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Select Comfort sees improvements against turn-around plan

25
Jul '09
Select Comfort Corporation, the nation's leading bed retailer and creator of the SLEEP NUMBER bed, announced results for the fiscal 2009 second quarter ended July 4, 2009. Net sales for the quarter totaled $120.6 million, a decrease of 21 percent compared to $152.1 million in the second quarter of 2008. The company reported second quarter operating income of $1.0 million, an $11.2 million improvement compared to the second quarter of 2008. Net loss was $4.0 million, or $0.09 per diluted share, compared to a net loss of $6.6 million, or $0.15 per diluted share, in the second-quarter of 2008.

Second-quarter results include a $3.6 million charge to eliminate the company's remaining deferred tax assets. Excluding this non-cash expense, the company would have reported a net loss of $0.3 million or $0.01 per diluted share. During the second quarter, the company generated cash flow from operating activities of $11.5 million, reduced borrowings under its revolving credit facility to $43.8 million and reached agreement with Sterling Partners for a $35.0 million cash investment into the company, subject to shareholder approval.

“We continued to make improvements in our financial results, despite ongoing economic challenges and what is historically our weakest selling period,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “During the quarter, we made progress against our 2009 turn-around plan, which resulted in positive cash flow and an improved pre-tax profit over the prior quarter.”

During the second quarter, the company continued to focus on its priorities of aligning costs with current and anticipated sales levels, reigniting the Sleep Number brand, and preserving cash and improving its capital structure:

Cost Reduction
• Closed 21 stores during the quarter and 51 stores year-to-date, with plans to close at least 15 additional stores by the end of 2009. These actions are expected to reduce fixed store costs by approximately $14.0 million in 2009;
• Enhanced effectiveness and efficiency of marketing spend, with second-quarter marketing expense as a percent of net sales down from 25.4 percent in 2008 to 17.7 percent in 2009, a 765 basis-point improvement; and
• Reduced general and administrative and research and development expenses in the quarter by $2.5 million on a year-over-year basis.

Reigniting the Sleep Number Brand
• Continued to support the company's value strategy, benefiting from first-quarter product line redesign and refining successful promotional programs;
• Continued to advance results from core direct marketing and the new local radio campaign, which highlights the differentiated benefits of the Sleep Number bed and the location of the company's retail stores; and
• Experienced sequential improvement in same-store sales to an 11 percent decline in the second quarter from a 14 percent decline in the first quarter of 2009.


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