Attached files
| file | filename |
|---|---|
| 8-K - SELECT COMFORT CORP 8-K 10-19-2011 - Sleep Number Corp | form8k.htm |
| EX-99.1 - EXHIBIT 99.1 - Sleep Number Corp | ex99_1.htm |
Exhibit 99.2
October 2011
Sleep Number . . .
Transforming a large, undifferentiated industry
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
effectiveness of our marketing and sales programs, including advertising and promotional efforts;
consumer acceptance of our products, product quality and brand image; our ability to continue to
improve our product line and product quality; warranty obligations; availability of attractive and cost-
effective consumer credit options; execution of our retail store distribution strategy; rising commodity
costs and other inflationary pressures; our dependence on significant suppliers, including several
sole-source suppliers and the vulnerability of suppliers to recessionary pressures; industry
competition; risks of pending and potentially unforeseen litigation; increasing government
regulations; the adequacy of our management information systems to meet the evolving needs of our
business and evolving regulatory standards; our ability to attract and retain key employees; and
uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the
threat of such events. Additional information concerning these and other risks and uncertainties is
contained in our filings with the SEC, including our Annual Report on Form 10-K, and other periodic
reports filed with the SEC. The company has no obligation to publicly update or revise any of the
forward-looking statements in this presentation.
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
effectiveness of our marketing and sales programs, including advertising and promotional efforts;
consumer acceptance of our products, product quality and brand image; our ability to continue to
improve our product line and product quality; warranty obligations; availability of attractive and cost-
effective consumer credit options; execution of our retail store distribution strategy; rising commodity
costs and other inflationary pressures; our dependence on significant suppliers, including several
sole-source suppliers and the vulnerability of suppliers to recessionary pressures; industry
competition; risks of pending and potentially unforeseen litigation; increasing government
regulations; the adequacy of our management information systems to meet the evolving needs of our
business and evolving regulatory standards; our ability to attract and retain key employees; and
uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the
threat of such events. Additional information concerning these and other risks and uncertainties is
contained in our filings with the SEC, including our Annual Report on Form 10-K, and other periodic
reports filed with the SEC. The company has no obligation to publicly update or revise any of the
forward-looking statements in this presentation.
4
• 30 years consistent industry
growth, reset in ’08/’09 . . .
6% CAGR
growth, reset in ’08/’09 . . .
6% CAGR
• Premium (>$1,000) outpacing total
industry growth
industry growth
• Specialty also outpacing with
consumer trend toward better sleep
consumer trend toward better sleep
• Significant growth opportunity in
adjustable “air” segment
adjustable “air” segment
• SCSS = 5% market share in $’s;
lead markets 2-3X
lead markets 2-3X
Innerspring
Foam
1Total Wholesale Sales based on ISPA 2010 Annual Report and ISPA Oct. 2011
Forecast. Premium percentages for 2012 are company estimates.
Forecast. Premium percentages for 2012 are company estimates.
Competing in the industry sweet spot
5
Unique, vertically-integrated business model
Differentiated end-to-end brand experience
• 374 stores nationwide, supported by
sleepnumber.com and call center
sleepnumber.com and call center
• Knowledgeable, tenured Sleep Experts and “white
glove” home delivery and service
glove” home delivery and service
• Company-controlled customer touchpoints provide
direct insight into product innovation and R&D
direct insight into product innovation and R&D
Flexible, cash advantaged supply chain
• Two plants (UT & SC), 10 hubs and 127 spokes
support national distribution
• Build-to-order, JIT inventory translates to minimal
inventory (15 turns in manufacturing)
• Negative 30-day cash conversion cycle
- Cash receipt at time of order
- Payables cycle tied to time of manufacture
6
Proprietary products . . . real consumer benefits
Individualized comfort at the touch of a button
• 9 out of 10 couples prefer different mattress firmness
• Adjustable comfort on both sides…only with Sleep Number
Scientifically proven benefits
• 3rd party studies - improved sleep quality, reduced pain
• Superior consumer satisfaction - 20 pts higher
than traditional mattresses
Broad product offering at competitive value
• Good/Better/Best mattresses, full range of bedding & bases
• Pricing starts at $699 (Queen Mattress)
Sleep Number Bed Series & Models (Queen Sets)
Classic Series
c2
$999
c3
$1,299
c4
$1,599
Performance Series
p5
$2,099
p6
$2,599
p7
$2,899
Innovation Series
i8
$3,199
i10
$4,699
7
Product
Marketing
Target
Customer
Distribution
Sustainable
Competitive
Advantages
Competitive
Advantages
Expanding consumer base through integrated
consumer-focused strategy
consumer-focused strategy
8
The product opportunity
• Value: Addressed price confusion in 2009;
currently emphasizing accessibility (e.g.,
queen mattresses starting @ $699)
currently emphasizing accessibility (e.g.,
queen mattresses starting @ $699)
• Core promise: Proprietary personalized
comfort for individuals and couples
comfort for individuals and couples
– Sleep Number brand
– “DualAir technology inside”
– New “signature look”
• Innovation: Support brand development and
re-engage owners
re-engage owners
– Enhance - e.g., line refresh 2011 Q2
– Extend - e.g., AirFit pillow 2011 Q4
– Evolve - e.g., R&D investment
• Margin: Goal to continue increasing gross
margin over next 3 years
margin over next 3 years
– Sales/transaction - e.g., bedding, foundations
– Pricing - e.g., +4% annualized taken in 2011
9
Media efficiency performance
Broad Reach
- National
- National
Broad Reach
- Local
- Local
Digital
Media spend by type
Direct
Response
Response
• Sleep Number: Recently consolidated
brand in 2010
brand in 2010
• Creative & Media: Evolving to reach a
broader target customer, addressing
proprietary benefits - including
advantaged store experience
broader target customer, addressing
proprietary benefits - including
advantaged store experience
– Local
– National
• Value & Urgency: Media and
merchandising targeted to mattress
buying consumer holidays
merchandising targeted to mattress
buying consumer holidays
• Sustainable Expansion: Integrated
sales and marketing; leveraging selling
expense now - preparing to leverage
media longer-term
sales and marketing; leveraging selling
expense now - preparing to leverage
media longer-term
The marketing opportunity
10
New Store Economics
Build out costs (000’s) ~$320
Inventory (000’s) $15
Payback 12-18 months
First year sales target (000’s) >$1,500
The distribution opportunity
• Company-controlled channel growth
– Average sales/store leverage
– Store expansion starts in 2012; 5-7% net
expansion, >500 stores by 2015
expansion, >500 stores by 2015
• Market-based development for
profitable expansion
profitable expansion
– Accelerate sustainable market share
– Compete locally
• Customer experience leadership &
innovation
innovation
– New formats . . . non-mall stores
– New designs . . . experiential
– Advanced selling . . . selection, training,
tenure
tenure
11
Today, every $100,000
increase in average
sales per store
increase in average
sales per store
• $38 million sales (+1 bed/store/week)
• ~ $11 million operating profit
• ~ $0.13 incremental EPS
Store growth adds incremental upside potential
12
Integrated marketing and retail demonstrate path
to increase market share
to increase market share
13
1Q3-11 represents trailing 12 months
Early stage growth company . . . revenue and profit
14
|
|
20091
|
20112
|
Potential
by 2015
|
Drivers
|
|
Gross margin
|
60%
|
63%
|
#2-3 pts
|
• Supply chain leverage & efficiencies
• Product innovation & pricing
|
|
Selling &
Marketing % |
50%
|
43%
|
$2-5 pts
|
• Store base leverage
• Media mix & efficiency
|
|
G&A/other %
|
11%
|
9%
|
$0-1 pts
|
• Focus on core business
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|
Operating margin
|
(1%)
|
12%
|
> 15%
|
|
1Trailing 12 months ended third quarter on a pro forma basis
2Trailing 12 months ended third quarter
The profit margin opportunity
16
Investment Summary . . . why now?
• SCSS emerged from 2008-2009 economic crisis a stronger company,
prepared for an uncertain economy
prepared for an uncertain economy
– Consolidated brand
– Target customer expansion
– Breakeven point lowered
– Flexibility with short lead-time media and promotions
– Balance sheet strength - $136 million cash & securities, no debt
– Management team experience during the crisis and growth
• A unique and highly profitable growth opportunity
– Sustained revenue/share growth
– Continued profit leverage
– Strong cash flow
– Early stage development = opportune time
17
Appendix
18
|
Name
|
Age
|
Title
|
# yrs w/
SCSS |
Previous experience
|
|
Bill McLaughlin
|
55
|
President & CEO
|
11
|
PepsiCo/Frito-Lay
|
|
Shelly Ibach
|
52
|
COO
|
4
|
Macy’s, Target
Corporation |
|
Kathy Roedel
|
51
|
EVP, Chief Technology &
Services |
6
|
GE Health Care
|
|
Wendy Schoppert
|
44
|
EVP & CFO
|
6
|
U.S. Bank, America
West, Northwest, AMR |
|
Mark Kimball
|
53
|
SVP & General Counsel
|
12
|
Oppenheimer, Wolff &
Donnelly |
|
Karen Richard
|
41
|
SVP, Human Capital
|
15
|
TCF Financial Corp
|
Experienced Management Team
19
Unaided Brand Awareness
Unaided Store Awareness
Brand
Store
#1 Growth Opportunity . . .
Awareness & Consideration
Awareness & Consideration