Select Comfort
First Quarter 2008 Investor Call
April 23, 2008
Statements used in this press release 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; 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; our ability to fund our operations, through cash flow
from operations, or availability under our bank line of credit or other sources, and the cost of credit or
other capital resources necessary to finance operations; 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 which bring product cost pressures
and have required implementation of systems and manufacturing process changes to ensure
compliance. 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 this news release.
Forward Looking Statements
FY08 First Quarter Results Summary
Q1
Q1
2008
2007
Change
Net Sales
168.2
$
216.5
$
(48.3)
$
Gross Profit
96.9
$
134.2
$
(37.3)
$
Operating (loss) income
(11.0)
$
16.8
$
(27.8)
$
Net (loss) income per share
(0.16)
$
0.21
$
(0.37)
$
Diluted Shares (millions)
44.1
51.8
(7.7)
($ in millions, except EPS)
Combination of External and Company-Specific Q1 Events
Macro - existing home sales down 23%
Media investment reduced 23% vs. PY
Product mix lowered sales by $6M
Wholesale timing lowered sales by $7M
QVC
Retail Partners
Factors Affecting First Quarter Revenue
(3%)
(3%)
(5%)
(22%)
(2%)
(25%)
(20%)
(15%)
(10%)
(5%)
0%
5%
10%
15%
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Company-Owned Channels Unit Order % Change vs. Prior Year
Existing Home Sales
Total Media Spending Change vs. Prior Year
Actions in Face of Difficult Environment
2008 Impact
Cost and Margin
$30M
Staffing: Corporate, sales & operations
Lowered promotions, price increase
Cash, Inventory and Payables Management
$8M - $15M
Deferral of programs: International, SAP & Stores
Stabilize / Restore Sales
Restore media investment
Equal to 2007 for Q2 to Q4
New product introduction (6000 model)
Improving Mix
New media campaign
March Launch
Channel Performance and Store Summary
Q1 Channel Sales
Store Summary
Stores with New Fitch Design by Quarter
2 8 9 14 24 41 53 58
Total Store Count
471
485
483
478
481
478
447
460
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08(E)
Q3-08(E)
Q4-08(E)
Q1 Net Operating Results Roadmap
($ in millions)
Cash Generation Remains Strong
($ in millions)
Operating Cash Flow of $14.6M
Targeting Return to Profitability in Q3
Operating Profit Benefit of $10M+
Q1 and Q3 historically similar: Planned Q3 Improvements
Cost Reductions
$4M -$5M
Corporate, selling, staffing reductions
Flat store count
Lower consumer financing costs (lower interest rates)
Q1 severance
Gross Margin Enhancements
+2 ppts
Plant staffing reductions
Product mix improvement
Pricing / promotion
Sales Opportunities
+$10M - $15M
Media investment
New campaign
Wholesale normalized
