Tags: Select | Comfort | premium | SCSS

Select Comfort Carves Out Premium Market

By    |   Thursday, 08 Dec 2011 10:50 AM

Bed manufacturer Select Comfort (SCSS) is a growth stock story in a relatively non-differentiated industry. The company has prospects for strong growth with a strategy of carving out a premium slice of the large bedding market.

Select Comfort manufactures and retails its line of beds, along with accessories such as bases, bedding and pillows. The company sells the widely advertised Sleep Number beds, which use air pressure to adjust the firmness of each side of the bed, allowing two sleepers to sleep on different levels of firmness.

The company sells the beds primarily through 370 company-owned retail stores plus direct marketing and e-commerce. The business model has a negative cash conversion cycle, where a bed is ordered and paid for before being manufactured and delivered to a customer.

For the first nine months of 2011, Select Comfort reported sales of $554 million, up 21 percent from $457 million in the same period of 2011. Net income for the three quarters was 80 cents per share, up 82 percent from 44 cents in 2010.

For the full year, the company is forecast to earn $1.01 per share, compared to 57 cents in 2010. The consensus earnings estimate for 2012 is $1.25 per share.

Recessionary spending

Select Comfort sets itself apart from the mass market innerspring mattress business with its unique adjustable products. The company currently sells just 5 percent of a $6 billion mattress market. The premium end of the mattress business — those costing $1,000 or more — is the fastest-growing segment of the industry. The Sleep Number bed sets start at that $1,000 mark and go up to over $4,500.

Buying a premium bed is a discretionary purchase, and customers can hold back or delay their purchases if they are not comfortable with the economy. During the recessionary years of 2007 through 2009, Select Comfort experienced eight consecutive quarters of declining sales before turning up in 2010. The forecasted 20 percent growth rates for the company may not materialize if the economy dips back into recession.

In recent analyst reports on Select Comfort, the analysts at Wedbush Securities reiterated their neutral rating on the stock, and Longbow Securities analysts reiterated a buy rating.

The company reports next on Jan. 18.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Companies
Bed manufacturer Select Comfort (SCSS) is a growth stock story in a relatively non-differentiated industry. The company has prospects for strong growth with a strategy of carving out a premium slice of the large bedding market. Select Comfort manufactures and retails its...
Select,Comfort,premium,SCSS
369
2011-50-08
Thursday, 08 Dec 2011 10:50 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved