Sleep Number Corp (NASDAQ:SNBR) Plunges After Q3 Earnings and Revenue Miss Estimates

Sleep Number Corp (NASDAQ:SNBR) reported third-quarter financial results that fell significantly short of analyst expectations, triggering a sharp decline in its stock price during pre-market trading.

Earnings and Revenue Miss

The bedding retailer's Q3 2025 performance failed to meet Wall Street forecasts on key financial metrics. The company reported a substantial decline in both sales and profitability compared to the same period last year.

• Revenue: $342.9 million, a 19.6% year-over-year decrease, missing analyst estimates of $369.7 million.
• Earnings Per Share (EPS): A GAAP loss of $1.73 per share, a significant miss compared to the estimated non-GAAP profit of $0.21 per share.

The sales decline was attributed to a combination of lower sales volumes and a reduced store count, reflecting ongoing challenges in driving consumer demand.

Market Reaction and Financial Outlook

The market reacted negatively to the earnings miss and the company's revised outlook for the full year. In pre-market trading following the announcement, Sleep Number's stock dropped over 30%.

The company provided a revised financial outlook for the full year 2025 that also came in below analyst expectations. Sleep Number now anticipates:

• Full-year 2025 net sales of approximately $1.4 billion, which is below the analyst consensus estimate of $1.47 billion.
• Negative free cash flow of approximately $50 million for the year.

This downward revision appears to have compounded investor concerns following the weak quarterly results.

Operational Performance and Restructuring

The earnings release highlighted several operational challenges and costs associated with the company's ongoing turnaround efforts.

• Gross Profit Margin: Slightly contracted to 59.9% from 60.8% in the prior-year period.
• Restructuring Costs: The quarter included $41 million in restructuring and other non-recurring costs, driven by severance, contract terminations, and asset impairments.
• Cost Reductions: The company achieved an 18% reduction in operating expenses, excluding restructuring costs, through lower spending across marketing, general administration, and research and development.

Balance Sheet and Liquidity

The company's balance sheet shows a leveraged position, with borrowings under its credit facility increasing to $579.5 million. Management emphasized that it has successfully amended and extended its bank agreement through 2027, providing what it calls "greater flexibility" to execute its turnaround plans. The company's leverage ratio stood at 5.0x EBITDAR at quarter-end, close to the amended covenant maximum of 5.25x.

Strategic Commentary

Linda Findley, President and CEO, framed the current situation as a "full turnaround" of what she described as an "inherently great company." She expressed optimism about the company's future but acknowledged that the pace of work and capital structure constraints have made the initial phase challenging. The strategic plan involves shifts in product, brand positioning, and distribution to drive consumer demand, with investments in growth planned for 2026.

For a detailed look at future earnings estimates and historical performance, you can review the earnings and estimates data for SNBR.

Disclaimer: This article provides a financial news summary based on company reports and market data. It is not intended as investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.