Sleep Number Logs Strong Q4 Performance, Beats Guidance on Adjusted EBITDA
On Thursday, Sleep Number reported its fourth quarter and full-year 2025 earnings results, exceeding market expectations on key metrics.
The company's President and CEO, Linda Findley, highlighted the significant progress made in executing its turnaround strategy during a conference call with analysts.
'We delivered on the guidance we provided in our last call,' Findley said, citing full-year net sales of $1.41 billion, which met expectations despite reduced marketing spend and lower traffic throughout the year.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) came in at $78 million, exceeding the company's guidance of $70 million. Cash use for 2025 was a mere $18 million compared to the guided $50 million.
The company's full-year pro forma adjusted EBITDA margin was approximately 9%, with Findley stating that the long-term benefit to this metric comes from two main areas: renewed growth from its product line redesign and significant cost savings already achieved, with another $50 million of annualized fixed costs yet to be executed.
Notably, Sleep Number removed more than $185 million in annualized costs and has identified an additional $50 million worth of annualized fixed costs to tackle. Findley stressed that the company remains in full turnaround mode, acknowledging that it still faces hurdles in 2026.
The impact of severe weather and macroeconomic pressures on sales was evident during January and early February, with 236 stores closed for at least one day in the first month of the year. However, Sleep Number adjusted its marketing spend and strategy to adapt to these changes, resulting in sequential improvement into February and March driven largely by its product launch.
One key factor contributing to this turnaround is the company's new product line, which includes the ComfortMode mattress priced under $1,600. This innovative bed has seen a fantastic response from customers, with sales 3.5 times higher than initially expected and nearly twice those of all three C-Series beds it replaces.
The success of the ComfortMode bed is an important indicator for the rest of Sleep Number's portfolio, built on the same principles and value proposition. As Findley noted, 'the response from customers has been fantastic,' giving the company confidence in its new marketing and product strategies to propel the next phase of its turnaround.
