Bedding manufacturer and retailer Sleep Number (NASDAQ: SNBR) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 16.4% year on year to $393.3 million. Its non-GAAP loss of $0.38 per share was significantly below analysts’ consensus estimates.

Is now the time to buy SNBR? Find out in our full research report (it’s free).

StockStory’s Take

Sleep Number’s first quarter results reflected continued demand challenges, which new CEO Linda Findley addressed directly on the earnings call. Management attributed the sales decline to persistent consumer uncertainty and a loss of focus on the company’s core value proposition. Findley emphasized that, upon joining in April, she identified opportunities for more effective marketing, streamlined decision-making, and a renewed focus on products that address immediate customer needs. CFO Francis Lee highlighted that operational efficiencies in supply chain and manufacturing helped expand gross margin, but these improvements were outweighed by lower fixed-cost leverage due to reduced sales.

Looking ahead, management provided only directional guidance, citing the volatile macroeconomic environment and evolving consumer sentiment. The company expects continued pressure on topline performance but is focused on maintaining recent gross margin gains and implementing $80 million to $100 million in annualized cost reductions. Findley noted that everything is under review, including the supply chain, organizational structure, and product priorities, with a bias toward bold and rapid action. "We are fundamentally changing how we run our business and anticipate these changes will positively impact our financial model in 2025 and beyond," Lee stated.

Key Insights from Management’s Remarks

Sleep Number’s leadership outlined a series of immediate and longer-term operational changes in response to ongoing revenue and profitability pressures. Management was explicit about the need to reset the business model and restore focus on clear customer benefits, rather than distant innovation goals.

• Leadership transition and new priorities: Linda Findley, the recently appointed CEO, initiated a comprehensive review of business strategy, emphasizing a return to the brand’s core strengths in sleep wellness and customer-centricity. She cited the need to reconnect with customers’ current needs rather than focusing solely on future innovations.
• Cost structure overhaul: The company announced a new executive and senior leadership structure, resulting in a 21% reduction in corporate management roles. This consolidation aims to improve decision speed, accountability, and expense control.
• Marketing model reset: Management is shifting from broad-based advertising to more targeted, benefits-focused digital campaigns. Chief Marketing Officer Amber Minson will lead efforts to enhance marketing efficiency and messaging effectiveness, aiming to drive more engagement per dollar spent.
• Product and R&D realignment: The company is redirecting R&D resources away from longer-term, uncertain adjacent opportunities to sustaining and improving core products. Management plans to focus innovation on features that matter most to customers now, while controlling associated costs.
• Tariff and supply chain flexibility: The team is actively managing sourcing and pricing strategies to offset potential tariff impacts, using supply chain flexibility to mitigate up to $17 million of a possible $30 million tariff headwind for 2025. They are also considering strategic pricing adjustments as part of this response.

Drivers of Future Performance

Management’s outlook for the coming quarters is shaped by a cautious view of consumer demand and an aggressive focus on cost efficiency. The company’s ability to execute on restructuring and reposition its core product offering will be critical to future performance.

• Sustained cost reductions: Leadership expects $80 million to $100 million in annualized cost savings, achieved through organizational redesign, marketing efficiency, and R&D reprioritization. These efforts are intended to protect margins even if sales remain pressured.
• Gross margin preservation: The company aims to maintain improvements in gross profit margin via ongoing supply chain optimization and material cost reductions, while offsetting most of the expected tariff headwinds through flexible sourcing and supplier partnerships.
• Demand-side risk: Management acknowledged that consumer sentiment remains weak and may not improve in the near term, potentially limiting topline recovery. The company is preparing for a prolonged period of subdued demand by building a more flexible and resilient cost structure.

Top Analyst Questions

• Alessandra Jimenez (Raymond James): Asked about immediate opportunities for improvement in 2025; Findley cited marketing efficiency, faster decision-making from organizational changes, and focusing R&D on core products.
• Dan Silverstein (UBS): Queried how marketing and partnerships will evolve; Findley emphasized shifting to digital, benefits-based messaging and maximizing value from existing and potential new partnerships.
• Peter Keith (Piper Sandler): Sought specifics on reconnecting with the core value proposition; Findley explained the need to better communicate the everyday benefits of Sleep Number beds and to focus product development on current customer needs.
• Bradley Thomas (KeyBanc): Asked about balancing marketing spend reductions with sales impact; Findley stressed a shift toward digital and targeted outreach to improve efficiency without simply cutting spend.
• Bradley Thomas (KeyBanc): Followed up on pricing and promotions amid tariffs; Findley stated they will use pricing selectively and balance promotions to manage both customer affordability and tariff impacts.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the execution and financial impact of planned cost reductions, (2) the effectiveness of the new marketing strategy in stabilizing or growing demand, and (3) management’s progress in maintaining gross margin gains despite tariff pressures and weak consumer sentiment. We will also track any updates on strategic changes to the product portfolio, store footprint, and supply chain structure as part of the company’s broader transformation.

Sleep Number currently trades at a forward EV-to-EBITDA ratio of 1.9×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.

Stocks That Trumped Tariffs in 2018

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.