Sleep Number Corporation · NASDAQ:SNBR
Sleep Number — Select Comfort — Investor Presentation (January 2004)
25 slides from Sleep Number's investor presentation, Jan 14, 2004
Slide 1: Select Comfort: Creator of the Sleep Number Bed
select comfort CREATOR OF THE SLEEP NUMBER BED
Slide 2: Forward Looking Statements
Forward Looking Statements Cautionary statements Certain risks on forward looking information Statements used in this presentation that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties including, among
Slide 3: Select Comfort - Revolutionizing an Industry
Select Comfort - Sales $450 million, Market Cap $850 million Sleep and bed experts Consumer Product Company Leading national retailer of beds $7.6 billion industry... growing consumer trend Advantaged product and business model Proven strategies - profitable growth Revolutionizing an Industry
Slide 4: Profitable Growth
Profitable growth Product, brand and national distribution National - 6% share Lead markets 15% - 20% share Unique business model Customer satisfaction Profit and cash leverage Growth opportunities: geography, product, channel Proven management team/ performance culture 2001 2002 2003 Sales 262 336
Slide 5: Video In Progress
Video In Progress
Slide 6: Starts with a Better Mattress
Adjustable firmness (air technology) Personal Comfort Better Sleep Clinically proven Low pressure points Reduced back pain 1.5 million owners/50K Testimonials Priced for broad consumer market Queen mattress $800 - $2,500 Company advantage: Starts with a Better Mattress Innerspring Sleep Number(r) Be
Slide 7: Positive Consumer Trends
Positive consumer trends Premium segment leading growth Active, affluent, aging Personalization, trading up Select Comfort National Market Share ($): 6% Consumers Increasingly Appreciating Quality Sleep '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 East 2.38 2.56 2.76 3.02 3.18 3.35 3.62 4.02
Slide 8: Broad Consumer Market
Broad Consumer Market Better Sleep 25-45 Years TV, Radio Proprietary Everybody has a Sleep Number(r) - What's Yours? Key driver of revenue growth - Brand awareness
Slide 9: Video In Progress
Video In Progress
Slide 10: Advertising: Brand/Product Awareness, Share Growth
Advertising Brand/Product Awareness Share Growth 2001 2002 2003 Sealy & Stearns 0.5 0.5 0.5 0.5 0.5 0.5 Denver 0.05 0.05 0.15 0.18 0.21 0.22 National SC 0.04 0.04 0.04 0.048 0.058 0.06 Leading Innerspring Denver Select Comfort 2000 2001 2002 2003 National 0.046 0.044 0.045 0.045 0.045 0.047 0.048 0.
Slide 11: Controlled Sales and Distribution
Product Development Sales Service/ Home Delivery Customer Service Customer Satisfaction further enhanced by Controlled Sales and Distribution 2003 Sales % of Total Growth Retail 79% 40% Direct 13% 25% E Commerce 4% 37% Wholesale 4% 23%
Slide 12: Advantage: Business Model
Advantage: Business Model Advantage: Business Model National Brand Controlled Sales Stores as showroom Low inventory Store capacity - $1M to $4M sales with same footprint Cash at time of order Build to Order Manufacturing 50% Excess plant capacity Proprietary supply chain Strong investment return Ne
Slide 13: Sustainable Growth Expectations
Sustainable Growth Expectations Revenue 15% - 25% Earnings 30% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 East 0.6 1.7 3.4 3 5.8 8.8 6.6 7.6 11.5 14 4 4.27 4.56 4.87 5.2 5.55 5.93 6.33 6.76 7.22 Guidance Actual 2001 2002 2003 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 East 64.1 69.3 81.2 77.3 85.1 92.3 102 102 117.4 137.1 75
Slide 14: Growth Formula
Growth Formula Revenue Growth '02 '03 '04 Retail: Same store: Units 11% 14% 15% ASP 16% 17% 5% 27% 31% ^20% New stores 0% 7% ^5% Total Retail 27% 38% ^25% Total Growth 28% 36% ^20% Profit - % of Sales Est. '02 '03 '04 Gross Margin 63% nc nc Marketing 20% nc +1pt Selling 27% -2ppts -2ppts G&A 10% -1p
Slide 15: Investing in our Future - National and Local
Investing in our Future - National and Local '01 '02 '03 '04 Est. National 19.2 25.4 36 44 Local 10.3 14 24 36 $29 $39 $60 $80+ Local Market Development Markets % US HH % SC Stores 2001 8 10% 16% 2002 16 20% 29% 2003 21 29% 41% 2004 34 54% 67% Major metro expansion: 2002 - San Francisco 2003 - Chica
Slide 16: Increasing Awareness allows Profitable Distribution Expansion
Increasing Awareness allows Profitable Distribution Expansion # of Stores 2001 2002 2003 2004E East 328 322 344 367 Focus: Leveraging media expansion New Stores Media Markets '03 '04 '01-'02 10 5 '03 8 8 '04 5 12 Other 4 4 27 29
Slide 17: Compelling Store Model
Compelling Store Model 2001 2002 2003 0.098 0.241 0.49 New Stores 1,000 to 1,400 square feet $160,000 initial investment $800,000+ first year sales Year 1 operating cash flow positive 18 - 24 month payback 10% 24% 49% Retail Operating 4% 12% 15% Margin $1 Million Stores
Slide 18: Products that Deliver Real Benefit and Value
Products that Deliver Real Benefit and Value Remain Heart of Select Comfort 2002: Product line upgrade 2003: Adjustable Foundation Grand King Legs 2004: Product line upgrade Sofa
Slide 19: People & Culture
People & Culture Developing Source of Long-Term Advantage Average SCSS Tenure = 4 Years
Slide 20: 2003 Outlook
2003 Outlook ($MM) (1) Millions of shares: 39.3 in Q4 and 2003, 41.5 in 2004 (2) 2002 Proforma comparison after tax EPS at 38% estimated rate Q4 2003 2003 2004 Net Sales +/- Same store sales $137 +49% +28% $458 +36% +31% $535 - $565 +20% +18%-22% EPS (1)(2) $.26 - $.28 +70% $0.67 - $0.69 +80% $0.84
Slide 21: Long-Term Financial Targets
Long-Term Financial Targets 2003 2005 Target Revenue Growth 36% 15% - 25% Gross Margin 63% 63% Operating Margin 9% 12% - 15% EPS Growth 80% 30%+
Slide 22: Strong Balance Sheet
Strong Balance Sheet ($MM) December 2003 Cash $75 Working Capital $50 Total Debt --- Shareholder's Equity $89
Slide 23: Long-Term Growth & Competitive Advantage
Long-Term Growth & Competitive Advantage Unique product features and long-term consumer appreciation? Exposure to competition? Price pressure Distribution security & effectiveness Expansion opportunities? People and culture?
Slide 24: Select Comfort - Uniquely Positioned for Continued Growth
Select Comfort - Uniquely Positioned for Continued Growth Strong Consumer Trend - personal comfort, importance of sleep Differentiated Product and Brand Controlled Sales and Distribution Advantaged Business Model - profit and cash People and Culture Expansion opportunity Product Channel Geography
Slide 25: Mission: Improving Lives; Vision: Leader in Sleep
Mission: Improving Lives Vision: Leader in Sleep
Select Comfort — Investor Presentation (January 2004) on 6ix