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Select Comfort Idea Proposal (SCSS, SNBR)

Select Comfort Idea Proposal (SCSS, SNBR)
 

Will smart beds help Select Comfort grow unit volume overall?

 

Report Available: September 15, 2017

 

Blueshift’s initial research found SCSS introducing a new line of innovative mattresses with smart technology and a high price tag that the company expects will increase sales and drive profit. But SCSS had inventory concerns which delayed delivery in Q2 and faces a highly competitive environment with lower-priced direct-to-consumer bed in a box mattress companies in an environment highly sensitive to a change in unit sales.

 

Observations

  1. SCSS missed earnings and revenue expectations in Q2. Revenue grew by 3% year to year. Demand was higher than the company expected and an inventory shortage resulted in $25 million in sales (or one week of customer delivery) being pushed back into Q3 because of delayed shipments. The company said the issue was a one-time occurrence with a new supplier and expects no effect on future performance, reiterating its guidance projection for the year.
  2. SCSS introduced the Sleep Number 360 smart bed with the i7 and i10 models reaching all stores in May. Demand for this bed is ahead of expectations. The bed boasts the latest in sleep technology with automatic adjustment in mattress firmness, lifting the mattress when snoring is detected, heating feet, and providing data on sleep quality via a mobile app. Other models will be rolled out in 2017 and into 2018.
  3. The i7 ($3,499) and i10 ($4,999) are sizeable investments at a time when lower-priced mattresses, driven by the bed-in-a-box boom, are gaining steam. Casper introduced a premium mattress designed to conform to your body with a balance of soft and firm elements. It starts at $1,000 for a twin and as much as $2,250 for a California King, and still allows customers 100 days to try it out. Casper’s traditional mattresses start at $500 and are now available in TGT stores and other retail locations. Tuft & Needle is partnering with AMZN when it opens its Seattle store. With one-fourth of its sales coming through AMZN, Tuft & Needle is encouraging showrooming at its Seattle location, equipping the store with AMZN technology to help customers make purchases. And Purple announced it will merge with GPAC in a deal that values the direct-to-consumer mattress company at $1.1 billion.
  4. In previous coverage of the mattress industry, Blueshift’s Oct. 6, 2016, report said TPX would struggle to grow revenue in the face of several competitive headwinds. Specifically, ETR:SNH’s entrance into the U.S. market is shaping up to be its biggest threat. Tempur’s Sealy division remains its weak link and has not shown any improvement since Blueshift’s May 25, 2016, report noted the brand’s struggles. It is the most vulnerable of the large mattress manufacturers to Steinhoff’s acquisition of Mattress Firm, and continues to lose share to Advent International Corp.’s Simmons and Serta.

 

What do consumers think of the new smart beds? How are sales? What effect are these beds having on margin? How is SCSS faring against competitors? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Supply chain, Store personnel, Competitors, and Industry specialists.

 

Companies: Select Comfort (SCSS), Steinhoff International Holdings (ETR:SNH), Tempur Sealy (TPX)

 

Research Begins: August 28, 2017