Select Comfort Management Discusses Q2 2012 Results - Earnings Call Transcript

I will now turn the call over to Shelly for her comments.

Shelly R. Ibach

Thank you, Mark. Good afternoon, and thank you for joining our earnings call today. We're very pleased with our second quarter financial performance. Earnings per share increased 50% from a year ago to a second quarter record of $0.30. Sales increased 27% from a year ago to a second quarter record of $205 million. These results demonstrate the strength of our unique business model and integrated growth formula.

Our vertically-integrated model as a manufacturer and retailer provides multiple points of leverage to maximize operating margin, which was also a second quarter record of 12.6%. Strong cash flow allows us to self fund growth, and we remain committed to achieving the appropriate balance between seizing investment opportunities and managing risks.

Our integrated growth formula supports our long-term strategy, focused on delivering an unparalleled customer experience. We are driving traffic and conversion through our brand advertising, exclusive distribution, relationship-based selling experience and proprietary benefit-driven suite of products and services.

Again, in the second quarter, we experienced strong units in ASP growth. This validates our differentiated strategy that goes beyond selling mattresses to offering consumers a complete individualized value-added sleep experience. Therefore, we are confident in our ability to drive performance in the short and long term.

As we have previously discussed, our strategy has delivered top and bottom line growth regardless of the economic environment or changes in the competitive landscape.

In the second quarter, we increased media investment as planned by 37% over prior year. At the same time, we continued to shift media buys to more effectively reach our expanded target consumer and develop local markets. As expected, these actions resulted in the following: improved brand and store awareness; increased traffic, driving a 13% unit increase in our company-controlled channels; and advancement of our local market development strategy, including the launch of our seventh aggressive growth market at the end of the quarter.

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