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Operating income increases 53% at Select Comfort
10
Feb '11
Select Comfort Corporation reported fourth quarter and fiscal 2010 results for the period ended Jan. 1, 2011. Net sales for the quarter totaled $148.7 million, an increase of 9 percent on same-store growth of 12 percent, compared to $136.5 million in the prior-year period.

The company reported fourth quarter net income of $7.1 million, or $0.13 per diluted share, compared to net income of $35.3 million, or $0.69 per diluted share, in the prior-year period. On a comparable basis, excluding a valuation adjustment for income taxes, net income per diluted share would have been $0.08 in the fourth quarter of 2009.

Net sales for 2010 totaled $606 million, an increase of 11 percent as compared to $544 million in the prior-year period. The company reported net income of $31.6 million, or $0.57 per diluted share in 2010, compared to net income of $35.6 million, or $0.77 per diluted share, in the prior-year period. On a comparable basis, excluding a valuation adjustment for income taxes and costs associated with a terminated financing transaction, net income per diluted share would have been $0.24 in 2009.

"Our fourth quarter and full-year performance demonstrate consistent execution against a focused set of priorities as well as solid progress against our profit and sales-growth goals," said Bill McLaughlin, president and CEO, Select Comfort Corporation. "We are particularly pleased we have continued to increase profit margins and grow faster than the industry as we lapped tougher year-over-year comparisons."

"As we move into 2011, we're confident we've built a solid financial and operational platform from which to accelerate growth and improve market share," McLaughlin continued. "Our strategies reflect this position as we increase investments to drive greater awareness and consideration for the Sleep Number brand and stores."

Fourth Quarter and Full-year Summary

During the fourth quarter, net sales increased by 9 percent as compared to the year-ago period. The increase in sales was driven by a 12 percent increase in same-store sales, offset by the impact of the closure of 24 stores during 2010. Operating income improved by 53 percent to $11.5 million and the operating margin improved 220 basis points to 7.7 percent.

Gross profit margins increased 10 basis points from 62.9 percent in the prior-year period to 63 percent in fourth-quarter 2010. The increase reflects a relatively stable cost structure and channel mix versus 2009.

Sales and marketing costs in the fourth quarter of 2010 increased by 6 percent to $68.6 million, representing 46.1 percent of net sales. This compares to $64.8 million, or 47.5 percent of net sales in the prior-year period. Media investments in the fourth quarter totaled $18.5 million, 15 percent higher than a year ago. General and administrative expenses equaled $13.2 million, or 8.9 percent of net sales. This compares to $12.7 million, or 9.3 percent of net sales, in the fourth quarter of 2009.


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