Select Comfort Reports Fourth-quarter And Full-year 2012 Results

Select Comfort Corporation (NASDAQ: SCSS) today reported fourth-quarter and full-year 2012 results for the period ended Dec. 29, 2012. Select Comfort also announced the purchase of the business and assets of Comfortaire Corporation and an additional strategic investment to support innovation and further strengthen the company’s competitive advantages.

Fourth-quarter Financial Summary

• Net sales increased 17% to a fourth-quarter record of $221 million, up from $189 million in the fourth quarter of 2011.
• Company-controlled comparable sales grew 11%, representing the 13 ^th consecutive quarter of double-digit comparable-sales growth.
• Operating income decreased 3% to $19.4 million, and, as a percentage of net sales, was 8.8% compared to 10.6% in the fourth quarter of 2011. Operating margin decreased 180 basis points year-over-year, which included a 250 basis-point increase in sales and marketing expenses and a 30 basis-point increase in research and development expenses. This was partially offset by a 60 basis-point improvement in gross margin and a 50 basis-point decrease in general and administrative (G&A) expenses.
• Earnings per diluted share for the quarter were $0.22, a 19% decrease vs. $0.27 per diluted share in the fourth quarter of 2011. Fourth-quarter 2011 results included a $1.9 million, or $0.03 per diluted share, non-recurring net decrease to income-tax expense related to the favorable resolution of prior-years’ tax matters.
• During the quarter, the company opened 20 new stores and closed four, ending the year at 410 stores, 19% of which were in the non-mall format.
• Average retail sales per comparable store on a trailing 12-month basis reached a record $2.2 million, 26% higher than prior-year.

Full-year 2012 Financial Summary

• Net sales increased 26% to a record $935 million, up from $743 million in 2011.
• Company-controlled comparable sales grew 23%.
• Results included a $5.6 million, or $0.06 per diluted share, non-recurring, non-cash charge in the first quarter associated with the June 1, 2012 chief executive officer (CEO) transition.
• Adjusted operating income increased 39% to a record $125.4 million (excluding the CEO transition charge), and, as a percentage of net sales, was a record 13.4% compared to 12.2% for 2011.
• The 120 basis-point, year-over-year increase in adjusted operating margin included a 70 basis-point decrease in G&A expenses and a 50 basis-point improvement in gross margin.
• Earnings per diluted share on a GAAP basis were a record $1.37, a 28% increase vs. $1.07 per diluted share in 2011. Adjusted earnings per diluted share were $1.43 (excluding the CEO transition charge), which were 34% higher than 2011.
• The company opened 57 new stores and closed 28 in 2012; year-end store count of 410 was 8% higher than year-end 2011.

“We are extremely pleased with our record 2012 annual performance and the progress we’ve made toward our long-term goals. That said, fourth-quarter results were negatively impacted by a significant sales slow-down the last two weeks of December. We also invested in marketing production and testing, as well as product and service innovation, from which we expect to benefit in the current year and beyond,” said Shelly Ibach, president and CEO, Select Comfort.

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