UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                 For the Quarterly Period Ended October 2, 2004


                           COMMISSION FILE NO. 0-25121

                             -----------------------



                           SELECT COMFORT CORPORATION
             (Exact name of registrant as specified in its charter)


                    MINNESOTA                                    41-1597886
         (State or other jurisdiction of                      (I.R.S. Employer
         incorporation or organization)                      Identification No.)

             6105 TRENTON LANE NORTH
             MINNEAPOLIS, MINNESOTA                                55442
    (Address of principal executive offices)                     (Zip code)

       Registrant's telephone number, including area code: (763) 551-7000


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES[X] NO[ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
YES[X]  NO[ ]

As of October 2, 2004, 35,965,520 shares of Common Stock of the Registrant were
outstanding.





                           SELECT COMFORT CORPORATION
                                AND SUBSIDIARIES



                                      INDEX


                                                                        Page No.
                                                                        --------


PART I: FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets
         October 2, 2004 and January 3, 2004.................................  3

         Consolidated Statements of Operations
         for the Three Months and Nine Months ended
         October 2, 2004 and September 27, 2003..............................  4

         Consolidated Statements of Cash Flows
         for the Nine Months ended
         October 2, 2004 and September 27, 2003..............................  5

         Notes to Consolidated Financial Statements..........................  6

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations.......................  9

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......... 16

Item 4.  Controls and Procedures............................................. 16

PART II: OTHER INFORMATION

Item 1.    Legal Proceedings................................................. 17

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds....... 17

Item 3.    Defaults Upon Senior Securities................................... 18

Item 4.    Submission of Matters to a Vote of Security Holders............... 18

Item 5.    Other Information................................................. 18

Item 6.    Exhibits.......................................................... 18





PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                                   (UNAUDITED)
                                                                    OCTOBER 2,     JANUARY 3,
                                                                       2004           2004
                                                                   -------------  --------------
                                                                            
                              ASSETS
Current assets:
   Cash and cash equivalents                                          $ 29,662       $ 24,725
   Marketable securities - current (note 2)                             26,320         49,322
   Accounts receivable, net of allowance for doubtful
     accounts of $662 and $619                                           7,621          6,823
   Inventories (note 3)                                                 17,637         14,110
   Prepaid expenses                                                      7,229          5,968
   Deferred tax assets                                                   7,387          6,039
                                                                   -------------  --------------
       Total current assets                                             95,856        106,987

Marketable securities - non-current (note 2)                            38,725          1,071
Property and equipment, net                                             41,014         36,134
Deferred tax assets                                                      7,603          5,620
Other assets                                                             3,624          3,343
                                                                   -------------  --------------
       Total assets                                                  $ 186,822       $153,155
                                                                   =============  ==============

               LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                   $ 27,200      $  16,502
   Consumer prepayments                                                  5,861          5,970
   Accruals:
    Sales returns                                                        4,635          3,469
    Compensation and benefits                                           16,291         17,303
    Taxes and withholding                                                8,935          3,661
    Other                                                                6,640          6,110
                                                                   -------------  --------------
       Total current liabilities                                        69,562         53,015
Accrued warranty costs                                                   2,403          2,557
Other liabilities                                                        5,237          4,821
                                                                   -------------  --------------
       Total liabilities                                                77,202         60,393
                                                                   -------------  --------------



Shareholders' equity (notes 4 and 5):
   Undesignated preferred stock; 5,000,000 shares authorized,
     no shares issued and outstanding                                        -              -
   Common stock, $.01 par value; 95,000,000 shares authorized,
     35,965,520 and 35,769,606 shares issued and outstanding,              360            358
     respectively
   Additional paid-in capital                                          100,637        104,085
   Unearned compensation                                                (1,863)          (877)
   Retained earnings (accumulated deficit)                              10,486        (10,804)
                                                                   -------------  --------------
       Total shareholders' equity                                      109,620         92,762
                                                                   -------------  --------------
       Total liabilities and shareholders' equity                    $ 186,822       $153,155
                                                                   =============  ==============


                 See accompanying notes to consolidated financial statements.


                                       3




                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)




                                               THREE MONTHS ENDED            NINE MONTHS ENDED
                                           ----------------------------  -----------------------------
                                             OCTOBER 2,   SEPTEMBER 27,   OCTOBER 2,    SEPTEMBER 27,
                                               2004           2003          2004           2003
                                           -------------  -------------  -------------  -------------
                                                                           
Net sales                                    $144,348       $117,400       $409,031       $321,351
Cost of sales                                  57,366         42,447        159,101        119,424
                                           -------------  -------------  -------------  -------------
   Gross profit                                86,982         74,953        249,930        201,927
                                           -------------  -------------  -------------  -------------
Operating expenses:
   Sales and marketing                         63,848         53,279        185,206        148,480
   General and administrative                  10,425         10,144         31,109         27,654
   Store closings and asset impairments             -              8              -             67
                                           -------------  -------------  -------------  -------------
       Total operating expenses                74,273         63,431        216,315        176,201
                                           -------------  -------------  -------------  -------------
Operating income                               12,709         11,522         33,615         25,726
                                           -------------  -------------  -------------  -------------
Other income (expense):
   Interest income                                351            148          1,003            398
   Interest expense                                 -            (15)             -           (156)
   Other, net                                       -              2              -             26
                                           -------------  -------------  -------------  -------------
       Other income (expense), net                351            135          1,003            268
                                           -------------  -------------  -------------  -------------
Income before income taxes                     13,060         11,657         34,618         25,994
Income tax expense                              5,028          4,430         13,328          9,878
                                           -------------  -------------  -------------  -------------
Net income                                   $  8,032       $  7,227       $ 21,290      $  16,116
                                           =============  =============  =============  =============

Net income per share (note 4) - basic        $   0.22       $   0.22       $   0.59      $    0.50
                                           =============  =============  =============  =============
Weighted average shares - basic                36,123         33,528         36,243         32,142
                                           =============  =============  =============  =============

Net income per share (note 4) - diluted      $   0.20       $   0.18       $   0.53      $    0.42
                                           =============  =============  =============  =============
Weighted average shares - diluted              39,313         39,576         39,880         38,929
                                           =============  =============  =============  =============



                 See accompanying notes to consolidated financial statements.


                                       4




                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


                                                               NINE MONTHS ENDED
                                                          -----------------------------
                                                           OCTOBER 2,    SEPTEMBER 27,
                                                              2004           2003
                                                          -------------- --------------
                                                                   
Cash flows from operating activities:
   Net income                                                $ 21,290       $ 16,116
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization                             10,084          8,251
     Amortization  of debt discount and deferred  finance           -            130
       fees
     Non-cash compensation                                        294             52
     Loss on disposal of assets and impaired assets                 -             69
     Deferred tax (benefit) expense                            (3,331)         6,263
     Change in operating assets and liabilities:
       Accounts receivable, net                                  (798)        (2,932)
       Inventories                                             (3,527)        (2,396)
       Prepaid expenses                                        (1,261)           479
       Other assets                                              (307)           129
       Accounts payable                                        10,698          6,559
       Accrued sales returns                                    1,166            964
       Accrued compensation and benefits                       (1,012)           176
       Accrued taxes and withholding                           10,054          1,997
       Consumer prepayments                                      (109)         4,338
       Other accruals and liabilities                             792          1,472
                                                          -------------- --------------
         Net cash provided by operating activities             44,033         41,667
                                                          -------------- --------------

Cash flows from investing activities:
   Purchases of property and equipment                        (14,938)       (14,915)
   Investments in marketable securities                       (60,908)       (19,117)
   Proceeds from maturity of marketable securities             46,256         16,732
                                                          -------------- --------------
         Net cash used in investing activities                (29,590)       (17,300)
                                                          -------------- --------------

Cash flows from financing activities:
   Principal payments on debt                                       -            (11)
   Repurchase of common stock                                 (14,886)        (1,834)
   Proceeds from issuance of common stock                       5,380          3,590
                                                          -------------- --------------
         Net cash (used in) provided by financing              (9,506)         1,745
           activities
                                                          -------------- --------------

Increase in cash and cash equivalents                           4,937         26,112
Cash and cash equivalents, at beginning of period              24,725         27,176
                                                          -------------- --------------
Cash and cash equivalents, at end of period                  $ 29,662       $ 53,288
                                                          ============== ==============



          See accompanying notes to consolidated financial statements.

                                       5



                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements for the three months and nine months ended
October 2, 2004 of Select Comfort Corporation and subsidiaries ("Select Comfort"
or the "Company"), have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission and reflect,
in the opinion of management, all normal recurring adjustments necessary to
present fairly the financial position of the Company as of October 2, 2004 and
January 3, 2004 and the results of operations and cash flows for the periods
presented.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes the disclosures are adequate to make
the information presented not misleading. These consolidated financial
statements should be read in conjunction with the Company's most recent audited
consolidated financial statements and related notes included in the Company's
Annual Report to Shareholders and its annual report on Form 10-K for the fiscal
year ended January 3, 2004. Operating results for the Company on a quarterly
basis may not be indicative of operating results for the full year. Certain
prior-year amounts have been reclassified to conform to the current-year
presentation including inventory and accounts payable balances that have been
modified to reflect certain inventories in transit.

On October 13, 2004, the Financial Accounting Standards Board (FASB) issued an
Exposure Draft suggesting that FASB Statement No. 123R would be effective for
public companies for interim or annual periods beginning after June 15, 2005.
FASB Statement No. 123R "Share-Based Payment," would require all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement as expense based on their fair values. The
Company does not intend to adopt a fair-value based method of accounting for
stock-based employee compensation until a final standard is issued by the FASB
that requires this accounting treatment.

No additional new accounting pronouncements have been issued that are expected
to have a material effect on the Company's financial results.

(2)  MARKETABLE SECURITIES

The Company invests its cash in highly liquid debt instruments issued by the
U.S. government and related agencies, municipalities and in corporate notes and
commercial paper issued by companies with investment grade ratings. The
Company's investments have an original maturity of up to 36 months with an
average time to maturity of 17 months as of October 2, 2004. Investments with an
original maturity of less than 90 days are classified as cash equivalents.
Investments with an original maturity of greater than 90 days are classified as
marketable securities. Marketable securities with a remaining maturity of
greater than one year are classified as long-term. The Company's marketable
securities are classified as held-to-maturity and are carried at amortized cost.
Marketable securities held at October 2, 2004 carried an amortized cost of $65.0
million and a fair value of $64.6 million.

(3)  INVENTORIES

Inventories consist of the following (in thousands):

                                                 OCTOBER 2,     JANUARY 3,
                                                    2004           2004
                                                -------------- --------------
                                                         
Raw materials                                       $  6,136       $  5,444
Work in progress                                         122            123
Finished goods                                        11,379          8,543
                                                -------------- --------------
                                                     $17,637        $14,110
                                                ============== ==============



                                       6


                  SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (4)  NET INCOME PER COMMON SHARE

The following computations reconcile reported net income with net income
available to common shareholders per share-basic and diluted (in thousands,
except per share amounts):



                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                  ------------------------------- ------------------------------
                                                             WEIGHTED                       WEIGHTED
                                                     NET     AVERAGE   PER SHARE     NET    AVERAGE   PER SHARE
           OCTOBER 2, 2004                         INCOME     SHARES    AMOUNT     INCOME    SHARES    AMOUNT
           ---------------                        ---------- --------- ---------- --------- ---------- ---------
                                                                                     
BASIC EPS
Net income available to common shareholders         $ 8,032    36,123     $ 0.22   $ 21,290    36,243    $ 0.59
                                                                       ==========                      =========
EFFECT OF DILUTIVE SECURITIES
   Options                                               -     1,882                    -      2,285
   Common stock warrants                                 -     1,308                    -      1,352
                                                  ---------- ---------            --------- ----------
DILUTED EPS
Net income available to common shareholders        $ 8,032    39,313     $ 0.20   $ 21,290    39,880    $ 0.53
                                                  ========== ========= ========== ========= ========== =========




                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                  ------------------------------- ------------------------------
                                                             WEIGHTED                       WEIGHTED
                                                     NET     AVERAGE   PER SHARE     NET    AVERAGE    PER SHARE
         SEPTEMBER 27, 2003                        INCOME     SHARES    AMOUNT     INCOME    SHARES     AMOUNT
         ------------------                       ---------- --------- ---------- --------- ---------- ---------
                                                                                     
BASIC EPS
Net income available to common shareholders        $ 7,227    33,528     $ 0.22   $ 16,116    32,142    $ 0.50
                                                                       ==========                      =========
EFFECT OF DILUTIVE SECURITIES
   Options                                               -     3,001                    -      2,693
   Common stock warrants                                 -     3,047                    -      3,733
   Convertible debt                                      -         -                  131        361
                                                  ---------- ---------            --------- ----------
DILUTED EPS
Net income available to common shareholders
   plus assumed conversions                        $ 7,227    39,576     $ 0.18   $ 16,247    38,929    $ 0.42
                                                  ========== ========= ========== ========= ========== =========


Additional potentially dilutive securities totaling 753,000 and 540,000 for the
three- and nine-month periods ended October 2, 2004 and 73,000 and 163,000 for
the three- and nine-month periods ended September 27, 2003, have been excluded
from diluted EPS because these securities' exercise price was greater than the
average market price of the Company's common shares.

(5)  STOCK AND STOCK OPTION INCENTIVES

The Company uses the intrinsic value method of accounting for stock options.
Under this method no compensation cost has been recognized in the consolidated
financial statements for employee stock option grants or the discount feature of
the Company's employee stock purchase plan.


                                       7


Had the Company determined compensation cost based on the fair value at the
grant date for its stock options and the discount feature of its employee stock
purchase plan under an alternative accounting method, the Company's net income
would have been adjusted as outlined below (in thousands, except per share
amounts):


                                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                           ---------------------------  ---------------------------
                                            OCTOBER 2,   SEPTEMBER 27,   OCTOBER 2,   SEPTEMBER 27,
                                               2004          2003           2004         2003
                                           ------------- -------------  ------------- -------------
                                                                          
Net income, as reported                     $   8,032     $   7,227      $ 21,290      $   16,116
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects                       (787)         (655)       (2,241)         (1,518)
                                           ------------- -------------  ------------- -------------
Pro forma net income                        $   7,245     $   6,572      $ 19,049      $   14,598
                                           ============= =============  ============= =============

Income per share
        Basic - as reported                 $    0.22     $    0.22      $   0.59      $     0.50
        Basic - pro forma                   $    0.20     $    0.20      $   0.53      $     0.45

        Diluted - as reported               $    0.20     $    0.18      $   0.53      $     0.42
        Diluted - pro forma                 $    0.18     $    0.17      $   0.48      $     0.38


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

                                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                           ---------------------------  ---------------------------
                                            OCTOBER 2,   SEPTEMBER 27,   OCTOBER 2,   SEPTEMBER 27,
                                               2004          2003           2004         2003
                                           ------------- -------------  ------------- -------------
                                                                          
Expected dividend yield....................       0%            0%             0%           0%
Expected stock price volatility............      55%           90%            55%          90%
Risk-free interest rate....................     2.0%          2.0%           2.0%         2.0%
Expected life in years.....................     3.6           3.6            3.6          3.6
Weighted-average fair value at grant date..    $7.18        $11.68         $10.33        $6.96


The Company issued restricted stock awards to certain employees in conjunction
with its stock-based compensation plan. The shares vest between five and ten
years from the date of issuance based on continued employment. Compensation
expense related to restricted stock awards is based upon the market price at
date of grant and is charged to earnings on a straight-line basis over the
vesting period. 153,500 shares of restricted stock were outstanding as of
October 2, 2004. Total compensation expense related to restricted stock was
$111,000 and $22,000 and $294,000 and $52,000 for the three months and nine
months ended October 2, 2004 and September 27, 2003, respectively.

(6)  LITIGATION

On August 13, 2003, a lawsuit was filed against the Company in Superior Court of
the State of California, County of Ventura. The suit was subsequently amended on
September 18, 2003. This suit was filed by two former store managers alleging
misclassification of employment position and seeking class certification. The
complaint seeks judgment for unpaid overtime compensation alleged to exceed $1.0
million, together with related penalties, restitution, attorneys' fees and
costs. We are investigating the allegations in the complaint and intend to
vigorously defend this litigation. As this case is in the early stages of
discovery, the financial impact to the Company, if any, cannot be predicted.

On October 18, 2004, a lawsuit was filed against the Company in Hennepin County
District Court in the State of Minnesota by one of our customers alleging
deceptive trade practices, fraud and breach of warranty and seeking class
certification.  The complaint seeks various forms of legal and equitable relief,
including without limitation rescission and/or actual damages in an amount to be
determined at trial, including interest, costs and attorney's fees.  The Company
believes that the complaint is without merit and intends to vigorously defend
the claims. As this case is in the early stages and discovery has not yet
commenced, the financial impact to the Company, if any, cannot be predicted.

The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, any losses that may
occur from these other matters are adequately covered by insurance or are
provided for in the consolidated financial statements and the ultimate outcome
of these other matters will not have a material effect on the consolidated
financial position or results of operations of the Company.

                                       8



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED HEREIN. THIS
QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. YOU CAN
IDENTIFY FORWARD-LOOKING STATEMENTS BY THOSE THAT ARE NOT HISTORICAL IN NATURE,
PARTICULARLY THOSE THAT USE TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECTS," "ANTICIPATES," "CONTEMPLATES," "ESTIMATES," "BELIEVES," "PLANS,"
"PROJECTS," "PREDICTS," "POTENTIAL" OR "CONTINUE" OR THE NEGATIVE OF THESE OR
SIMILAR TERMS. THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
HISTORICAL EXPERIENCE AND ITS PRESENT EXPECTATIONS OR PROJECTIONS. IMPORTANT
FACTORS KNOWN TO SELECT COMFORT THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE
IDENTIFIED AND DISCUSSED IN PART I, ITEM 1 OF OUR ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED JANUARY 3, 2004, WHICH DISCUSSION IS INCORPORATED HEREIN
BY REFERENCE. THESE IMPORTANT FACTORS INCLUDE:

o   GENERAL AND INDUSTRY ECONOMIC TRENDS,
o   UNCERTAINTIES ARISING FROM DOMESTIC AND GLOBAL EVENTS,
o   CONSUMER CONFIDENCE AND SPENDING,
o   THE EFFECTIVENESS AND EFFICIENCY OF OUR ADVERTISING AND PROMOTIONAL EFFORTS,
o   ADVERTISING RATES AND THE VOLATILITY OF ADVERTISING RATES DURING THE
    ELECTION SEASON,
o   OUR ABILITY TO SECURE SUITABLE RETAIL LOCATIONS;
o   OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED SALES PROFESSIONALS AND OTHER
    KEY EMPLOYEES;
o   CONSUMER ACCEPTANCE OF OUR PRODUCTS AND SLEEP TECHNOLOGY,
o   OUR ABILITY TO CONTINUE TO EXPAND AND IMPROVE OUR PRODUCT LINE;
o   INDUSTRY COMPETITION,
o   WARRANTY EXPENSES,
o   THE OUTCOME OF PENDING LITIGATION, INCLUDING CONSUMER CLAIMS AND CALIFORNIA
    WAGE AND HOUR LITIGATION,
o   OUR DEPENDENCE ON SIGNIFICANT SUPPLIERS OR SINGLE SOURCES OF SUPPLY,
o   THE VULNERABILITY OF ANY SUPPLIERS TO RECESSIONARY PRESSURES, LABOR
    NEGOTIATIONS, LIQUIDITY CONCERNS OR OTHER FACTORS,
o   GOVERNMENTAL REGULATION, INCLUDING ANTICIPATED FUTURE REGULATION OF DIRECT
    MARKETING TELEPHONE SOLICITATIONS AND BEDDING FLAMMABILITY STANDARDS,
o   INFLATION OF COMMODITY OR DELIVERY COSTS, AND
o   RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS
    WITH THE SEC, INCLUDING THE COMPANY'S 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 CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q.

OVERVIEW

Select Comfort(R) is the leading developer, manufacturer and marketer of
premium-quality, adjustable-firmness beds. The air-chamber technology of our
proprietary Sleep Number bed allows adjustable firmness on each side of the
mattress and provides a sleep surface that is clinically proven to provide
better sleep quality and greater relief of back pain compared to traditional
mattress products. In addition, we market and sell accessories and other sleep
related products which focus on providing personalized comfort to complement the
Sleep Number bed and provide a better night's sleep to the consumer.

We generate revenue by selling our products through four complementary
distribution channels. Three of these channels: retail, direct marketing and
e-commerce, are company-controlled and sell directly to consumers. Our wholesale
channel sells to leading home furnishings retailers, specialty bedding retailers
and the QVC shopping channel.

                                       9


The proportion of our total net sales, by dollar volume, from each of our
channels is summarized as follows:


                                Three Months Ended   Nine Months Ended
                                ------------------- -------------------
                                 10/2/04   9/27/03   10/2/04   9/27/03
                                --------- --------- --------- ---------
                                                  
       Stores                      78%       79%       77%       78%
       Direct Call Center          11%       13%       12%       14%
       E-commerce                   4%        4%        5%        4%
       Wholesale                    7%        4%        6%        4%


The growth rates of each distribution channel are as follows:


                                Three Months Ended   Nine Months Ended
                                ------------------- -------------------
                                 10/2/04   9/27/03   10/2/04   9/27/03
                                --------- --------- --------- ---------
                                                 
       Retail:
        Comparable store sales     15%       32%       18%       32%
        New/closed stores, net      7%        7%        8%        4%
                                  ----      ----      ----      ----
               Retail total        22%       39%       26%       36%
       Direct marketing             5%       24%       15%       18%
       E-commerce                  24%       34%       36%       29%
       Wholesale                  113%       87%       88%       10%


The number of company-operated retail locations is summarized as follows:


                                Three Months Ended   Nine Months Ended
                                ------------------- -------------------
                                10/2/04   9/27/03   10/2/04   9/27/03
                                --------- --------- --------- ---------
                                                  
       Beginning of period          360       332       344       322
       Opened                         2        12        23        24
       Closed                         -        (1)       (5)       (3)
                                --------- --------- --------- ---------
       End of period                362       343       362       343
                                ========= ========= ========= =========


We anticipate opening 6 new retail stores during the remainder of 2004. We do
not anticipate closing any additional stores in 2004.

Our growth plans are centered on increasing the awareness of our products and
stores through expansion of media, increasing distribution - primarily through
new retail store openings, and expanding and improving our product lines. Our
primary market consists of consumers in the U.S. domestic market.

On May 21, 2004, we entered into an agreement with Radisson Hotels. We expect
revenue over the contract term of $40 million to $60 million with revenues
ultimately dependent upon order volumes from individual Radisson franchisees,
but expected to occur predominately in 2005 and 2006. While we expect margins
from these incremental sales to be in the single digits, we believe the added
exposure to consumers provides an opportunity for additional incremental sales
through our existing higher margin channels.

In August 2004, a local Minneapolis news story reported the potential for mold
formation within our mattresses. The publicity has adversely affected sales in
the Minneapolis metropolitan market. In addition, following an initial increase
in warranty and return claims during the period after the news story, customer
claims have returned to historical levels. Historically, warranty claims made
associated with mold have affected a very low percentage of our installed
customer base. We believe our warranty reserves are adequate to address this
issue, but will continue to monitor claims activity and make future adjustments
to our warranty reserves, if appropriate.

Increases in sales, along with controlling costs, have provided significant
improvement to our operating income and operating margin over the past several
years. The majority of operating margin improvement has been generated through
leverage in selling expenses (increased sales through the existing store base)
and leverage of our existing infrastructure (general and administrative
expenses). We expect any future improvements in operating margin to be derived
from similar sources. Rising energy based commodity costs have the potential to
adversely affect our gross margins due to increased raw material costs (plastic
and foam) and rising fuel costs affecting the cost to deliver our products. We
will continue to evaluate the impact of these higher costs and manage the impact
on gross margin through cost reduction initiatives or pricing actions, where
appropriate. Our target is to sustain sales growth rates of at least 15% and to
sustain earnings growth rates of at least 20%.

                                       10


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Company's results
of operations expressed as dollars and percentages of net sales. Dollars are in
millions.


                                        THREE MONTHS ENDED                 NINE MONTHS ENDED
                                  -------------------------------  --------------------------------
                                    OCTOBER 2,     SEPTEMBER 27,      OCTOBER 2,     SEPTEMBER 27,
                                       2004             2003             2004            2003
                                  --------------- ---------------  --------------- ---------------
                                                                   
Net sales                          $144.3  100.0%  $117.4  100.0%   $409.0  100.0%  $321.4  100.0%
Cost of sales                        57.4   39.7%    42.4   36.2%    159.1   38.9%   119.4   37.2%
                                  ------- ------- ------- -------  ------- ------- ------- -------
   Gross profit                      87.0   60.3%    75.0   63.8%    249.9   61.1%   201.9   62.8%
                                  ------- ------- ------- -------  ------- ------- ------- -------

Operating expenses:
   Sales and marketing               63.8   44.3%    53.3   45.4%    185.2   45.3%   148.5   46.2%
   General and administrative        10.4    7.2%    10.1    8.6%     31.1    7.6%    27.7    8.6%
   Store   closings   and   asset     0.0    0.0%     0.0    0.0%      0.0    0.0%     0.1    0.0%
     impairments
                                  ------- ------- ------- -------  ------- ------- ------- -------
       Total operating expenses      74.3   51.5%    63.4   54.0%    216.3   52.9%   176.2   54.8%
                                  ------- ------- ------- -------  ------- ------- ------- -------
Operating income                     12.7    8.8%    11.5    9.8%     33.6    8.2%    25.7    8.0%
Other income (expense), net           0.4    0.2%     0.1    0.1%      1.0    0.3%     0.3    0.1%
                                  ------- ------- ------- -------  ------- ------- ------- -------
Income before income taxes           13.1    9.0%    11.7    9.9%     34.6    8.5%    26.0    8.1%
Income tax expense                    5.0    3.4%     4.4    3.7%     13.3    3.3%     9.9    3.1%
                                  ------- ------- ------- -------  ------- ------- ------- -------
Net income                         $  8.0    5.6%  $  7.2    6.2%   $ 21.3    5.2%  $ 16.1    5.0%
                                  ======= ======= ======= =======  ======= ======= ======= =======


Net sales
- ---------
We record revenue at the time product is shipped to our customer, except when
beds are delivered and set up by our home delivery employees, in which case
revenue for products and home delivery services is recorded at the time the bed
is delivered and set up in the home. We reduce sales at the time revenue is
recognized for estimated returns. This estimate is based on historical return
rates, which are reasonably consistent from period to period. If actual returns
vary from expected rates, revenue in future periods is adjusted, which could
have a material adverse effect on future results of operations. Historically, we
have not experienced material adjustments to the financial statements due to
changes to these estimates.

Cost of sales
- -------------
Cost of sales includes costs associated with purchasing materials, manufacturing
costs and costs to deliver our products to our customers. Cost of sales also
includes estimated costs to service warranty claims of customers. This estimate
is based on historical claim rates experienced during the warranty period.
Because this estimate covers an extended period of time, a revision of estimated
claim rates could result in a significant adjustment of estimated future costs
of fulfilling warranty commitments. An increase in estimated claim rates could
have a material adverse effect on future results of operations. Historically, we
have not experienced material adjustments to our consolidated financial
statements due to changes to these estimates. However, as we announced early
October 2004, we did increase our warranty reserves by $1.2 million (pre-tax)
during the third quarter of 2004. This change to our estimate is associated with
planned changes to our customer service practices which will result in higher
costs to service future warranty claims.

Gross profit
- ------------
Our gross profit margin is dependent on a number of factors and may fluctuate
from quarter to quarter. These factors include the mix of products sold, the
level at which we offer promotional discounts to purchase our products, the cost
of materials, delivery and manufacturing and the mix of sales between wholesale
and company-controlled distribution channels. Sales of products manufactured by
third parties, such as accessories and our adjustable foundation, generate lower
gross margins. Similarly, sales directly to consumers through company-controlled
channels generally generate higher gross margins than sales through our
wholesale channels because we capture both the manufacturer's and retailer's
margin.

                                       11


Sales and marketing expenses
- ----------------------------
Sales and marketing expenses include advertising and media production, other
marketing and selling materials such as brochures, videos, customer mailings and
in-store signage, sales compensation, store occupancy costs and customer
service. We expense all store opening and advertising costs as incurred, except
for production costs and advance payments, which are deferred and expensed from
the time the advertisement is first run. Advertising expense was $19.8 million
and $60.2 million for the three and nine months ended October 2, 2004,
respectively, as compared to $16.2 million and $43.5 million for the three and
nine months ended September 27, 2003, respectively. Future advertising
expenditures will depend on the effectiveness and efficiency of the advertising
in creating awareness of our products and brand name, generating consumer
inquiries and driving consumer traffic to our points of sale.

General and administrative expenses
- -----------------------------------
General and administrative expenses include costs associated with management of
functional areas, including information technology, human resources, finance,
sales and marketing administration, investor relations, risk management and
research and development. Costs include salaries, bonus and benefits,
information hardware, software and maintenance, office facilities, insurance,
shareholder relations costs and other overhead.

Store closings and asset impairments
- ------------------------------------
Store closing and asset impairment expenses include charges made against
operating expenses for store related or other capital assets that have been
written-off when a store is underperforming and generating negative cash flows.
We evaluate our long-lived assets, including leaseholds and fixtures in existing
stores and stores expected to be remodeled, based on expected cash flows through
the remainder of the lease term after considering the potential impact of
planned operational improvements and marketing programs. Expected cash flows may
not be realized, which could cause long-lived assets to become impaired in
future periods and could have a material adverse effect on future results of
operations. Store assets are written off when we believe these costs will not be
recovered through future operations.

Quarterly and annual results
- ----------------------------
Quarterly and annual operating results may fluctuate significantly as a result
of a variety of factors, including increases or decreases in comparable store
sales, the timing, amount and effectiveness of advertising expenditures, any
changes in sales return rates or warranty experience, the timing of new store
openings and related expenses, net sales contributed by new stores, competitive
factors, any disruptions in supplies or third-party service providers and
general economic conditions, seasonality of sales and timing of QVC shows and
wholesale sales and consumer confidence. Furthermore, a substantial portion of
net sales is often realized in the last month of a quarter, due in part to our
promotional schedule and commission structure. As a result, we may be unable to
adjust spending in a timely manner, and our business, financial condition and
operating results may be significantly harmed. Our historical results of
operations may not be indicative of the results that may be achieved for any
future period.

COMPARISON  OF THREE  MONTHS  ENDED  OCTOBER  2, 2004 WITH  THREE  MONTHS  ENDED
SEPTEMBER 27, 2003

NET SALES
Net sales increased 23% to $144.3 million for the three months ended October 2,
2004 from $117.4 million for the three months ended September 27, 2003, due to a
11% increase in mattress unit sales and higher average selling prices. The
average selling price per bed in our company controlled channels was $1,966, an
increase of approximately 15% over third quarter last year. The higher average
selling price resulted primarily from growth in unit sales at higher price
points and a decline in unit sales at lower price points. The increase in
mattress unit sales was driven predominately by sales from new stores and by
sales to QVC and wholesale partners while the growth rate of unit sales from
same stores was essentially flat.

The increase in net sales by sales channel was attributable to (i) a $20.0
million increase in sales from our retail stores, including an increase in
comparable store sales of $13.4 million and an increase of $6.6 million from new
stores, net of stores closed, (ii) a $0.7 million increase in direct marketing
sales, (iii) a $1.2 million increase in sales through the Company's e-commerce
channel and (iv) a $5.0 million increase in sales from the Company's wholesale
channel.

GROSS PROFIT
Gross profit decreased to 60.3% for the three months ended October 2, 2004 from
63.8% for the three months ended September 27, 2003, primarily due to an
additional warranty charge of $1.2 million (pre-tax) to allow for broader
flexibility to satisfy future warranty claims after modifying our customer
service practices, channel mix (i.e. increased percentage of our total net sales
from our lower margin wholesale channel), increased sales of adjustable
foundations which are not manufactured by us so result in lower gross margins
and increased utilization of our home delivery services. .

                                       12


SALES AND MARKETING EXPENSES
Sales and marketing expenses increased 20% to $63.8 million for the three months
ended October, 2004 from $53.3 million for the three months ended September 27,
2003 and decreased as a percentage of net sales to 44.3% from 45.4% for the
comparable prior-year period. The $10.5 million increase was primarily due to
additional media investments, sales-based incentive compensation, and increased
number of stores. The decrease as a percentage of net sales was comprised
primarily of a 0.1 percentage point (ppt) increase in media investments offset
by a 1.2 ppt leverage of fixed costs (occupancy, base sales compensation and
certain marketing expenses) over higher sales. With additional sales growth, we
expect sales and marketing expenses as a percentage of net sales to decline as
we achieve greater leverage from our base sales compensation and occupancy costs
while reinvesting some of these leverage benefits into higher levels of media
investments and training.

GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative (G&A) expenses increased 3% to $10.4 million for the
three months ended October 2, 2004 from $10.1 million for the three months ended
September 27, 2003 but decreased as a percentage of net sales to 7.2% from 8.6%
for the prior-year period. The dollar increase in G&A was comprised primarily of
increased expenses from increased compensation and benefits expenses related to
additional headcount, higher professional fees and from additional depreciation
from information technology infrastructure investments, offset by a reduction in
management incentive compensation expense. We expect G&A growth rates to
continue to be lower than the rate of sales growth due to leveraging the fixed
component of G&A expenses across a higher sales base.

OTHER INCOME (EXPENSE), NET
Other income (expense), net increased $216,000 to $351,000 for the three months
ended October 2, 2004 from $135,000 for the three months ended September 27,
2003. The improvement is primarily due to increased interest income resulting
from higher average balances of invested cash.

INCOME TAX EXPENSE
Income tax expense increased $0.6 million to $5.0 million for the three months
ended October 2, 2004 from $4.4 million for the three months ended September 27,
2003. The effective tax rate was 38.5% in 2004 and 38.0% in 2003.

COMPARISON OF NINE MONTHS ENDED OCTOBER 2, 2004 WITH NINE MONTHS ENDED SEPTEMBER
27, 2003

NET SALES
Net sales increased 27% to $409.0 million for the nine months ended October 2,
2004 from $321.4 million for the nine months ended September 27, 2003, due to a
15% increase in mattress unit sales and higher average selling prices. The
average selling price per bed in our company controlled channels was $1,839, an
increase of approximately 14% over the nine month average selling price last
year. The higher average selling price resulted primarily from growth in unit
sales at higher price points and a decline in unit sales at lower price points.
The increase in mattress unit sales was driven predominately by sales from new
stores, and by sales to QVC and other wholesale partners while the growth rate
of units within same stores slowed in comparison to prior periods.

The increase in net sales by sales channel was attributable to (i) a $64.4
million increase in sales from our retail stores, including an increase in
comparable store sales of $44.1 million and an increase of $20.3 million from
new stores, net of stores closed, (ii) a $6.3 million increase in direct
marketing sales, (iii) a $4.8 million increase in sales through the Company's
e-commerce channel and (iv) a $12.1 million increase in sales from the Company's
wholesale channel.

GROSS PROFIT
Gross profit decreased to 61.1% for the nine months ended October 2, 2004 from
62.8% for the nine months ended September 27, 2003, primarily due to decreases
in gross margins resulting from channel mix (i.e. increased percentage of our
total net sales from our wholesale channel), increased sales of adjustable
foundations which are not manufactured by us so result in lower gross margins,
an additional warranty charge in the third quarter of $1.2 million (pre-tax) to
allow for broader flexibility to satisfy future warranty claims after modifying
our customer service practices and increased utilization of our home delivery
services.


                                       13


SALES AND MARKETING EXPENSES
Sales and marketing expenses increased 25% to $185.2 million for the nine months
ended September 27, 2004 from $148.5 million for the nine months ended September
27, 2003 and decreased as a percentage of net sales to 45.3% from 46.2% for the
comparable prior-year period. The $36.7 million increase was primarily due to
additional media investments, sales-based incentive compensation, and increased
number of stores. The decrease as a percentage of net sales was comprised
primarily of a 1.2 percentage point (ppt) increase in media investments offset
by a 2.1 ppt leverage of fixed costs (occupancy, base sales compensation and
certain marketing expenses) over higher sales.

GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative (G&A) expenses increased 12% to $31.1 million for the
nine months ended October 2, 2004 from $27.7 million for the nine months ended
September 27, 2003 but decreased as a percentage of net sales to 7.6% from 8.6%
for the prior-year period. The dollar increase in G&A was comprised primarily of
increased expenses from increased compensation and benefits expenses related to
additional headcount, higher professional fees and from additional depreciation
from infrastructure investments, offset by a reduction in management incentive
compensation expense.

OTHER INCOME (EXPENSE), NET
Other income (expense), net increased $0.7 million to $1.0 million for the nine
months ended October 2, 2004 from $0.3 million for the nine months ended
September 27, 2003. The improvement is primarily due to increased interest
income resulting from higher average balances of invested cash.

INCOME TAX EXPENSE
Income tax expense increased $3.4 million to $13.3 million for the nine months
ended October 2, 2004 from $9.9 million for the nine months ended September 27,
2003. The effective tax rate was 38.5% in 2004 and 38.0% in 2003.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

As of October 2, 2004, we had cash and marketable securities of $94.7 million,
$56.0 million classified as a current asset. As of January 3, 2004, cash and
marketable securities totaled $75.1 million, $74.0 million classified as
current. Net working capital totaled $26.3 million as of October 2, 2004
compared to $54.0 million for 2003. The decrease in net working capital was due
to a shift to longer-term investments which are reported as non-current assets.
The $19.6 million improvement in cash balances was the result of generating
$29.1 million of operating free cash flow ($44.0 million of cash provided by
operating activities, reduced by $14.9 million of capital expenditures), offset
by $9.5 million of cash used in financing activities. Cash from financing
activities was primarily comprised of cash received from option and warrant
exercises and shares purchased by employees as part of an employee share
purchase program, offset by purchases of stock made by us as part of our ongoing
common stock repurchase program. We expect to continue to generate positive cash
flows from operations in the future, while not anticipating any significant
additional working capital requirements due to our advantaged business model
which requires low levels of inventory and other working capital assets.

We generated cash from operations for the nine months ended October 2, 2004 and
September 27, 2003 of $44.0 million and $41.7 million, respectively. The $2.3
million year-to-year improvement in cash from operations resulted primarily from
improved operating income for the nine months ended October 2, 2004 largely
offset by increases in income taxes paid, reflecting the utilization of
substantially all net operating loss carryforwards in 2003.

Capital expenditures amounted to $14.9 million for the nine months ended October
2, 2004, compared to $14.9 million for the nine months ended September 27, 2003.
In both periods our capital expenditures related primarily to new and remodeled
retail stores and investments in information technology. In the first nine
months of 2004 we opened 23 retail stores and completed the marquee and design
upgrade of approximately 130 stores, while in the first nine months of 2003 we
opened 24 stores. We anticipate opening 6 additional stores in 2004. We will
fund the investment in new and upgraded stores with cash on hand and cash
generated from operations. We expect our new stores to be cash flow positive
within the first 12 months of operations and, as a result, do not anticipate a
negative effect on net cash provided by operations.

Net cash used in financing activities totaled $9.5 million for the nine months
ended October 2, 2004, compared to $1.7 million net cash provided by financing
activities for the nine months ended September 27, 2003. The $11.2 million
decrease in cash from financing activities was comprised of an increase of $1.9
million received for exercises

                                       14


of stock options and warrants and for employee purchases of common stock, offset
by $14.9 million in purchases of common stock by us under our board-authorized
common stock repurchase program, an increase from $1.9 million repurchased
during the same period last year. Additional purchases of Select Comfort stock
may be made from time-to-time, subject to market conditions and at prevailing
market prices, through open market purchases. Repurchased shares will be retired
and may be reissued in the future for general corporate or other purposes. Total
outstanding authorization at October 2, 2004 was $11.7 million. We may terminate
or limit the stock repurchase program at any time.

Management believes that cash generated from operations will be a sufficient
source of liquidity for the short- and long- term and should provide adequate
capital for capital expenditures and common stock repurchases, if any. In
addition, our advantaged business model, which can operate with minimal working
capital, does not require significant additional capital to fund operations. In
2003 we obtained a $15 million bank revolving line of credit to provide
additional cash flexibility in the case of unexpected significant external or
internal developments. The line of credit is a three-year senior secured
revolving facility. The interest rate on borrowings is calculated using LIBOR
plus 1.50% to 2.25% with the incremental rate dependent on our leverage ratio,
as defined by the lender. We are subject to certain financial covenants under
the agreement, principally consisting of minimum liquidity requirements, working
capital and leverage ratios. We have remained and expect to remain in the
foreseeable future in full compliance with the financial covenants. We currently
have no borrowings outstanding under this credit agreement.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions. Predicting future events is inherently an imprecise activity and as
such requires the use of judgment. Actual results may vary from estimates in
amounts that may be material to the financial statements. The accounting
policies discussed below are considered critical because changes to certain
judgments and assumptions inherent in these policies could materially affect the
financial statements.

Our critical accounting policies relate to revenue recognition, accrued sales
returns, accrued warranty costs and impairment of long-lived assets and
long-lived assets to be disposed of by us.

In certain instances, U.S. generally accepted accounting principles allow for
the selection of alternative accounting methods. Our significant policy that
involves the selection of an alternative method is accounting for stock options.

STOCK-BASED COMPENSATION

Two alternative methods exist for accounting for stock options: the intrinsic
value method and the fair value method. We use the intrinsic value method of
accounting for stock options, and accordingly, no compensation expense has been
recognized in the financial statements for options granted to employees, or for
the discount feature of our employee stock purchase plan.

REVENUE RECOGNITION

We record revenue at the time product is shipped to our customer, except when
beds are delivered and set up by our home delivery employees, in which case
revenue is recorded at the time the bed is delivered and set up in the home.

ACCRUED SALES RETURNS

We reduce sales at the time revenue is recognized for estimated returns. This
estimate is based on historical return rates, which are reasonably consistent
from period to period. If actual returns vary from expected rates, revenue in
future periods is adjusted, which could have a material adverse effect on future
results of operations.

ACCRUED WARRANTY COSTS

The estimated costs to service warranty claims of customers is included in cost
of sales. This estimate is based on historical claim rates during the warranty
period. Because this estimate covers an extended period of time, a revision of
estimated claim rates could result in a significant adjustment of estimated
future costs of fulfilling warranty commitments. An increase in estimated claim
rates could have a material adverse effect on future results of operations.

                                       15


STORE CLOSING AND ASSET IMPAIRMENT EXPENSES

We evaluate our long-lived assets, including leaseholds and fixtures in existing
stores, based on expected cash flows through the remainder of the lease term
after considering the potential impact of planned operational improvements and
marketing programs. Expected cash flows may not be realized, which could cause
long-lived assets to become impaired in future periods and could have a material
adverse effect on future results of operations. Store assets are written off
when we believe these costs will not be recovered through future operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Credit Risk. Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of investments. The
counterparties to our investments consist of government agencies and various
major corporations of investment-grade credit standing. The Company does not
believe there is significant risk of non-performance by these counterparties
because the Company limits the amount of credit exposure to any one financial
institution and any one type of investment.

Interest Rate Risk. In addition, our investments carry fixed interest rates
which, in an increasing interest rate environment, would result in unrealized
losses in our investment portfolio. The Company limits this interest rate risk
by designating this portfolio as "held-to-maturity" and by managing the
short-term liquidity needs of the business by matching investment duration to
liquidity needs.

ITEM 4.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures ( as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information
required to be disclosed by us in the reports we file or submit under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized,
and reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms and that such information is accumulated and
communicated to our management, including our principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Our management evaluated,
with the participation of our Chief Executive Office and Chief Financial
Officer, the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered in this Quarterly
Report on From 10-Q. Based on that evaluation, our Chief Executive officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of the end of such period.

CHANGES IN INTERNAL CONTROLS

There was no change in our internal control over financial reporting that
occurred during our quarter ended October 2, 2004 that has materially affected,
or is reasonably likely to materially affect our internal control over financial
reporting.

                                       16


PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On August 13, 2003, a lawsuit was filed against the Company in Superior Court of
the State of California, County of Ventura. The suit was subsequently amended on
September 18, 2003. This suit was filed by two former store managers alleging
misclassification of employment position and seeking class certification. The
complaint seeks judgment for unpaid overtime compensation alleged to exceed $1.0
million, together with related penalties, restitution, attorneys' fees and
costs. We are investigating the allegations in the complaint and intend to
vigorously defend this litigation. As this case is in the early stages of
discovery, the financial impact to the Company, if any, cannot be predicted.

On October 18, 2004, a lawsuit was filed against the Company in Hennepin County
District Court in the State of Minnesota by one of our customers alleging
deceptive trade practices, fraud and breach of warranty and seeking class
certification. The complaint seeks various forms of legal and equitable relief,
including without limitation rescission and/or actual damages in an amount to be
determined at trial, including interest, costs and attorney's fees. The Company
believes that the complaint is without merit and intends to vigorously defend
the claims. As this case is in the early stages and discovery has not yet
commenced, the financial impact to the Company, if any, cannot be predicted.

The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, any losses that may
occur from these other matters are adequately covered by insurance or are
provided for in the consolidated financial statements and the ultimate outcome
of these other matters will not have a material effect on the consolidated
financial position or results of operations of the Company.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

          (a) - (b) Not applicable.

          (c)              Issuer Purchases of Equity Securities
                                                                  (c) Total
                                                                   number of        (d) Maximum
                                                                   Shares (or        Number (or
                                                                     Units)         Approximate
                                   (a) Total                       Purchased        Dollar Value)
                                   Number of                       as Part of       May Yet Be
                                   Shares (or     (b) Average       Publicly         Purchased
                                    Units)         Price Paid       Announced         Under the
                                   Purchased       per Share        Plans or          Plans or
              Period              Purchased(1)     (or Unit)       Programs (2)       Programs
        ----------------------    ------------    ------------    -------------   ----------------
                                                                      
        Fiscal July 2004              624,809        $18.65          617,431       $  4,911,039
        Fiscal August 2004            180,254         17.75          176,000         11,704,790
        Fiscal September 2004             341         17.14                -         11,704,790
                                  ------------                    -------------
        Total                         805,404        $18.45          793,431
                                  ============                    =============


         (1) Includes 11,973 shares acquired in open market transactions by the
         administrator of the Company's non-qualified deferred compensation plan
         in order to accommodate investment elections of plan participants.

         (2) In February 2003, the Company announced that the Board of Directors
         had authorized the use of up to $12.5 million for the repurchase of
         shares of the Company's common stock. This authorization was
         subsequently modified and expanded by a subsequent board resolution
         dated August 12, 2004 to allow for the repurchase of an additional $10
         million of shares. The Audit Committee of the Board of Directors
         reviews, on a quarterly basis, the authority granted as well as any
         repurchases under this program. This authorization is currently not
         subject to expiration. Total outstanding authorization at October 2,
         2004 was $11.7 million.

                                       17


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS

                  Exhibit
                  Number            Description
                  -------           -----------
                  31.1        Certification  of CEO  pursuant  to  Section  302
                              of the Sarbanes-Oxley Act of 2002.
                  31.2        Certification  of CFO  pursuant  to  Section  302
                              of the Sarbanes-Oxley Act of 2002.
                  32.1        Certification  of CEO  pursuant  to  Section  906
                              of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                              Section 1350.
                  32.2        Certification  of CFO  pursuant  to  Section  906
                              of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                              Section 1350.



                                       18



                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                           SELECT COMFORT CORPORATION



                                           /s/ William R. McLaughlin
                                           -------------------------------------
November 12, 2004                          William R. McLaughlin
                                           President and Chief Executive Officer
                                           (principal executive officer)




                                           /s/ James C. Raabe
                                           -------------------------------------
                                           James C. Raabe
                                           Senior Vice President and Chief
                                           Financial Officer
                                           (principal financial and accounting
                                           officer)


                                       19




                                  EXHIBIT INDEX

   Exhibit Number                        Description

        31.1          Certification of CEO pursuant to Section 302 of
                      the Sarbanes-Oxley Act of 2002.
        31.2          Certification of CFO pursuant to Section 302 of
                      the Sarbanes-Oxley Act of 2002.
        32.1          Certification of CEO pursuant to Section 906 of
                      the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                      1350.
        32.2          Certification of CFO pursuant to Section 906 of
                      the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                      1350.


                                       20