Exhibit 99.1
2007 Analyst Day
Forward Looking Statements
Statements used in this presentation that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; uncertainties arising from global events; consumer confidence; effectiveness of our advertising and promotional efforts; our ability to secure suitable retail locations; our ability to attract and retain qualified sales professionals and other key employees; our ability to successfully expand distribution through independent retailers; consumer acceptance of our products, product quality, innovation and brand image; our ability to continue to expand and improve our product line; industry competition; warranty expenses; risks of potential litigation; our dependence on significant suppliers, and the vulnerability of any suppliers to commodity shortages, inflationary pressures, labor negotiations, liquidity concerns or other factors; rising commodity costs; the capability of our information systems to meet our business requirements and our ability to upgrade our systems on a cost-effective basis without disruptions to our business; and increasing government regulations, including new flammability standards for the bedding industry and our ability to successfully implement systems and manufacturing process changes to ensure compliance with these requirements. Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, 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 that may be in today’s presentation.
Mark Kimball
Senior Vice President,
General Counsel
2007 Analyst Day– Agenda
12:00-12:25 p.m. Jim Raabe – Business Overview
12:30-12:55 p.m. Shelly Ibach – Retail Excellence
1:00-1:25 p.m. Kathy Roedel – Funding Growth
1:30-1:55 p.m. Bill McLaughlin – Taking Control
2:00-2:30 p.m. Q&A
3:00-5:30 p.m. Store Tour – Paradise Valley Mall
7:00-9:00 p.m. Management Reception – WeKoPa Clubhouse
Time
Presenter / Topic
Jim Raabe
Senior Vice President,
Chief Financial Officer
20 Years of Growth
and Innovation
2006
1987
0.3
0.6
$0.9
Significant Untapped Opportunity
Source: International Sleep Products Association (ISPA),
2006 Annual Report; Furniture Today
$750
$900
$1,050
$1,200
2006
2004
$ales CAGR
5-year 8.1%
10-year 7.3%
20-year 6.5%
U.S. Retail Market
Other
Specialty
16%
Total $7.8B
2002
2005
SCSS 4%
Total $11.7B
SCSS 6%
Other
Specialty
20%
2-Year CAGR – 20.4%
Long-Term Growth Potential
15%+ Sales, 20%+ Profit
Net sales ($billions)
$
Operating Profit Margin (%)
15%
0
7.5%
Leverage
Awareness
Distribution
Innovation
People &
Systems
Expand
Focused Strategy
2006
Direct - 9%
eCommerce - 6%
Other - 9%
Retail
76%
Transforming Retail
Increasing Distribution
2002
FY07
250
375
500
Delivering Customer Loyalty
& Competitive Advantage
Complex product – history, scale
JIT supply chain – quality, cash
Integrated, company-owned service
Direct to consumer
Cost, Quality, Service – Difficult to Replicate
Manufacturing
Sourcing
Product Design
Logistics
Home Delivery
Customer Service
Product - Early Stages of New Innovation
Shelly Ibach
Senior Vice President
U.S. Retail
Marketing Evolution
Retail Progression
Market Development
Marketing Evolution
Local Sunday Insert- Front / Back Cover
August Marketing Campaign
August Marketing Campaign
Local Sunday Insert- Inside spread
August Marketing Campaign
National Newspaper
August Marketing Campaign
Direct Mail
August Marketing Campaign
Bed Owners
In-Store Marketing
August Marketing Campaign
April Marketing Campaign
Magazine
Direct Mail
Bed Owner Newsletter
In-Store Marketing
April Marketing Campaign
Retail Progression
In-Store Experience
Favorable Retail Store Model
New Store Economics
First-year sales: >$1,000K
Capital investment: $280K
Four-wall cash flow: $250K
Payback: Approx. 1 year
$700
$900
$1,100
$1,300
$1,500
$1,700
Average sales per store ($000)
Existing Stores
Expect to open 40 – 50 new stores in 2008
2002
2007E
Program
Design &
Testing
Store Roles
(SM & SP)
Market
Manager
Role
Regional
Director
Role
Q3 ’06 Q3 '07
Q3 and Beyond
Timeline:
Key Changes:
Expected Benefits:
Retail Progression – People
Retail Organization:
Optimize In-Store Experience
Improve Selling Process
Maximize Sales Results
Attract Talent
Improve Retention
Store Manager (SM):
Select, Train and Lead Sales Teams
Increase Decision-Making
Accountable for Store Results
Sales Professional (SP):
Customer Experience Focused
Enhanced Training
Certified Selling Skills
Combining the best of both approaches; in place for our Q3 and Q4
sales planning process.
Retail Progression – Planning Process
Market Development
Dallas
Orlando
Dallas Orlando
Media Cost 2X 1X
Share of Voice
2%
2%
Competition (doors)
68
25
Demographic Makeup
Age 50+
33%
45%
Ethnic Mix
31%
21%
Avg Household Income
$77K
$64K
Untapped Potential
8X
X
Focused Approach - Example
Taking Control
Kathy Roedel
Senior Vice President,
Global Operations
Delivering Customer Loyalty
& Competitive Advantage
Advantaged Business Model
Complex Product – History, Scale
JIT Supply Chain – Quality, Cost, Cash
Integrated, Company-Owned Service
People & Culture
Complex, Differentiated Product
Air Control System
User Interface – Controls
Service 7 Days/Week
20 Year Durability
Modularity
More than a bed…a “sleep system”
Just In Time – Flexibility & Cash
Select Comfort
Manufacturing
Customer’s
Home
Suppliers
Build to Order
Ship < 48 hours
No warehouse
…no inventory
Short supply lines
Hrs –> Days Mat’l
Customer sees
“out of box” quality
Care Specialists…Bed Owners
All Channels, 7 Days/Week
Metrics & Incentives
Trained Company Techs
White Glove Service
Seals the Deal
Company-Owned Services
Winning Team & Culture
Passion for customers
and results
100% bonus participation
Innovation mindset
Community commitment
Proud of accomplishments
Bullish on our future!
Competitiveness Engine
Service – ‘Wow’ Every Customer
Quality – Zero Defect Culture
Our Mission…Transforming
Competitive Advantage
50-100 bps
Every Year
All New
Delivery Network
Six Sigma
Journey
Competitiveness Engine
Service – ‘Wow’ Every Customer
Quality – Zero Defect Culture
Our Mission…Transforming
Competitive Advantage
50-100 bps
Every Year
All New
Delivery Network
Six Sigma
Journey
Fueling Growth with Efficiency
Offset 210 bps Pressure
- Economics
- Regulatory
2Q07 up 80 bps Y / Y
- Strategic Sourcing
- Logistics
- - Quality / Warranty
- FR Roll-out Timing
61.2%
62.0%
60.9%
62.0%
60.4%
60.1%
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
Gross Margin
Sourcing / Value Engineering
Material Cost / Unit
Dual / Alternate Sources
Value Engineering
50% Fewer SKUs
Business Continuity / Terms
Indirects Sourcing
100
95
89
2005
2006
2007
Est.
2005 Index
Driving 160 bps Full Year Impact
Translating to Indirects
20%
30%
40%
50%
60%
10%
Office
Supplies
Travel
Prof.
Svcs.
All
Indirects
Sourcing Process
Discipline
Usage Management
Leveraging Scale
Innovative Payment
Processes
Significant Savings Beginning
in 2007…Bigger Savings in ‘08
Annual Savings
Info
Systems
Competitiveness Engine
Service – ‘Wow’ Every Customer
Quality – Zero Defect Culture
Our Mission…Transforming
Competitive Advantage
50-100 bps
Every Year
All New
Delivery Network
Six Sigma
Journey
Irmo SC
Salt Lake City UT
Minneapolis
2 Manufacturing Locations + HQ (Partner Fulfillment)
A Look Back at our Logistics
Foundations
Fabric
Foam
Foam
Foam
Foundations
Foundations
Foam
Foundations
Foundations
Foundations
Global & Local Suppliers
Home Delivery thru >100 Cross Docks
All New ‘Hub & Spoke’ in 2007
Salt Lake City UT
Irmo, SC
Minneapolis
13 UPS Hubs + 90 Spokes
11 Done…on Track for 13 in 2007
All New Delivery Capability
…a ‘Hub & Spoke’ Network
Phase 2: 2008
Regional Inventory
Speed to customers
…”Next Day” on top 15
High velocity inventory
Returns sort centers
Plant capacity
Phase 1: 2007
Build the Network
Freight savings –
full truck loads
Reduced in-transit
losses…<1%
>99% inventory
accuracy
Competitiveness Engine
Service – ‘Wow’ Every Customer
Quality – Zero Defect Culture
Our Mission…Transforming
Competitive Advantage
50-100 bps
Every Year
All New
Delivery Network
Six Sigma
Journey
Six Sigma – A Definition
A methodology for using tools to reduce
variation and defects to deliver products
and services that meet customer
expectations
1
2
3
4
5
DEFINE
MEASURE
ANALYZE
IMPROVE
CONTROL
What Customer
expectations are we
not meeting?
What is the
frequency of the
defects?
Why, when, and
where do defects
occur?
How can we fix the
process/product?
How can we make
sure the
process/product
stays fixed?
Six Sigma Phases
Customers feel the impact of a
Six Sigma journey…
1,000,000
100,000
10,000
1,000
100
10
1
0.1
1
2
3
4
5
6
7
Sigma level
Defects Per
Million
IRS Tax
Advice
Bogie
Golf
Burglary Case
Closure
Baggage
Handling
Tech Center
Wait Time
Flight Delays
Airline
Fatality
Defect Rate
69%
31%
7%
0.6%
0.02%
0.0003%
Dramatic increase in
Customer Satisfaction
at Four Sigma
Most
Industries
0%
10%
20%
30%
40%
50%
2
3
4
5
6
Sigma Level
Near
Term
Goal
Shareholders feel it too…
Targeting a Better Customer
Experience
Select Comfort
Customer Loyalty
Drivers
49%
18%
7%
24%
2%
Customer
Service
Product
Quality & Bed
Benefits
Information
Source
Trial
Experience
Purchase
Experience
1st Year Warranty Claim Rates
2007 Game Plan
Measure/Analyze
Improve/Control
Q2
Q3
Q4
Q1
Q2
Q3
Q4
(60%)
Defects
------2006-------
------2007-------
Improving Product Quality
Product claims 40% YTD
Not just for Manufacturing
Returns & Exchanges
Order Cycle Time
Marketing Efficiency
Delivering a better experience
and Cost Savings
Relentless cost attack …leveraging scale and innovation
Transforming Service …an all-new delivery capability
Incomparable quality … customer centric, every time
Transforming Competitive
Advantage
Bill McLaughlin
President & Chief Executive Officer
Innovation
Brand
Summary
Agenda
Product Innovation
Distinct Competitive Advantages
Investing
2007 Impact
FR
Cost & Quality
Early Innovation
Innovation Going Forward
Innovation
Accelerating Innovation
% of Net Sales
R&D Spending ($M)
People
Research
Tools & Equipment
0
3
6
9
2002
2004
2006
2007E
2008E
0.0%
0.3%
0.6%
0.9%
R&D Allocation
2002
2004
2006
2007
2008
New Product Innovation
Incremental Improvements
Cost & Quality
Regulatory
Innovation Process
Concept
Guiding Principles:
Consumer-Driven Insights
Science Based
Proprietary and Advantages
Feasibility
Commercialization
Launch
Improve
Example: 2007 Line Upgrade
Consumer
Operations
Technical
Temperature & Breathability
Latex-Like Comfort
Coordinated Design
Fabrics
Comfort Layers
Component Testing
Simplification
FR-Compliant
Process Engineering
Concept:
WOW Customers, Owners and
Sales Team
Accessories
Enhanced Comfort Materials
Improved Functionality
Better Overall Design
2007 Innovation / Proprietary Highlights
Converted all product
to new FR standards
Introduced new 7000
and 9000 models
Introduce new 3000,
4000 and 5000 models
Introduce new
accessories
End of Summer Event
Labor Day Event
June
July
August
September
Distinct Competitive Advantages
Investing
2007 Impact
FR
Cost & Quality
Early Innovation
Innovation Going Forward
Innovation
Find Your Sleep Number
0
20
40
60
80
100
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Mar-07
Sealy
Serta
Simmons
SCSS
TPX
Building Strength in our Brand
Awareness Correlates with Growth
50
60
70
80
90
100
0%
5%
10%
15%
20%
Market Share (%)
Sleep Number Integration
Plan Going Forward
Integrate Around Proven Core
Original Sleep Number® campaign nationally
Fitch store design / research
New retail activation, owners, etc.
Develop New Creative – Address Learning
Sleep Number® evolution (not revolution)
Advance past “what” to “why” and “where”
One integrated look
Optimizer target for media plan
Long-Term Opportunity Stronger than Ever
Proven Strategies, Proven Team
Bold Actions Taken – and Continuing
Summary – Building on Strengths
Leverage
Awareness
Distribution
Innovation
People &
Systems
Proven Strategies
Expand
Global Opportunity
2006 Sales Mix
Sealy
Tempur-Pedic
Domestic
Int’l
Domestic
Int’l
SCSS
Domestic
Annual Net Sales Growth Rates
Source: International Sleep Products Association (ISPA), 2006 Annual Report
-10%
0%
10%
20%
30%
40%
2000
2001
2002
2003
2004
2005
2006
SCSS
ISPA
Building on Strengths
0.0
1.0
2.0
2002
2007E
2008E
2013E
Net sales ($billions)
$
$1.0B
$2.0B
2007 Analyst Day