SNBR - Sleep Number: Re-Rating Following Decline In Performance
2024-03-28 22:26:29 ET
Summary
- Sleep Number’s revenue has grown well (CAGR: +7%), owing to successful product innovation and brand development, contributing to market share growth.
- The company has executed well, with significant potential as consumer awareness improves and it optimizes its software offering.
- This said, mistakes and weaknesses have led to a capitulation in performance, with the company’s long-term trajectory fundamentally weakened.
- We believe margins will normalize below its historical average, while economic conditions and industry fundamentals will mean medium-term growth is lower than historical levels.
- We believe Sleep Number is overvalued, with its current valuation suggesting better than forecast margin improvement, which we struggle to see materializing.
Introduction and thesis
Sleep Number Corporation ( SNBR ) is a U.S.-based company that specializes in the design, manufacturing, and retailing of smart beds and sleep solutions. Founded in 1987, the company is headquartered in Minneapolis, Minnesota, and operates a network of retail stores across the United States.
Sleep Number is fundamentally a quality business, with a developing brand and patents that should allow the company to maintain its market share and potentially grow it. The business, commercially, is headed in the correct direction, with its software offering having good potential....
Sleep Number: Re-Rating Following Decline In Performance