Select Comfort loses $57.4 million in quarter
By Larry Thomas -- Furniture Today, March 23, 2009
MINNEAPOLIS — Bedding manufacturer and retailer Select Comfort reported a fourth-quarter net loss of $57.4 million and said its auditor has issued a qualified opinion on its 2008 financial statement that questions the company's ability to continue as going concern.
The producer of airbeds and related accessories said its sales tumbled 31.3% in the fourth quarter.
Its 471 company-owned stores, which account for about 80% of total sales, had a same-store sales decline of 29% in the quarter.
“There is no doubt that we are operating in the most challenging environment in our company's history,” said Bill McLaughlin, president and CEO. “While we have made good progress on reducing costs and stabilizing sales, it also is important for us to further enhance our financial flexibility.”
Sales for the quarter ended Jan. 3 totaled $131.1 million. The most recent quarter's loss compares with net income of $2.17 million a year earlier.
The latest quarter's results include one-time charges of $58.9 million, the largest of which was a $32.1 million asset impairment charge.
For the year ended Jan. 3, sales were down 23.9% to $608.5 million. Last year's net loss totaled $70.2 million, compared with income of $27.6 million in 2007.
In an effort to preserve cash, McLaughlin said Select Comfort is cutting costs with moves including the closing of at least 55 stores this year. He said 29 already have been closed.
Select Comfort also will cut media spending by at least $30 million or roughly 30% this year, and virtually eliminate capital expenditures, which were $30 million last year.
Plus, he said the company has revamped its product line to emphasize lower price points with a starting price of $699 in queen. Previously, nearly all Select sleep sets retailed for $1,000 and up in queen size.
The company said its auditors have issued a “going concern” qualification because of doubts about its ability to adequately fund operations.
“We are seeking to raise additional capital through the issuance of debt or equity securities or a combination thereof, which may adversely impact our profitability,” the company said in a regulatory filing. “If we are unable to obtain additional capital, we may not be able to fund our operating needs, we would face a risk of default under our credit agreement and we may not be able to continue as a going concern.”
The company said it has not been in compliance with some debt covenants, but its lender has waived compliance through March 31.
Select Comfort
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
| Quarter ended 1/3(a) | 2009 | 2008 | Change |
| (a) The latest fiscal quarter and year each included one extra week, compared with the previous quarter and year. (b) Includes pretax asset impairment charges of $32.1 million in the 2009 quarter, $211,000 in the 2008 quarter, $34.6 million in the 2009 year and $409,000 in the 2008 year. |
|||
| Sales | $131,073,000 | $190,672,000 | (31.3%) |
| Operating income | (16,862,000) | 4,461,000 | — |
| Net income (b) | (57,436,000) | 2,168,000 | — |
| Earnings per share | (1.30) | 0.05 | — |
| Year ended 1/3 (a) | 2009 | 2008 | Change |
| Sales | $608,524,000 | $799,242,000 | (23.9%) |
| Operating income | (31,490,000) | 49,597,000 | — |
| Net income (b) | (70,177,000) | 27,620,000 | — |
| Earnings per share | (1.59) | 0.57 | — |
Select Comfort's net sales drop 21% in 2Q
07/27/2009
