Sleep Number Q4 net sales increased 13%

MINNEAPOLIS — Sleep Number Corp.’s fourth quarter net sales increased 13%, and full-year net sales increased 6% to a record $1.53 billion.

Operating income increased to $38 million, or 9.3% of net sales, a 380 basis-point rate improvement vs. the prior year’s fourth quarter, the company said.

Earnings per diluted share increased 108% to 81 cents, while earnings per diluted share for the second half of 2018 increased 31%.

“Our purpose-driven brand and our revolutionary new 360 smart beds are driving enthusiastic consumer engagement and accelerated performance, including 12% adjusted net sales growth and 48% adjusted EPS growth for the second half of 2018,” said Shelly Ibach, president and CEO. “We expect this trajectory to continue in 2019 as we advance our initiatives to drive demand, leverage our business model and deploy capital efficiently.”

For the full year, the net sales increase included a 3% comparable sales gain and 3 percentage points of growth from new stores.

The company said operating income increased to $92 million, or 6% of net sales, while absorbing approximately $16 million of 360 smart bed transition impacts.

Sleep Number said it generated $132 million of operating cash flows in 2018 and invested $46 million in capital expenditures, with $481 million of capital invested in the business over the past six years, in addition to building “essential infrastructure and growth-driving capabilities.”

The company said it increased share repurchases 86% to $279 million in 2018, bringing total cash returned to shareholders to $738 million over the past six years.

Sleep Number said its return on invested capital was 16% for the year, which it said compares favorably to its high single-digit weighted average cost of capital.

The company expects to generate full-year 2019 earnings per diluted share of between $2.25 and $2.75, a 17% to 43% increase vs. full-year 2018 earnings per diluted share of $1.92. The outlook assumes 6% to 10% net sales growth for 2019. The outlook also assumes an estimated effective income tax rate of 24.5%, compared to 19.6% for 2018. The company anticipates 2019 capital expenditures to be $50 million to $60 million, officials said.