Sleep Number’s second quarter was marked by a significant revenue decline and a non-GAAP loss that fell short of Wall Street’s expectations, leading to a sharp negative market reaction. Management pointed to an intentional and deep reduction in marketing spend as a primary driver behind the lower sales, with CEO Linda Findley explaining, “We took the necessary actions to reset the marketing program with a 30% cut to Q2 year-over-year marketing spend.” The company’s leadership adopted a self-critical tone, acknowledging that these cuts, while necessary to improve efficiency, contributed to the revenue shortfall.
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Sleep Number (SNBR) Q2 CY2025 Highlights:
- Revenue: $327.9 million vs analyst estimates of $357.4 million (19.7% year-on-year decline, 8.3% miss)
- Adjusted EPS: -$0.82 vs analyst estimates of -$0.18 (significant miss)
- Adjusted EBITDA: $23.56 million vs analyst estimates of $24.65 million (7.2% margin, 4.4% miss)
- Operating Margin: 0%, down from 1.5% in the same quarter last year
- Locations: 630 at quarter end, down from 646 in the same quarter last year
- Same-Store Sales fell 1% year on year (0% in the same quarter last year)
- Market Capitalization: $198.6 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Sleep Number’s Q2 Earnings Call
- Daniel Arnold Silverstein (UBS) pressed for details on the composition of cost savings and questioned the long-term impacts of aggressive cuts. CEO Linda Findley responded that savings are spread across G&A, R&D, and marketing, emphasizing a structural, not just temporary, approach.
- Silverstein (UBS) also asked about potential digital-first retail partnerships and the economics of new distribution channels. Findley clarified that the vertical model remains central and that any channel expansion must preserve the company’s strong margin profile.
- Bradley Bingham Thomas (KeyBanc) sought more information on the strategy for product assortment and pricing refresh. Findley explained that extensive consumer research and existing sleep data are informing the process, with changes expected to roll out in 2026.
- Thomas (KeyBanc) further probed on wholesale channel opportunities and margin implications. Findley indicated all options are under review but stressed the priority of maintaining the current margin structure.
- Bobby Griffin (Raymond James) asked about the future target for marketing spend as a percentage of sales. Findley stated that while near-term volatility is expected, the long-term goal is a more efficient and lower spend ratio aligned with industry norms.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the continued improvement in marketing efficiency and resulting trends in customer acquisition, (2) progress toward product portfolio simplification and digital channel expansion, and (3) the company’s ability to achieve and sustain cost savings while managing its capital structure. Any updates on partnerships or new distribution initiatives will also be important milestones.
Sleep Number currently trades at $8.72, up from $8.16 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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