Attached files
| file | filename |
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| 8-K - SELECT COMFORT CORPORATION 8-K 08-22-2011 - Sleep Number Corp | form8k.htm |
August 2011
Sleep Number . . .
Transforming a large, undifferentiated industry
2
Forward Looking Statements
Statements used in this news release relating to future plans, events, financial results or performance
are forward-looking statements subject to certain risks and uncertainties including, among others,
such factors as current general and industry economic trends; consumer confidence; the
effectiveness of our marketing and sales programs, including advertising and promotional efforts;
consumer acceptance of our products, product quality and brand image; our ability to continue to
improve our product line and product quality; warranty obligations; availability of attractive and cost-
effective consumer credit options; execution of our retail store distribution strategy; rising commodity
costs and other inflationary pressures; our dependence on significant suppliers, including several
sole-source suppliers and the vulnerability of suppliers to recessionary pressures; industry
competition; risks of pending and potentially unforeseen litigation; increasing government
regulations; the adequacy of our management information systems to meet the evolving needs of our
business and evolving regulatory standards; our ability to attract and retain key employees; and
uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the
threat of such events. Additional information concerning these and other risks and uncertainties is
contained in our filings with the SEC, including our Annual Report on Form 10-K, and other periodic
reports filed with the SEC. The company has no obligation to publicly update or revise any of the
forward-looking statements in this presentation.
are forward-looking statements subject to certain risks and uncertainties including, among others,
such factors as current general and industry economic trends; consumer confidence; the
effectiveness of our marketing and sales programs, including advertising and promotional efforts;
consumer acceptance of our products, product quality and brand image; our ability to continue to
improve our product line and product quality; warranty obligations; availability of attractive and cost-
effective consumer credit options; execution of our retail store distribution strategy; rising commodity
costs and other inflationary pressures; our dependence on significant suppliers, including several
sole-source suppliers and the vulnerability of suppliers to recessionary pressures; industry
competition; risks of pending and potentially unforeseen litigation; increasing government
regulations; the adequacy of our management information systems to meet the evolving needs of our
business and evolving regulatory standards; our ability to attract and retain key employees; and
uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the
threat of such events. Additional information concerning these and other risks and uncertainties is
contained in our filings with the SEC, including our Annual Report on Form 10-K, and other periodic
reports filed with the SEC. The company has no obligation to publicly update or revise any of the
forward-looking statements in this presentation.
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Large industry
. . . “one-size-fits-all”
New advances . . .
brand/distribution/product
4
Sleep Number . . .
A unique and highly profitable growth opportunity
A unique and highly profitable growth opportunity
• Sustained Growth
– Demonstrated ability to deliver compelling top line growth
– Clear upside potential . . . mid to high teens comp expected balance of 2011
• Robust Profitability
– Model driving profit growth in excess of top line; accelerating earnings
– Long term 15-20% EPS growth potential, higher near term
• Strong Cash Flow
– Strong cash generation self-funding growth investments
– Substantial liquidity, no debt
• New advances = opportune time
– Marketing: recently consolidated brand and evolving media
– Distribution: refocused and ready to expand
– Products: newly enhanced and innovating
Differentiated & affordable products that
deliver real consumer benefits
deliver real consumer benefits
Scientifically proven benefits
than traditional mattresses
Classic Series
c2
$999
c3
$1,299
c4
$1,599
p5
$2,099
p6
$2,599
p7
$2,899
i8
$3,199
i10
$4,699
Revolutionary product within a large,
“one-size-fits-all” industry
“one-size-fits-all” industry
$6 Billion U.S. Wholesale Industry1
Sleep Number competes in
the industry sweet spot
the industry sweet spot
• 30 years consistent industry
growth, reset in ’08/’09 . . .
6% CAGR
growth, reset in ’08/’09 . . .
6% CAGR
• 7-8% industry growth in 2011
projected by ISPA
projected by ISPA
• Premium (>$1,000) outpacing total
industry growth
industry growth
• Specialty also outpacing with
consumer trend toward better sleep
consumer trend toward better sleep
• Significant growth opportunity in
adjustable “air” segment
adjustable “air” segment
• SCSS = 5% market share in $’s;
lead markets 2-3X
lead markets 2-3X
Innerspring
Foam
Air
1Total Wholesale Sales based on ISPA 2010 Annual Report and ISPA Oct. 2010
Forecast. Premium percentages for 2011-2012 are company estimates.
Forecast. Premium percentages for 2011-2012 are company estimates.
Unique, vertically-integrated business model
Differentiated end-to-end brand experience
• 375 stores nationwide, supported by
sleepnumber.com and call center
• Knowledgeable, tenured “Sleep Experts”
deliver best in class store experience
• National customer service and “white glove”
home delivery
Flexible, cash advantaged supply chain
• Two plants (UT & SC), 10 hubs and 127 spokes
support national distribution
• Build-to-order, JIT inventory translates to minimal
inventory (15 turns in manufacturing)
• Negative 30-day cash conversion cycle
- Cash receipt at time of order
- Payables cycle tied to time of manufacture
Sales and profit growth
. . . proven and better positioned than ever
. . . proven and better positioned than ever
NOP Rate (4.9%) 5.5% 8.6% 8.0% 9.2% 9.7% 5.4% (5.9%) 4.4% 8.6% 10.9%
1
1Q2-11 represents trailing 12 months
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Sales growth driven by integrated top line strategy
• Awareness and Consideration
– Superior product, but too few know about it or where to find it
• Product
– Steady pipeline of innovative products for new and existing customers
• Marketing
– Optimizing creative, media levels, media mix and digital
• Distribution
– Store location, format and design; market-focused expansion
New advances to continue profitably building a
national iconic brand
national iconic brand
• 100% Sleep Number brand - leverage
• Advertising focused on unique product &
consumer benefits, only at Sleep Number
consumer benefits, only at Sleep Number
• Value and urgency proven in consumer
events
events
• Digital and social media advancing
• Local marketing, with national overlay
• Market-based development
– Focused investment for scale and return
– Accelerating awareness and share growth
• Real estate strategy
– Improving mall locations
– Non-mall pilot - awareness and flexibility
• Store base ready to expand; incremental
source of growth
source of growth
• Evolving store designs - experiential, unique
Marketing optimization
Distribution leverage
Sales growth and leverage . . . just getting started
Today, every $100,000
increase in average
sales per store
increase in average
sales per store
• $38 million total sales (+1 bed/store/week)
• ~ $11 million operating profit
• ~ $0.13 incremental EPS
Net Sales
12
Profit margin growth accelerates earnings
|
|
20091
|
20111
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Potential
by 2015
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Drivers
|
|
Gross margin
|
60%
|
63%
|
#2-3 pts
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• Supply chain leverage & efficiencies
• Product innovation & pricing
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|
Selling &
Marketing % |
52%
|
43%
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$2-5 pts
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• Store base leverage
• Media mix & efficiency
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|
G&A/other %
|
10%
|
9%
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$0-1 pts
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• Focus on core business
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|
Operating margin
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(3%)
|
11%
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> 15%
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|
1Trailing 12 months ended second quarter
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Strong cash flow to self-fund organic growth
Robust cash generation
Rock solid balance sheet
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Investment Summary . . . why now?
• Succeeding in the current macro-economic environment
– Market share opportunity, regardless of total industry growth
– Product delivers real consumer benefits and value
– Ability to be nimble with short lead-time media and promotions
– Strong balance sheet - $100+ million cash, no debt
– Management team experience & expertise during 2008-2009 economic crisis
• New growth opportunities
– Distribution expansion through store growth, including new non-mall
– Market-based development and increasing efficiency of national media
– Pricing opportunities within our competitive set as we accelerate demand
• Cash to fund further opportunities
– Increasing ability to accelerate growth investments
– Other shareholder return acceleration under evaluation
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Sleep Number . . .
A unique and highly profitable growth opportunity
A unique and highly profitable growth opportunity
• Sustained Growth
• Robust Profitability
• Strong Cash Flow
• New advances = opportune time
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Appendix
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Experienced Management Team
|
Name
|
Age
|
Title
|
# yrs w/
SCSS |
Previous experience
|
|
Bill McLaughlin
|
55
|
President & CEO
|
11
|
PepsiCo/Frito-Lay
|
|
Shelly Ibach
|
52
|
COO
|
4
|
Macy’s, Target
Corporation |
|
Kathy Roedel
|
50
|
EVP, Chief Technology &
Services |
6
|
GE Health Care
|
|
Wendy Schoppert
|
44
|
EVP & CFO
|
6
|
U.S. Bank, America
West, Northwest, AMR |
|
Mark Kimball
|
53
|
SVP & General Counsel
|
12
|
Oppenheimer, Wolff &
Donnelly |
|
Karen Richard
|
41
|
SVP, Human Capital
|
15
|
TCF Financial Corp
|
#1 Growth Opportunity . . .
Awareness & Consideration
Awareness & Consideration
Growth Drivers
• Marketing: Creative, media mix, media levels, digital
• Distribution: Location, format and number of stores; store design
• Products: Steady pipeline of innovative products for new and existing customers
Unaided Brand Awareness
Unaided Store Awareness
Brand
Store
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Market performance demonstrates tight
correlation of awareness and market share growth
correlation of awareness and market share growth
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What
• Three year market level goals
– Double market share to >10%
– Achieve above average market profit rate
How
• Aggressive media investment
– Compete on share of voice
• Real estate
– Reposition existing stores to align to target
customer and eliminate trade area overlap
customer and eliminate trade area overlap
– Add stores
• Other tests
– Promotion, marketing, staffing and
compensation
compensation
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Solid execution has returned company to growth
*As adjusted for one time items in 2008/2009
Significant Returns in 2010: ROA 21%, ROE 72%
Solid Sales Growth (1 Year & 2 Year Comps)
(TTM$ in mm)
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Favorable store economics provide margin upside
*Excluding national media and customer support