Sleep Number Corporation · NASDAQ:SNBR
Sleep Number — Select Comfort — Investor Presentation (February 2012)
25 slides from Sleep Number's investor presentation, Feb 27, 2012
Slide 1: Unleashing Profitable Growth Formula
Unleashing Profitable Growth Formula February 2012
Slide 2: Forward Looking Statements
Statements used in this news release relating to future plans, events, financial results or performance are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as current general and industry economic trends; consumer confidence; the effectiven
Slide 3: Key Investment Proposition
Self-funding, strong balance sheet and no debt Self-funding, strong balance sheet and no debt Accelerating margins Accelerating margins Compelling sales growth Compelling sales growth KEY INVESTMENT PROPOSITION
Slide 4: Sleep Number Overview
4 • Differentiated product - DualAir ™ adjustable mattress and proprietary bedding collection • Exclusive distribution • Advantaged business model - vertically integrated • 12 consecutive quarters of profit improvement 26% comp in 2011 SLEEP NUMBER OVERVIEW
Slide 5: Company Transformation
Top-Line Growth Sustainable Profitable Growth Top-Line Growth Sustainable Profitable Growth • Older customer with back pain • Narrow Direct Response media • National store growth • Younger, more affluent customer • Broad-reach media • Market development COMPANY TRANSFORMATION Sleep Number transforme
Slide 6: Proven Growth Formula
Operating Margin EPS Net Sales Growth (11%) 11% 23% Growth formula has led to record levels of sales and margin 1-Yr Comp (4%) 19% 26% Operating Margin 8.6% 12.2% GM% SM Exp% 61.6% 62.5% 63.3% 47.6% 44.6% 42.7% 4.4%* EPS $0.57 $1.07 $0.24* *Pro Forma EPS *Pro Forma Operating Margin PROVEN GROWTH FOR
Slide 7: Positioned with Economic Flexibility
Additional financial buffer Gap to break-even sales $250M (33%) >$125M in cash & No debt Additional financial buffer + + Gap to break-even sales $250M (33%) Break-even sales (ttm) Actual sales (ttm) $250M (33%) $250M (33%) >$125M in cash & No debt Net sales distribution of stores open > 1 year Main
Slide 8: Industry Dynamics
US wholesale mattress sales steadily growing Industry moving to non-innerspring • Consistent growth over past three decades, reset in 08/09 (resilient following recessions) • Premium ($>1,000) outpacing total industry • Current recovery driven by non-innerspring • Industry sales at retail $12B • Sle
Slide 9: Sleep Number Vision
SLEEP NUMBER VISION Seta new standard in sleep by providing individualized sleep experiences and elevating people’s expectations above the “one-size-fits-all” solution offered by other mattress brands Leveraging Our unique business model | Awareness to fund innovation and growth | Experience ...will
Slide 10: Awareness drives market share
Awareness drives market share 55% 15% 10-12% #1 growth opportunity 5% 15% 10-15% share $1.5B+ net sales Broadening awareness is #1 growth opportunity Awareness drives market share National average • Leading markets 10-12% share • Sleep Number awareness lags industry leaders 55% Leading Innerspring L
Slide 11: Increasing media investment & effectiveness
Increasing media investment & effectiveness Broader target Customer Increases target market 4x Direct Media Achieving ~3x reach with 2x investment Increasing media investment & effectiveness • Broader media strategy increases reach • Increased investment focused on national advertising leverage and
Slide 12: National retailer; flexible real estate
National retailer Flexible real estate - mall and non mall National retailer National scale in place; now focused on local market development • 380+ stores in 45 states • Exclusive distribution • 5-8% annual store growth with >90% market fill-in Sleep Number store presence • Differentiated store des
Slide 13: Aggressive growth strategy for large, underdeveloped markets
Aggressive growth strategy Aggressive growth pilot Aggressive growth strategy for large, underdeveloped markets Aggressive growth strategy • Heavy-up local media for break-through share of media voice • Rapidly optimize store location, format and design • Pilot market success - on track to double ma
Slide 14: Innovative Products
Performance Innovation Memory Foam Classic INNOVATIVE PRODUCTS The most differentiated products in the industry c2 $999 c3 $1,399 c4 $1,699 p5 p6 $2,599 i8 $3,199 i10 $4,699 $2,099 Sleep Number Bed Series Pricing (Queen Sets): m7 $3,199 Performance Innovation Memory Foam Sleep Number Beds: • DualAir
Slide 15: Consumer insight-driven product launches
Consumer insight-driven product launches • Introduction to the Sleep Number experience • Adjusts to individual’s size, shape, sleeping position • CoolFit ™ Foam, Memory Fiber or European White Goose Down • Price $189 - $229 AirFit ™ Adjustable Pillow INNOVATIVE PRODUCTS • Proprietary CoolFit ™ foam
Slide 16: Differentiated store experience
Differentiated store experience End-to-end customer experience Differentiated store experience • Highly trained & tenured full time Sleep Professionals • Technology shows science behind the bed • Relationship-based selling process • 95% of customers report store experience exceeded expectations End-
Slide 17: Leveraging Our Unique Business Model
• • Build awareness • • Remodels/Repositions • • Product Innovation • • 5-8% annual store growth • • Year 1 new stores > company average Growing share through existing and new stores while improving operating margins $743M* Open new stores $1.5B+ Build awareness Remodels/Repositions Product Innovati
Slide 18: Margin Outlook
Profit Margins 2011 2015 Drivers Gross Margin Sales & Marketing G&A/Other Operating Margin Profit Margins Drivers 63% 43% 8% 12% >15% • Supply chain leverage & efficiencies • Product innovation & pricing • Store base leverage • Media mix & efficiency • Focus on core business Compelling margin expans
Slide 19: Strong Cash Flow Generation
Robust cash flow Use of Cash Sleep Number self-funds growth with advantaged profit and cash model Robust cash flow Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 EBITDA ttm ($ in millions) Use of Cash • Maintain $125M minimum balance • Priority #1: Self-fund high growth …stores, systems
Slide 20: Key Investment Proposition
Self-funding, strong balance sheet and no debt Self-funding, strong balance sheet and no debt Accelerating margins Accelerating margins Compelling sales growth Compelling sales growth KEY INVESTMENT PROPOSITION
Slide 21: Appendix
APPENDIX
Slide 22: Strong, experienced management team
Bill McLaughlin President & CEO Age 55 Sleep Number since 2000 Other experience: PepsiCo Frito-Lay Shelly Ibach EVP & COO Age 52 Sleep Number since 2007 Shelly Ibach EVP & COO Age 52 Sleep Number since 2007 Other experience: Macy’s Target Corporation Kathy Roedel EVP & Chief Technology & Services Ka
Slide 23: Non-GAAP Financial Measures Reconciliation
Non-GAAP Financial Measures Reconciliation Fiscal Years 2009, 2010 and 2011
Slide 24: Non-GAAP Financial Measures Reconciliation
Non-GAAP Financial Measures Reconciliation EBITDA for 2009, 2010 and 2011 (trailing-twelve- month basis)
Slide 25: sleep bed number.
sleep bed number.
Select Comfort — Investor Presentation (February 2012) on 6ix