Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to Sleep Number's Q2 2023 Earnings Conference Call. All lines have been placed in a listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has objections, you may disconnect at this time. I would like to introduce Dave Schwantes, Vice President of Finance and Investor Relations. Dave. you, Thank

begin. You may

Dave Schwantes

and and and Quarter welcome joining Number afternoon, and Resources Chair, of the I are Human me Shelly Chief Ibach, Krusmark, to Earnings Conference our Second our Finance President XXXX Vice for and Dave Corporation's Relations. Call. With am today CEO; Good President Schwantes, Sleep Investor Chris Thank us. CFO Officer. you Interim

refer to website to being recorded and be may at This measures news sleepnumber.com. included financial discussed our to reconciliation Please Please release this and details telephone the is conference that information financial be on a in release the available will certain our our in replay. on news non-GAAP the for call. or supplemental of access also news refer release

of purpose ended. results is period to call fiscal the this discuss of primary the just The

your and earnings Form some number These our subject on XX-K statements commentary may are SEC. responses our annual with periodic The results detail uncertainties and However, in the may and vary to statements. actual forward-looking company's discussed filings report include in forward-looking release and risks future outlined a materially. certain to in questions other of news our

presentation, refer our you also Investor We to want be second which quarter accessed page our to website. earnings of can Relations the on

I will comments. now turn the call over her to Shelly for

Shelly Ibach

second earnings call. XXXX joining quarter Good our afternoon, for thank and you

CFO Wise including today, consumer-focused share Chief as Home Smart most strategy significant Sleep Number last Labs, our at IQ XX. to and and an finance XXX of Vice in I'm the AI-powered that Executive President as effective Gap Financial and Sleep brings My and appointment score Francis August XX Francis recently company's Nike was brands, announced leadership experience pleased innovator. Fortune Officer of Lee night.

reoccurring in leadership advancing creating planning, a flow value. and cash operational track a record capital strategy structure. emphasize streams to from evolution our hardware forward increased business business to software superior proven Francis lifetime in He Francis' differentiated through profitability has from value. model We revenue look and with shareholder that Wise, At customer transformation benefiting and

I'll are effectively, second quarter of we and cash creation XXXX of call, performance to prioritizing actions current strong today's we in operational context for improves. in conditions, and growth market provide efficiencies and value describe earnings have compete During our the how drive share positioned significant as demand generate business our highlights

quarter, demand levels. operating challenging Number driving Sleep has environment, been Over results delivered resulted in mattress consecutive first sales environment, flat mattresses at compared to actions recessionary net down points quarters for seven with spend that and slightly. $XXX our in the six macro overall and down the a disrupted year-over-year efficiency our demand in expectations few our percentage improved which million industry was -- have with second points below contraction and demand included mid-single sequentially historic a with this quarter a of percentage digits. QX demand but In of

Gross profit expectations. As with with trends was of low June line digits. rate and down improved quarter May the our demand demand single XX.X% year-over-year in right combined progressed,

Our we $X.XX. ongoing we the were $XX Based quarter on in operating QX cost share for share million gained control the actions surveys, expenses. Earnings and year-over-year market quarter. believe reduction the per drove analyst in industry a outperformed

are million levels XX XX XXXX. million XXXX, on a additional XX% through representing industry XX-month more an As reference unit QX units units than compared with below trailing in basis point, industry

units and and are down Number chip that impacted On X% basis, even the disproportionately with XXXX. shortages XXXX our company Sleep same in

connected demand smart cash to gross we flows and market the taking share supply profit priorities are back disruptions commitments, generating the global on expect after year-over-year. we with our leverage. half financial sleepers, leveraging deliver demand reducing has double-digit low three chain increased focused to our continued XXXX, Year-to-date, and growth in mid-single building, restoring steadily In innovation improved, and by brand and our improvement

Let up these cooling Life-changing hot get or drivers marketing be minutes from ClimateXXX microclimate. end world-class so ClimateXXX launched them restful generate are of and too on ideal couple with from too that me our features the one top ClimateXXX Smart priorities. the few at of continue in more its line. More sleeper in last each value. sleeps to examples year, delivering XX innovations Bed, of how of our can proof can share of performance we Bed control, XX% line. strong QX sleep of continues Smart affirms technology temperature provides say cold. temperature and to Bed active balancing point which important sleepers individualized a their And high The night using Smart to heating benefit recent this our per than

opening Smart us With advantaged competitively and and the technology under Sleep temperature an products experience price offerings expanded introduction new with of Smart These for our Beds, next-generation Beds sleep have the services. $X,XXX. Beds benefits Smart digital Number positions effortless platform through adaptive connected in points now the health all and offer future

efficiently to the transition managing our are new portfolio. We Bed Smart

for have demand, teams Our and unit planned and margin executed holistic management.

set period. stores the and Sleep of XX% our selling advance week. MX portfolio Bed Number we we Day remaining event our the and next iXX, QX, year, Smart the in Well will of the Labor In of introduced next-gen biggest all in the complete of

Number over the mid-single-digit growing and for double-digit -- with Sleep the introducing our compared search next declines same industry April, new We have late Since next for campaign in advertising level to brands in positive declines premium the period. interest campaign. driven we other are brand interest Sleep

XXX this we our we we the for to efficiency campaign, NFL gross tools introduce full a high-quality season, optimization store With at highs. leverage. than of media which expansion Complementing through while of expect that digital basis the advancement compelling will margin These effectiveness and and line start drive of and initiatives driving points these the experiences. And simplified tested initiatives digital year. in all-time are top rate resulting traffic media generating by more drivers growth are

as mix supporting our half, Smart commodity supply new through we margin margin across and introductions Bed back addition workforce to our costs, and improvement of digital efficiency the easing and planning from tools steady higher pricing, sources of management. predictable In include operations move data

We expect these be margin drivers of and gross balance year positive in the additional beyond. initiatives of to the and

in expect With more margin these in we $XXX than generate demand drivers, operations from cash and million XXXX. to

demand the improve. sentiment As third we indicators brand quarter, move direction, our beginning entered strong. and to continue Consumer trends right is in are the to year-over-year

our challenging half, guidance first per environment to the given the expectations slightly we full-year. narrowed $X.XX our the have economic However, with for $X.XX range earnings to behind for demand share

creation of the potential power as Importantly, ever. earnings our significant are and and model business value strong as our strategy

of the we and depressed years have our execute gains. and and consumer as top as long-term XX Even On expectations a improves website, highlight accelerating Page and posted period from levels. growth operational consumer industry we bottom market few Investor we including supporting continued position our sentiment to of disruption, our extended for growth we navigated on as advancement the Relations line the next recovers share of innovation demand and have deck business for our the to page strategy

level highly support including innovation advanced the our single-digit Bed to expect engaged Sleep Smart combined next building Smart sales our digital and brand with Bed we millions ClimateXXX customers ecosystem capabilities growth. next-generation differentiated and Specifically, of high pipeline, with

and Beds; drive are to gross relief other the innovation our with absorbed and pressures it during margin of in past to goal unit few return commodity Initiatives XX% and rate adjacent higher-margin couple next-gen of years. cost years. pipeline, expansion year expanding and a that high-margin focused fulfillment over new, and on we streams Increased from We through retail within our of intensely our Smart next to include: revenue networks addition growth, continued mix ClimateXXX margin our in including further a operations opportunities to products, XX% the leverage

driving with to low to expected productivity double-digit margin a are efficiencies, our These rate. margins combined ongoing EBITDA return improvements

of and while brand, strengthening our to deliver By well performance competitive we come. financial strategic milestones sustained for to disruptions the years performance the and healthy, the our keeping we've accelerate XXXX are and returns shareholders navigated culture to and challenges of hitting and our Number our business intact XXXX and While economic business effectively reflects impact external Sleep superior drivers advantages. positioned

thank Before business, the I turn for his Chris, We to leadership the exceptional to him search. appreciate as call CFO. Interim want the I over CFO contributions to significant team his and

performance balance half additional details quarter first provide year. the of for our will and and Chris Now outlook XXXX on second financial the

Chris Krusmark

you, Thank Shelly.

Smart were quarter, quarter, the we slightly Beds sales our network for For to of below backlog. our deliver our fulfillment leveraged year, XX% net existing $XXX incremental the expectations demand second million below from with last

Bed units Smart we a of delivered under an As XX,XXX $X,XXX. just nearly result, with ARU

million our XX.X% $XX expectations. quarter was second rate the resulted operating gross profit prior of $X.XX. second Focused controls with spending the of $XXX quarter quarter million in in delivered year. versus We Our EPS down of consistent expenses

a $XXX quarter included Smart X margin-rich second than shift quarter into of and FlexFit million reminder, bases of shifting adjustable a chips more Beds. This semiconductor shortage last As in in related year's resulted of our the first deliveries XXXX. higher-priced

ARU This quarter sales, of quarter all quarter in our the Last this margin is in second reduction. higher year. margin benefited sales EPS traditionally operating prior from EPS second gross year's year net and of $X.XX net what profit resulted lowest and backlog

minutes covering our year-to-date down full results to million year to net demand digits year-over-year. before with few Now our $XXX sales financial I'll a outlook. single X% declined spend turning Year-to-date high

of backlog, sales similar benefit was million half of excess The XXXX servicing to in half which from included year. net prior of the $XX first the the first of approximately benefit the

was with deleverage prior margin and from offset ongoing gross efficiencies. net XX.X% year-to-date the We sales easing actions operating the Our consistent decline year. with commodities of pricing of rate

decline shortages profit rate continue recover of a our operating related margin inefficiencies., year the The we operating $XX partially was XXX back reduction same net is gross last by million of nearly compared year. have as last points of the year-to-date for offset the with in disruption we dollars gross in operating half expenses. million year-over-year from generated million Importantly, profit from and period chip basis $XX up to $XX

year. to with we reduce of XX driven are basis versus for offers leverage first rate the mitigate environment. adjusted prior We've media of interest half consumer actions costs specific to financing have Here this efficiency taken year. operating associated the increased higher year-to-date the We points expenses

growth We down X% the new XX for about is our are year-over-year, and year. original plan our versus planning have store stores now of slowed net which actions store

for R&D We compared the prior $X.XX reduced optimize of X $X.XX same generated year. are and down expenses XXXX We first for we and levels EPS with also labor G&A year. period our months staffing cost the versus as the of last

year a million than period $X.XX year-to-date results a $XX the year. million flow first cash months the million more headwind for operating in expense We for include the generated six to $XX ago. $XX Our same compared from interest of last year of

$XXX Turning of below leverage and the We million ratio under ended our amended a Xx to leverage. facility quarter covenant. and liquidity revolving with X.Xx EBITDA, credit of liquidity

partnered bank the extend through our we group our third EBITDA Given quarter. with Xx covenant macro to fiscal uncertain environment, the

expect ratio We EBITDA. continue under year Xx to leverage to a with the end

range We a $X.XX the by our guidance. to versus our have updated which range narrows share, $X.XX XXXX $X.XX outlook to per EPS previous full year of

specific year outlook. are regarding Here assumptions full our

sales For our digits, mid-single to lower prior is we points two be than to to expectations. which net the low one full expect approximately year, down

of This lower demand half is the year. the reflective first of in

single expect digits digits Bed and we we half, from up easier Smart comparisons sales face net back introductions. fully improving low as on next-gen down the to demand benefit For mid-single

As at five to six half a back normalized returned the in second the reminder, to point levels quarter. a the year-over-year backlog of changes year end the represent of as backlog we headwind

We rate continue XXX to gross XXXX. expect of basis points at expansion in least margin

positive We million flows. in from and cash in more expect XXXX $XXX operations than cash free

of $X.XX in the expected interest headwind of expense includes in back increase year-over-year. the year $X half from guidance Our an million

provide We additional quarter regarding third expectations. also want clarity performance to and fourth

third expect the year's quarter of below be EPS slightly quarter, to $X.XX. last For we EPS third

quarter last including to Specifically, demand the to we compared backlog our optimize increase levels. impact fulfillment due down to for single mid- backlog expecting we efficiency sales with be up year-over-year with digits an transformed third high low net We in year anticipate staffing mid-single to year's changes. are to digits in newly network, as of this

Smart approximately the of third expect transition activity gross launch XX%. associated costs quarter, closeout all for with existing Beds. Also, setting to includes costs promotional our stores rate This we with margin and a next-generation of Beds Smart related

mid- digits we sales up high to to quarter, fourth to the are For single up digits. demand expecting be low mid-single with net double

to rate mature. margin XX% our our expect We gross approach QX as margin initiatives

We a expect with end year to backlog. the normalized

to prior closing for Q&A. for a now opening few back comments the I Shelly call to up call will turn the

Shelly Ibach

to stakeholders is their our grateful team execution I'm dedication in commitment whose mindset, and every extremely engaged purpose innovative our of consistent day to our apparent highly strategy. to our

along and operational have partnerships investments of the world-class creation improvements, significant and major us company, Our achievement a future. revolutionized customer with industry and strategic positioned milestones transformed connected digitally the for in our value

and the please line. Dave will questions. Lisa, open Chris, I Now to respond your

Operator

take We'll Raymond Griffin, Instructions] first [Operator the from Bobby question James.

Bobby Griffin

Or And second still to negative to demand kind at get afternoon, of a ease by the Good running of -- what embedded clip? positive? know taking is the seems the my kind believe gives and XQ, or spend time demand Is to back of quarter. confidence comparisons demand for missed a from at the of positive the I function easier because implied pricing helps in the a acceleration there in guidance Chris, first, everybody. launches here as there can just things or that's I the new the starting guess or so. that we main unpacking questions. few get but little least they details whatnot the Thanks get I you some there, I maybe going X% are it that little whatnot end in you assumptions of guys or in product that other

Shelly Ibach

the for will this. on I question, Thanks Bobby. Great. comment

a year, quarter second coming progression quarter. of noted. to single-digits had our in originally a from in First, here had coming are We're for mid- although us improving trends bit expectations the demand. since the which planned, you place of out points demand start as than positive We've a of in up the third demand slower we put couple demand of behind high

we took improved has low each quarter, But through steadily And the market flat were periods, steady third a month-to-date improvement to we here of and outperformed head third of into July expected to June. were digits. quarter is year, into that where here of believe expectations factor. quarter, as high compare we we third the we in be and with Yes, is mid- which single prior We the share. the balance to the demand down -- single-digits second May continued

level level, early drivers we all next on. campaign green Importantly, direction. in innovation, with we're the Bed our our our demand initiatives what fleet the Smart next-gen are We next And like implementation, along consumer here shoots. see big next sentiment of right seeing business. There's moving the

positive have brand. search We numbers for our

we're in the heading have We as biggest of period traffic into the event the positive time year.

So we the in demand that a the here big big in and back expect what we're we seeing, progress, half, first progress we had like half. continue and to trend

Bobby Griffin

Okay. I appreciate that, helpful.

was and in relatively to of just dots, last us can improvement kind been real the year, different what terms July? was or promotional promotional in quarter year, impacting Or For calendar similar we that XQ have of the closeouts quarter-to-date, so aspects saw to saw that we the saw of that connect was we second improvement into this throughout and of help as might this read the XQ fundamental? something we into there

Shelly Ibach

great of and closeouts for example end pretty it's that. at we through great to and activity. certainly a our our absolutely, is drive of is activity. Closeout changes And line low quarter. question. units real the of of Well, and And adjust continue a in the closeout second can the I the promotional make we benefits our time our think vertical we quarter within We accelerated model plan one delivered

June here as time hoped drive would closeout we not that in line frame. as top period had We in big we did the the

we get the impact, did So very incremental lift we positive demand not that. unit from saw

you at We at when you real. performance, year. as that So look step-up it look the our it's of and been where performance all and see progressive

to Beds think drive of and now I Smart move And good another continue our going ARU July higher that. next-gen example forward. with performance is our some we'll into

Bobby Griffin

it the luck back of else. the I to appreciate year. over Best I'll of somebody turn in details. half

Shelly Ibach

Thanks.

Operator

Next, Brad from KeyBanc we'll Thomas, take a Markets. Capital question

Brad Thomas

to questions. seeing the and about amount believe tightening where that a some that they been want them. my Thanks little lower done saying relationship what of perhaps kind selectively the lowered of about ask bit the they've afternoon. I I recently Synchrony approval you're they good out for and Hi, they're approving. taking public rate

important Just curious of business? how them, seeing and out importance to Thanks. their your just they've been late you given to what here you're of

Shelly Ibach

an portfolio important and at Brad. the Yes. Synchrony our to customers question, certainly is Sleep Thanks well. Synchrony are the Number as partner, important for

from and very adjustments for in which especially an made we've our favorable financing margin strategy efficiency been have standpoint. us, or productivity So

on like interest. to We've been effective. QX, we The tested what in we related have increase programs to a able we're mitigate lot we actions And and cost these into took been them, of seeing.

approval Our expect. we and and in conversion all sales where rates are financing line with

have specific no, a to seen an the highlighted. you So impact based answer that on actions question, your not we

Brad Thomas

you. Got

then we benefits from -- at were Bobby's average just you're promotions three might on the if size demand or us your different as you're thoughts thinking about think than updated all, about six and half you the thinking on some comment And transaction plans ago? the how give a months about Okay. back earlier how that follow-up in just be what and can

Shelly Ibach

Yes.

and difference, line. not promotion there. closer activity the of maybe start we so units QX, drive on did much units we pulled increased the I'll to drive forward demand, top June I think the to increased closeout start In our and overall

be of adjustment. an example So a good that would

the along utilize a we made to programs And way. the plans as as discounts financing conversion our some learned adjustments we've half, on and we've head now financing what tool. back Right based into we

where area the the probably made we've that's adjustments. So

with those a our having have importantly, about indicators and the with new excited we line advertising. portfolio drivers year-over-year, also advancement whole XX-week we ClimateXXX the our our trend. our sentiment, and are important along the here at we Bed at look next-gen and And of top line, leading We the econometric number Smart model look of of traffic,

back positive about high gives that robust us we've our increase in as expecting And half, also progression a XX% to XX-week XXXX on at then which the Again, half. to increase compared we see the XXXX. to first continued progression, XXXX almost outperform. And performance very not had to to an room some we in trend. We're of a look

Operator

The Piper question Sandler. is Keith, next Peter

Peter Keith

now afternoon. just such want into had shoots of dig you more Good marketplace MX, us specific you. half. to I been the that with comfortable with the Shelly, mix? have get models a the outlook guess Thank on within some back have models product green I your line, the up the the sales couple the those Has new to in moved those of for newer consumer weeks. reaction for iXX positive those demand

Shelly Ibach

Thanks for Peter. question, the

Our excited frontline about has been our model. really new

in Beds. the well and almost for performed So done. We're they have all stores very completing just next-gen launch, we're since all Smart the set

left about we're confident and one expectations the few head in over ability our with marketplace feel Labor a into fully very we have on days. as transitioning some our all coming to We track the here ease degree, event. the the And Day and to of line

they're the our the top our high about consumers yet they excited gives track plans of and on we're need ClimateXXX to So value be, that considering with our right some where line. at sensitivity price promotional with feel

we where are. yes, feel bullish we So about

Peter Keith

Okay.

a there has demand initial guess, in the products market? standout been those for I So

Shelly Ibach

had while we lot performed it. this a in slightly small It's our against out. have been of expectations close at haven't time They because ahead we've

real So demonstration now. is the

Peter Keith

wanted have now then on costs, and for which a opportunity. touch headwind to commodity been a And future Okay. I just the you

to you million beginning year, recovery. $XX were the million at expecting think of of the or relief I $XX about

on bit little anything looking? What's now how that less give is more going at on Has relief, changed? relief an midyear. Maybe update we're there a us that's

David Schwantes

of basis the the benefits still that in drivers as say that look and full-year that the commodity the are line, we of points I about quarter. at we're this at Yes. that them about, getting And is from we XXX talked that It's Hey about We we year, the our coming growing talked expected we Peter, of to I mix that expansion, benefits of it's which and taken. at the getting pricing the year really our part the it's be relief for having and Dave. beginning that would ClimateXXX in we've planned. one a of mix. the three important high is commodity as is talked first end the largely think

I So additional the drivers that and for are look on those the as planned. those coming three the we through of and three puts half opportunities but pressures always at years. each see year, continue if I kind there's back the last taken on in takes beyond the And as of some couple drivers, year of we to just side think over commodity we've work we unraveling of think

Operator

Your next question comes from Atul Maheswari, UBS.

Atul Maheswari

Thanks about my lower taking your a I a down sounds you're are meaningfully like on questions. given leveraging It strategy. sales. had media question media lot for costs Shelly,

So the lowering do Sleep given launches. efficacy in industry raised ahead the others risk important you Number of the of the typically spending historically have run media and launch of

Shelly Ibach

your environment. chips. compared supply And ago, Last in of to we year, expect were much year than Atul, question. on media is ago. position did we a A the not a our our -- last we an stronger of demand-driving we're such formula. efficiency year year's we we important Media needed for do thank have part were you

timeframe, only impacted our not our assortment. also impacted it And offer ability our full delivery it to

had we today media as wasn't we strong, efficient with line a and being ClimateXXX. new Beds full the including of so And situation media, Smart in and are tremendous as limitations

much traffic driving other industry. So to brands are interest stronger efficiencies, our and driving versus also the greater in brand search we while

do into and sentiment first expect Part which our and next what and what many model, we place of it, other also dollars where to lean support the it. fully Beds had consumer many is that we points leverage to on half. back we basis that XX half, helps how lean understand dollar the into in generation us factors So based expect leverage of next to as and return in We be. going an to utilize econometric Smart

So given expanding focus well as as environment in it taking given we're approaching margin. on we're and prudently the our share

Atul Maheswari

is Shelly, Got quarter just my follow-up, That's it it. heavy. like fourth guidance super sounds helpful. XXXX the

we stand the So greater understand is top-line? as this to on a a risk today, the of there risk to risk were miss if things gross guidance, on the the is a Or margin? greater of miss

Shelly Ibach

you think and as shape QX, QX of about and Well, the I'll margin. start with sales both

sales in impact product So hitting a due they're one-time we transition expect backlog year-over-year net gross decline part quarter. the the And third the third to for quarter, changes. of all in margin portfolio cost,

mid the expecting while QX. build expectations little resulted in expect quarter. the efficiency, second lower backlog demand demand backlog QX, in we're in a third we fulfillment to single-digit a including few a quarter, So and heading to points continued growth high into were the we improvements, focused very which behind in on We're

quarter entering benefit backlog we're be building from the we'll So or levels low the with. that

when look at progressive you So the quarter, we improvement. expect demand fourth

mid-single-digits QX, it is also they initiatives half quarter. fourth throughout we continue of initiatives increasingly mid as high contemplates then and seeing to also in this low continuation is of up And single-digit, we've up demand. And how as So we double-digits. QX and to layer our getting to the and what been to a progress back those easier the compare months approach on the the

Dave Schwantes

add on question. your as of color little gross a part And to Atul, margin just a

points XX.X% what margin we rate, had top expected. half which was we So back did basis it gross year, last year. the right importantly, improvement XXX of from And was almost of the first half of on

relative the up head of So compare much we we're prior I'll the a this going call from against, it, year, into challenged half year. as back --

the us are of help that year. the XX.X% half for achieve the that half the really back And intact the year initiatives first in of

at if covers margin the to and year. gross supporting go website the and compared how on people half rate XX% we're a as that of look first the of certainly our we half last put deck XX%. looking about have we're So out recommend back a to chance at versus the thinking half to back We

to we back shows the think year rate higher that top-line in year with than first the aren't of expecting the we the half is And materially expect as progression half the initiatives stronger and back year. And a well. we of going year-over-year margin the our intact frankly, the to be you of of kind fact the half the in gross what that be

Atul Maheswari

Got it.

Okay. helpful. historically that financing? one one. sneak -- or Dave percentage sales or That to of the in in is happened what If wants I is percentage who Like could higher the it. today? Shelly been answer has your last on And have that lower

Shelly Ibach

about it's XX%, and steady. It's Yes.

Atul Maheswari

rest Got year. you. Thank the it. Good luck with the of

Shelly Ibach

you. Thank

Operator

Securities. from We'll now hear with Bush Basham Seth

Seth Basham

you're taking any substantial lot us, on good price is that My remind on a Can you is Thanks models that's the models? there a and afternoon. question first increase previous relative just around pricing to the new line.

Dave Schwantes

Yes, Seth.

for took -- we from taken broadly April pricing four I models. new well with took on this to are more you last And new about we expecting around from the what the And year. as the actions points So the That that pricing. those year, if year. include we of we benefit M&I year, in effect, think introduced wrap line we we three of when as new around $XXX of the pricing would have did pricing into this models went think,

this take we some year, which benefit are full-year as benefit and last year. additional did both of the actions particularly providing get We December August in

and benefit top the the rest on of took the line, $XXX year. from yes, wraparound So the of then the last actions we

Seth Basham

Got it.

those you with price of that new much richness the Is the should higher margin products rate it limited increases. products? And Okay. new margin earn a on

Dave Schwantes

be profile. I similar, Seth, I the relative relatively say would would to just to similar. consider it margin

Seth Basham

are us big What Got remind and functionality. drivers it. the changes just features the line? the the Can new in you then behind

I that was in what there think internal different? efficient, supposed some selling components is cost else changes be are like that to

Shelly Ibach

Yes.

at I with Smart You're below CX, the across the with that line. temperature just next the Starting generation have start we now, right. features would $X,XXX. is Beds entire which And

excited So these to well our it's and how about so that on the stores. we're based has especially our features, ClimateXXX and really ClimateXXX drives performed front-line, having traffic

products also, And comfort then and then support, additional distribution and technology with front-line we to has and noticeable especially parts, broader more large that And which streams through well highlighted add which assembly units. with in sets ramp our up as increased percentage been is you revenue our very center much platform also the the there with And a and sensors future scale change you flexibility future then digital of help by the it's also exciting. received new services. our able -- will up to -- common and us be

Seth Basham

Great. you question the major holiday as as as in line. promotional on other selling think for product Do last you'll environment be And my the around this to new have periods Labor is you recently? had Day just with you've promotional now been

Shelly Ibach

Well, we'll past. as we be certainly It the have won't in compete aggressively closeout. our

periods, pricing closeout financing Day the but how strategy apply how our time learned in applying of how line. utilizing in past and have year especially both based bottom to results dollars this Our a the Labor was we're we the like we're and few saw the the optimized promotional what that more environment months, duration it even we've lot promotional we quickly period, and throughout we're from for top approaching confidence and in that this in aggressive QX, you the on

Operator

Bobby from Raymond follow-up a take Griffin, James. We'll

Bobby Griffin

me thanks Hey, in. for back get let

get expect XH On sequentially up do of part the demand. progression, meaningfully that's to improvement and ARU step in in as well we how we the

pretty like what just it demand favor? still positive in just trying strong dollar factor demand to dots even step-up a versus moving between can comparisons looks you improve? in when connect units So I'm your what the to going improve the Because

Dave Schwantes

Bobby, this hi, Yes, again. is Dave

you is the we the if was So half approaching QX, had look little $X,XXX. And of I first that at a of on over call. $X,XXX, the year, in used $X,XXX number an last the around ARU which

looking first half the the at As you going back similar be to quite actually that's to so an the of look half, $X,XXX. around likely ARU at year, we're

the low have is of which closeout particular, closer I'd little at of that QX impact to call ARU. QX for We QX end QX call we will pressure line, may $X,XXX. than in the do late And QX around a be in $X,XXX expect ARU an I'd in then on the of that the ARU, to put QX. to the bit stronger be activity mark going had

Bobby Griffin

Okay. more pricing, And mix then of and anything else there any beds or you a Is like attaching the by the or or that's items, there? more Are that line no? going closeouts function the on whatnot. new offset

Chris Krusmark

Yes.

ClimateXXX. any introduced last QX have fourth and if year-over-year, have in than year full at ClimateXXX. of you did QX even help year, a in deliveries have we didn't Climate do amount year, look year we the year-over-year. So deliveries we Last we a with this more particularly expect quarter. quarter this ClimateXXX will QX, last did of fourth the in fair But in ARU will quarter which year October, the

pricing the is in actions benefit the other the took. to we going and And QX thing of you're QX both get

in year Some of was was in August, last took some the pricing we December.

QX the benefit action. from August didn't full really a or So of December pricing get promotions those

both us expect mix help numbers get So QX both some in to and to and pricing QX those we up.

So a growth of back back the double-digit but it year. math, the just you, means $X,XXX ARU for north the year the to unit, half I Bob, was gave half which we're looking per if you number last of do of at

Bobby Griffin

details. the Thanks let me appreciate I in. get the follow-up Yes. for

Shelly Ibach

Great. Thank you.

Operator

closing questions. or remarks. management At I'll this hand call are for back time, the there additional no to further any

Dave Schwantes

well us for forward quarter XXXX big. to today. October. you look dream We with Thank Sleep third performance joining in our and you discussing

Operator

conclude all for that again, once participation. conference. today's you your Thank And does

Sleep Number (SNBR) 27 Jul 232023 Q2 Earnings call transcript