Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Muted sales and increased promotional expenses took a toll on Select Comfort Corporation’s (SCSS - Snapshot Report) second-quarter fiscal 2013 results. The mattress retailer posted quarterly earnings of 18 cents a share that missed the Zacks Consensus Estimate of 23 cents and plunged approximately 40% year over year.

Net sales for this Zacks Rank #4 (Sell) stock inched up 1% year over year to $207.4 million but came below the Zacks Consensus Estimate of $215 million. Moreover, comparable store sales decreased 6% year over year at company-controlled stores.

Gross profit remained almost flat at $131.4 million, while gross margin contracted 70 basis points to 63.4%. The decline reflected soft sales coupled with a 70 basis points expansion in cost of goods sold as a percentage of sales.

Select Comfort’s operating income plunged 41.6% year over year to $15.1 million, whereas the company’s operating margin contracted 530 basis points to 7.3%, reflecting rise in sales and marketing expenses coupled with an increase in research and development costs.

The company ended the quarter with cash and cash equivalents of $58.2 million and generated cash flow from operating activities of $36.1 million in the first half of fiscal 2013. Moreover, the company incurred capital expenditures of $37.1 million during the first six months of 2013. During the quarter, Select Comfort repurchased $10 million worth of shares. The company had no borrowings under its revolving credit facility. 

During the quarter, the company opened 17 stores and closed 15, bringing the total store count to 413. 

Outlook Maintained

Despite delivering sluggish results, Select Comfort stood by its earlier guidance for fiscal 2013. The company forecasts GAAP earnings per share to be in the range of $1.30 – $1.45. It expects net sales to increase in the high-teens rate.

Moreover, the company is anticipating capital expenditure in the range of $70 million – $80 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

Not all retail stocks are performing as poorly as Select Comfort. Here are some other retail companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Deckers Outdoor Corp. (DECK - Analyst Report), Earnings ESP of +13.21% and a Zacks Rank #2 (Buy).

The Gap, Inc. (GPS - Analyst Report), Earnings ESP of +1.70% and a Zacks Rank #2 (Buy).

Rent-A-Center, Inc. (RCII - Analyst Report), Earnings ESP of +1.33% and a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%