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15% increase in net sales at Select Comfort

22
Jul '10
Select Comfort Corporation reported second quarter results for the period ended July 3, 2010. Net sales for the quarter totaled $139 million, an increase of 15 percent on same-store growth of 28 percent, compared to $121 million in the second quarter of 2009.

The company reported net income of $6.2 million, or $0.11 per diluted share in the second quarter of 2010, compared to a net loss of $4 million, or $0.09 per diluted share, in the second quarter of 2009.

"During the second quarter, our focus on key priorities delivered double-digit growth in same-store and total sales as well as improved profitability," said Bill McLaughlin, president and CEO, Select Comfort Corporation. "The progress we made during the past 18 months in our cost structure and operational execution is generating sustained profitability. In addition, these enhancements are proving particularly valuable as we lap stronger comparisons to a year ago and the macro-economic environment remains uncertain."

McLaughlin added, "In the second half of 2010, we will continue to execute against priorities designed to drive sales and profitability. We also will selectively invest in and test programs to advance longer-term growth including evolving our media messages, our digital and web presence, and store locations, as well as further enhancing our customer experience."

Second Quarter Summary
During the second quarter, net sales increased by 15 percent as compared to a year ago and operating margin improved to 7.2 percent. Year-to-date, net sales increased by 14 percent and operating margin improved to 8.1 percent.

Sales growth was driven by a 28 percent increase in same-store sales. Same-store growth was offset by the impact of the closure of 46 stores since the beginning of second quarter of 2009 and the termination of retail partner relationships in 2009. Sales-per-store increased to $1.2 million, approximately 25 percent higher than the prior-year period.

Gross profit margins were 62.2 percent of net sales, 60 basis points higher than the 61.6 percent gross profit rate in the second quarter of 2009, reflecting improved manufacturing productivity.

Sales and marketing costs were 45.3 percent of net sales in the second quarter compared to 50.6 percent in the second quarter of 2009, a 530 basis-point improvement primarily due to the leverage of higher sales over a smaller store base. Sales and marketing costs increased year-over-year by $1.9 million to $63 million in 2010. Media investments in the second quarter totaled $16.1 million, 16 percent higher than the prior-year period.

General and administrative (G&A) expenses equaled $12.9 million in the second quarter, or 9.3 percent of net sales. This compares to $11.7 million, or 9.7 percent of net sales in the same period last year.

Cash flows from operating activities were $26 million for the first six months of 2010 compared to $36 million (which included a $23 million tax refund) in the year-ago period. Capital expenditures totaled $1.7 million, approximately equal to the prior year. As of the end of the quarter, cash and cash equivalents totaled $40 million and the company had no borrowings under its revolving credit agreement.


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