Shares of bedding manufacturer and retailer Sleep Number (NASDAQ:SNBR) fell 41.9% in the pre-market session after the company reported third-quarter results with revenue and EPS missing Wall Street's estimates, and it lowered its full-year guidance significantly for both metrics. Same-store sales also missed, and free cash flow turned negative. Management cited a downturn in demand for mattresses during the quarter, consistent with commentary we've heard from the broader consumer durables sector. As a reminder, bedding sales are highly correlated to home sales (you get a new bed when you move), and with high interest rates, the housing market has ground to a halt compared to years past. To adapt to the changing economic environment, Sleep Number initiated cost reductions that are expected to reduce 2024 operating expenses by approximately $50 million. This includes a reduction in workforce by around 10% or approximately 500 team members. Overall, this was a bad quarter for Sleep Number.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Sleep Number? Access our full analysis report here, it's free.
What is the market telling us:
Sleep Number's shares are very volatile and over the last year have had 54 moves greater than 5%. But moves this big are very rare even for Sleep Number and that is indicating to us that this news had a significant impact on the market's perception of the business.
Sleep Number is down 60% since the beginning of the year, and at $10.36 per share it is trading 75.1% below its 52-week high of $41.58 from February 2023. Investors who bought $1,000 worth of Sleep Number's shares 5 years ago would now be looking at an investment worth $262.96.
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