Earnings Results: Sleep Number stock tanks amid slashed earnings forecast, ‘historically low’ consumer sentiment

United States

Shares of Sleep Number Corp. were getting pummeled in late trading Wednesday after the maker of “smart beds” slashed its earnings forecast as it deals with the twin challenges of “historically low” consumer sentiment and chip-related supply-chain issues.

The company now anticipates $ 1.50 to $ 2.00 a share in earnings for the full year “driven by insufficient and uneven flow of chip supply and softer demand.” In its second-quarter report, Sleep Number SNBR, +1.92% provided an outlook calling for $ 3.00 to $ 4.00 in full-year EPS. Analysts were expecting $ 3.29.

Sleep Number executives also noted that their forecast assumes that fourth-quarter net sales will be flat relative to the prior year. The FactSet consensus was for $ 600 million in sales for the quarter, up from $ 492 million a year before.

The stock was down more than 20% in after-hours trading Wednesday.

“We are aggressively pursuing actions to improve supply, margin, and demand,” Chief Executive Shelly Ibach said in a release. “While the consumer is understandably cautious, our brand health remains very strong, and our customer loyalty is stellar.”

The outlook comes as Sleep Number’s latest quarterly results showed declines on key metrics, even as they exceeded Wall Street expectations. Third-quarter net income plunged to $ 5 million, or 22 cents a share, from $ 53.7 million, or $ 2.22 a share, a year before, while analysts tracked by FactSet were modeling 6 cents a share.

Sleep Number said in its release that the earnings performance reflected “ongoing chip supply constraints and challenging macroenvironment.”

Revenue fell to $ 540.6 million from $ 640.4 million but came in ahead of the FactSet consensus, which was for $ 529.3 million. The company’s earnings release called out “demand decreasing 16% for the quarter, as consumer sentiment remains at historically low levels.”