and marketing costs, as a percentage of total sales, increased 440 basis points, and gross margins decreased 70 basis points/

The company noted that it is seeing the inflow of new customers into its Sleep Number stores since the June launch of the Sleep Number DualTemp layer, which solves temperature balancing - one of consumers' most common sleep issues.

Looking ahead to fiscal 2013, the company continues to expect earnings in a range of $1.30 to $1.45 per share, on projected sales growth in the high-teens for the remainder of the year, and a net increase in store count to between 435 and 445 from 410 at year-end 2012.

Street is currently looking for full-year 2013 earnings of $1.37 per share on annual revenues of $996.66 billion.

The company also currently anticipates 2013 capital expenditures of $70 million to $80 million, reflecting continued investment in stores, technology and product innovation.

SCSS closed Wednesday's regular trading session at $26.56, down $0.44 or 1.65% on a volume of 2.74 million shares. The stock plunged a further $2.01 or 7.57% in after hours trading.