Rising Expenses Drive Select Comfort Profit Down in Q4; Company Swings Deal for Comfortaire

MINNEAPOLIS-Fourth-quarter net income for Select Comfort fell 18.7 percent to $12.5 million, with increased expenses applying much of the pressure on the bottom line.

Along with releasing its quarterly financial report, Select Comfort said it has purchased the assets of Comfortaire, which manufactures adjustable, air-supported mattresses. The acquisition, valued at $15.5 million, closed on Jan. 17.

Selling, general and administrative expenses in the quarter, which ended on Dec. 29, rose 21.2 percent in dollars and 200 basis points as a percentage of sales, to 53.8 percent. In a conference call to stock analysts yesterday, Shelly Ibach, Select Comfort's president and CEO, said part of this expenditure involved media testing that didn't deliver the results the company expected, along with a longer test period for its new advertising campaign. Also, Select Comfort began investments in the new advertising campaign and what Ibach described as "transformational product and service concepts," involving research and development and consumer insights.

"We expect the return on these investments to build during the next 12 to 14 months, further strengthening our competitive advantages," Ibach told the analysts.

The bump-up in investments trumped a net sales gain of 16.7 percent in the quarter, to a record $220.6 million. Gross margin gained 60 basis points to finish at 63.5 percent.

For the full fiscal year, Select Comfort's net income jumped 29.1 percent to $78.1 million, on record sales of $935 million, up 25.8 percent from fiscal 2011.

Speaking about the Comfortaire deal, Ibach said it strengthens Select Comfort's competitive position. "We intend to operate Comfortaire as an independent company," she said. "We are excited about operating the two largest air-bed companies with talented, experienced teams, who have a shared commitment to quality, innovation and individualization."

HFN Staff | News & Commentary

HFN provides detailed information on the key home classifications: Housewares, Tabletop, Floor Covering & Rugs, Furniture, Home Textiles, Lighting, Home Decor, Mattresses & Bedding, Gifts, Major Appliances and Consumer Electronics as well as Business, Finance and Retail.

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