Sleep Number (SNBR) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 were $393 million, down 16% year-over-year due to lower volume and reduced store count.

• Leadership transition with a new CEO focused on stabilizing and transforming the business for sustainable growth and shareholder returns, including a major organizational redesign that reduced corporate management by 21%.

• Operating expenses reduced by $23–$32 million year-over-year before restructuring and non-recurring costs, mainly from lower marketing and selling expenses.

• Adjusted EBITDA was $22 million, down from $37 million year-over-year, with margin declining 230 basis points to 5.6%.

• Net loss was $8.6–$9 million (about $0.38 per diluted share), compared to $7–$7.5 million in the prior year.

Financial highlights

• Gross profit margin expanded to 61.2%, up 250 basis points year-over-year, mainly due to product cost reductions, favorable mix, and logistics efficiencies.

• Gross profit was $241 million, a decrease of $36 million year-over-year.

• Operating expenses (excluding restructuring/one-time costs) were $237 million, a 9% improvement year-over-year.

• Free cash flow was a use of $7–$7.2 million, down $32 million year-over-year.

• Leverage ratio stood at 4.46x–4.5x EBITDA, within covenant maximum of 4.75x.

Outlook and guidance

• No full-year 2025 guidance provided due to leadership transition, macroeconomic uncertainty, and evolving consumer sentiment; guidance will be reassessed as the new team evaluates strategy and demand.

• Expect continued top-line pressure in the near term; cost structure prepared for stagnant demand.

• Gross margin improvements expected to be maintained, though tariffs could pressure margins by ~100 basis points.

• $80–$100 million in annualized cost reductions targeted, with immediate impact in Q2 and further benefits in the second half of the year.

• Additional $10–$15 million in restructuring costs expected through the remainder of 2025, primarily for severance, contract termination, and asset impairment.