Select Comfort cuts full-year forecast, to fix advertising missteps
(Reuters) - Specialty mattress maker Select Comfort Corp (SCSS.O) said it would revert to its earlier marketing strategy after a shift in advertising reduced exposure of its products to already cautious customers and hit sales.
Shares of the company, which cut its full-year profit forecast, fell about 9 percent after closing at $17.56 on the Nasdaq on Wednesday.
Select Comfort had changed the type of ads and had fewer TV ads in the quarter. The company also transitioned multiple agency buys to a new large agency and moved in-house media planning to the agency.
"We worked urgently with our agency partner to identify deviations from our proven formula and begin to aggressively implement corrections," Chief Executive Shelly Ibach said on the call.
The company said it does not expect the issues to be fully resolved by the end of the current quarter, and expects lower earnings in the second quarter.
The Minneapolis, Minnesota-based company warned in March its sales were below its plan due to changes to its marketing strategy.
"Frankly we moved too much too quickly, and we lost the day-to-day visibility during the transition," a company executive said on the conference call.
Select Comfort, known for its Sleep Number line of adjustable-firmness mattresses, expects to earn between $1.30 and $1.45 per share for the full year, down from its prior forecast of $1.65 to $1.80 per share.
Analysts expected full-year earnings of $1.52 per share.
Net income rose to $23.5 million, or 42 cents per share, in the first quarter from $22.4 million, or 39 cents per share, a year earlier.
On an adjusted basis, the company earned 41 cents per share.
Revenue fell 1.58 percent to $258.2 million. Same-store sales fell 9 percent.
Analysts on average had expected earnings of 43 cents per share on revenue of $288 million, according to Thomson Reuters I/B/E/S.
Select Comfort, which has a market capitalization of about $1 billion, gets more than 90 percent of its revenue from company-controlled distribution channels such as retail, direct marketing and e-commerce.
Other mattress makers such as Serta-Simmons and Tempur-Pedic International Inc (TPX.N) sell through its own distribution channels as well as through retailers including Mattress Firm Holding Corp (MFRM.O).
Mattress Firm, however, forecast full-year sales above Wall Street estimates last month.
(Reporting by Aditi Shrivastava and Arpita Mukherjee in Bangalore; Editing by Don Sebastian)
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