Select Comfort's Earnings Disappoint - Analyst Blog
April 18 2013 - 9:36AM
Zacks
Lower sales and increased
promotional expenses took a toll on Select Comfort
Corporation’s (SCSS) first-quarter fiscal 2013 results.
The mattress retailer posted adjusted quarterly earnings of 41
cents a share that missed the Zacks Consensus Estimate by a penny
and decreased 9% year over year. Including one time items, earnings
came in at 42 cents compared with 39 cents earned in the year-ago
quarter.
Net sales for this Zacks Rank #5
(Strong Sell) stock waned 2% year over year to $258 million and
came well below the Zacks Consensus Estimate of $291 million.
Moreover, comparable store sales plunged 9% year over year at
company-controlled stores. Change in its advertising strategy
backfired for the company, leading to reduced traffic and in turn
lower sales.
Gross profit inched down 0.5% to
$163.4 million, while gross margin expanded 70 basis points to
63.3%. The improvement was attributable to contraction in cost of
goods sold as a percentage of sales.
Select Comfort’s adjusted operating
income decreased 12.7% year over year to $34.8 million, whereas the
company’s adjusted operating margin decreased 170 basis points to
13.5%, reflecting rise in sales and marketing expenses coupled with
an increase in research and development costs.
Other Details
Select Comfort ended the quarter
with cash and cash equivalents of $84.8 million and generated cash
flow from operating activities of $45 million. Moreover, the
company incurred capital expenditures of $14.3 million during the
first quarter and repurchased $10 million worth of shares. The
company had no borrowings under its revolving credit
facility.
During the quarter, the company
opened 10 stores and closed 9, bringing the total store count to
411.
Outlook
Trimmed
Following sluggish results, Select
Comfort trimmed its fiscal 2013 outlook. The company now forecasts
GAAP earnings per share to be in the range of $1.30 – $1.45, down
from the previous guidance range of $1.65–$1.80. It expects
company-controlled comparable store sales to increase in the low to
mid single digits range.
Moreover, the company is
anticipating capital expenditure in the range of $70.0 million –
$80.0 million, mainly for new store openings, renovations and
remodels along with improvement in IT systems. Further, Select
Comfort is likely to continue with its share repurchase
activity.
Other Stocks to
Consider
Until any further upward revision
in Select Comfort’s rating, other stocks in the home furnishings
& fixtures industry worth considering include American
Woodmark Corp. (AMWD),Tempur-Pedic International
Inc. (TPX) and La-Z-Boy Incorporated
(LZB), all carrying a favorable Zacks Rank #1 (Strong Buy).
AMER WOODMARK (AMWD): Free Stock Analysis Report
LA-Z-BOY INC (LZB): Free Stock Analysis Report
SELECT COMFORT (SCSS): Free Stock Analysis Report
TEMPUR-PEDIC (TPX): Free Stock Analysis Report
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