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Select Comfort profits fall 41.5%

MINNEAPOLIS - Mattress manufacturer and retailer Select Comfort said second quarter profits tumbled 41.5% as the company ramped up its sales and marketing expenses.
     The maker of the Sleep Number bed said sales rose 1.1%, but comparable-store sales at company-owned retail stores fell 6%.
     Total sales for the quarter ended June 29 were $207.4 million, up from $205.2 million in last year's second quarter.
     Net income totaled $9.93 million or 18 cents per share, down from $17 million or 30 cents per share in the same quarter last year.
     The company said sales and marketing expenditures were approximately $10 million higher than the comparable period a year ago as it reverted back to an earlier successful media-buying plan. A revamped media-buying program was scrapped during the first quarter after it failed to produce the desired results.
     "During the (second) quarter, we experienced sequential monthly sales improvement and strengthened performance as we reestablished our proven media-buying formula," said Shelly I bach, president and CEO. "We also made progress on our top priorities, product innovation and local market development, as we position the company for short- and long term growth."
      Sales and marketing expenses for the most recent quarter were $98.4 million, or about 47% of sales. In last year's second quarter, the figures were $88.2 million, or about 43% of sales.
     For the six months ended June 29, sales fell 0.4% to $456.6 million, while net income was down 15.2% to $33.4 million or 60 cents per share.
     The company said it is maintaining its earnings projection for the year at $1.30 to $1.45 per share. It said the outlook assumes a sales increase in the high teens for the remainder of the year.
     As of June 29, Select Comfort had 413 retail stores. It expects to have 435 to 445 locations by the end of 2013.

Select Comfort

Earnings per share are fully diluted, and all figures in parentheses are losses or declines.

Quarter ended 6/29

2013
2012

Change

Sales

$207,391,000

$205,219,000

1.1%

Operating income

17,682,000

27,111,000

(34.8%)

Net income

9,926,000

16,973,000

(41.5%)

Earnings per share

0.18

0.30

(40.0%)

6 months ended 6/29

2013
2012

Change

Sales

$465,628,000

$467,602,000

(0.4%)

Operating income

55,104,000

68,296,000

(19.3%)

Net income

33,397,000

39,390,000

(15.2%)

Earnings per share

0.60

0.69

(13.0%)

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