UPDATE 1-Select Comfort expects weak sales to continue in 2014

Mon Jan 6, 2014 3:59pm EST

(Adds details, analyst comment; updates share movement)

By Devika Krishna Kumar

Jan 6 (Reuters) - Specialty mattress maker Select Comfort Corp estimated weaker-than-expected sales post Thanksgiving and warned that the challenging sales trends will continue into 2014, sending its shares tumbling 21 percent.

Shares of rival mattress maker Tempur Sealy International Inc fell 7 percent, while those of bedding retailer Mattress Firm Holding Corp dropped 4 percent on the news.

But analysts said Select Comfort's warning could possibly be a company-specific problem and not an industry-wide trend.

"One of the reasons I believe that this is a Select Comfort issue and not a mattress industry issue is their retail positioning," said Keybanc Capital Markets analyst Bradley Thomas.

"They have a significant portion of their sales in traditional malls and mall traffic was relatively soft during the holiday period," Thomas said.

Many U.S. retailers have struggled with weak mall traffic, particularly in December, which has forced them to resort to increased discounting. As of the end of 2012, 81 percent of Select Comfort's stores were located in shopping malls.

"The sales slowdown following the Thanksgiving holiday reflected a tepid retail holiday shopping season," Select Comfort CEO Shelly Ibach said in a statement.

"We expect this challenging environment to continue in 2014 and are planning accordingly," she said.

Tempur Sealy and Mattress Firm had reported strong sales in their latest quarters.

Mattress Firm also raised its full-year sales guidance in December.

Select Comfort, known for its Sleep Number adjustable-firmness mattresses, estimated fourth-quarter sales of about $231 million, and said it expects company-controlled same-store sales to be flat.

It expects profit to be below the low end of its forecast of 18 cents to 26 cents per share.

Analysts on average were expecting earnings of 22 cents per share on sales of $241.7 million, according to Thomson Reuters I/B/E/S.

The company's shares were down 20 percent at $16.99 in late trading. (Editing by Savio D'Souza, Maju Samuel)

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