Select Comfort Announces Fourth-Quarter and Full-Year 2016 Results

MINNEAPOLIS–( BUSINESS WIRE )–Select Comfort Corporation (NASDAQ: SCSS) today reported fourth quarter and full-year 2016 results for the period ended December 31, 2016.

“While our fourth quarter sales and earnings were below our expectations, we begin 2017 well positioned to accelerate earnings growth, cash generation and returns to shareholders. Thus far in 2017 traffic and sales are on target, which we attribute to a steadier consumer environment and improved marketing effectiveness,†said Shelly Ibach, president and chief executive officer of Select Comfort. “All of the investments we have made over the past five years are coming together with the roll out of our revolutionary new Sleep Number 360â„¢ smart beds, which will enable both continued market share growth and greater business leverage.â€

Fourth Quarter Statement of Operations Review

• Net sales increased 46% to $313 million, including a comparable sales increase of 34% and 12 percentage points (ppt) of growth from net new stores; Q4 of 2015 was impacted by our ERP system implementation
• Earnings per diluted share were $0.25, compared with a loss per diluted share of $0.42 for the prior year’s fourth quarter

Full-year Statement of Operations Review

• Net sales increased 8% to $1.31 billion in 2016, including a 1% comparable sales gain and 7 ppt of growth from new stores
• Gross margin increased 80 basis points to 61.8% through manufacturing and logistics efficiencies
• Earnings per diluted share increased 13% to $1.10, compared to $0.97 in 2015

Cash Flows and Balance Sheet Review

• Generated a record $152 million in operating cash flows in 2016 compared with $108 million in 2015
• Invested $58 million in capital expenditures, down 32% from 2015, bringing the total transformative investments in the business over the last five years to $427 million
• Increased share repurchases 27% to $125 million in 2016, bringing total returns to shareholders to $338 million over the past five years; $245 million remains under our current share repurchase authorization
• Delivered a 12.2% ROIC for the year, 54% above our 2016 weighted average cost of capital of 7.9%

Financial Outlook
The company expects to generate full-year 2017 earnings per diluted share of between $1.20 and $1.40, including $0.15 to $0.22 of incremental costs related to the launch of our new Sleep Number 360 smart bed line and the redesign of our logistics network. The outlook assumes mid- to high-single digit sales growth for the full year and a 3% to 4% increase in store count in 2017, building on 11% store count growth in 2016. The company anticipates 2016 capital expenditures to be approximately $50 to $55 million. The 2017 outlook does not contemplate a further worsening of the consumer spending environment.

Conference Call Information
Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EST (4 p.m. CST; 2 p.m. PST) today. To listen to the call, please dial 800-593-9959 (international participants dial 517-308-9340) and reference the passcode “Sleep.†To access the webcast, please visit the investor relations area of the Sleep Number website athttp://www.sleepnumber.com/eng/aboutus/InvestorRelations.cfm . The webcast replay will remain available for approximately 60 days.

About Select Comfort Corporation
Thirty years ago, Sleep Number transformed the mattress industry with the idea that ‘one size does not fit all’ when it comes to sleep. Today, the company is the leader in sleep innovation and ranked “Highest in Customer Satisfaction with Mattresses†by J.D. Power in 2015 and 2016. As the pioneer in biometric sleep tracking and adjustability, Sleep Number is proving the connection between quality sleep and health and wellbeing. Dedicated to individualizing sleep experiences, the company’s 3,700 employees are improving lives with innovative sleep solutions. To find better quality sleep visit one of the more than 540 Sleep Number® stores located in 49 states or SleepNumber.com .

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