Sleep Number Corp (SNBR) 2024 Q3 法說會逐字稿

Welcome to Sleep Number's Q3 2024 earnings conference call. (Operator Instructions) Today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would like to introduce Dave Schwantes, Vice President of Finance and Investor Relations. Thank you. You may begin.

歡迎參加 Sleep Number 2024 年第三季財報電話會議。（操作員說明）今天的通話正在錄音。如果有人有任何異議，您可以此時斷開連接。我想介紹一下財務與投資者關係副總裁 Dave Schwantes。謝謝。你可以開始了。

Good afternoon, and welcome to the Sleep Number Corporation third-quarter 2024 earnings conference call. Thank you for joining us. I am Dave Schwantes, Vice President of Finance and Investor Relations. With me today are Shelly Ibach, our Chair, President and CEO; and Francis Lee, our Chief Financial Officer. This telephone conference is being recorded and will be available on our website at sleepnumber.com.

下午好，歡迎參加 Sleep Number Corporation 2024 年第三季財報電話會議。感謝您加入我們。我是戴夫‧施萬特斯 (Dave Schwantes)，財務與投資者關係副總裁。今天與我在一起的有我們的董事長、總裁兼執行長 Shelly Ibach；和我們的財務長弗朗西斯李。本次電話會議正在錄製中，並將在我們的網站 sleepnumber.com 上提供。

Please refer to the details in our news release to access the replay. Please also refer to our news release for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release or that may be discussed on this call.

請參閱我們新聞稿中的詳細資訊以觀看重播。另請參閱我們的新聞稿，以了解新聞稿中包含的或本次電話會議中可能討論的某些非公認會計準則財務指標和補充財務資訊的調節表。

The primary purpose of this call is to discuss the results of the fiscal period just ended. However, our commentary and responses to your questions may include certain forward-looking statements.

這次電話會議的主要目的是討論剛結束的財政期間的結果。然而，我們對您問題的評論和答案可能包含某些前瞻性陳述。

These forward-looking statements are subject to a number of risks and uncertainties outlined in our earnings news release and discussed in some detail in our annual report on Form 10-K and other periodic filings with the SEC. The company's actual future results may vary materially.

這些前瞻性陳述受到我們的收益新聞稿中概述的許多風險和不確定性的影響，並在我們向 SEC 提交的 10-K 表格年度報告和其他定期文件中進行了詳細討論。公司未來的實際業績可能會存在重大差異。

I will now turn the call over to Shelly for her comments.

我現在將把電話轉給雪莉徵求她的意見。

Good afternoon, everyone, and thank you for joining us. My SleepIQ score was 76 last night. In addition to announcing our 2024 third quarter results today, we also announced that I will retire as Board Chair, President, and Chief Executive Officer, no later than the 2025 Annual Shareholders Meeting.

大家下午好，感謝您加入我們。昨晚我的 SleepIQ 分數是 76。除了今天宣布 2024 年第三季業績外，我們還宣布我將在 2025 年年度股東大會之前退休，擔任董事會主席、總裁和執行長。

In keeping with Sleep Number's established succession plan, the Board has engaged an independent executive search firm to help identify my successor. To further support an effective transition, I will serve as strategic advisor to the new CEO and Board through the end of 2025.

為了與 Sleep Number 既定的繼任計畫保持一致，董事會聘請了一家獨立的獵人頭公司來幫助確定我的繼任者。為了進一步支持有效的過渡，我將在 2025 年底前擔任新任執行長和董事會的策略顧問。

I'm filled with gratitude for our team's deep commitment to our mission and purpose, which has inspired innovations like our revolutionary smart bed and digital wellness platform that have improved almost 16 million lives. These life-changing innovations, combined with our company's remarkable culture, vertically integrated business model and operating model transformation, give me tremendous confidence in Sleep Number's enduring competitive advantages and stakeholder value creation.

我對我們的團隊對我們的使命和目標的堅定承諾充滿感激，這激發了我們革命性的智慧床和數位健康平台等創新，改善了近 1600 萬人的生活。這些改變生活的創新，加上我們公司卓越的文化、垂直整合的業務模式和營運模式轉型，讓我對 Sleep Number 持久的競爭優勢和利害關係人價值創造充滿信心。

The company also announced additional Board and governance changes today, consistent with our deliberate longstanding practice of aligning the company's strategic evolution with progressive Board composition and governance. Details of these changes are described in today's separate CEO retirement release and associated letter to shareholders. Now, shifting to our third quarter results.

公司今天還宣布了額外的董事會和治理變化，這與我們將公司的策略發展與不斷進步的董事會組成和治理相結合的長期實踐是一致的。這些變化的細節在今天單獨的執行長退休新聞稿和相關的股東信中進行了描述。現在，轉向我們的第三季業績。

Throughout the past year, we have taken ongoing actions to transform our operating model for greater financial resilience across a range of economic environments. During the third quarter, our initiatives drove broad-based efficiencies and a gross margin rate improvement to 60.8%, resulting in third quarter adjusted EBITDA of $28 million, which was in line with our expectations even with persistent weakness in consumer demand.

在過去的一年裡，我們不斷採取行動來轉變我們的營運模式，以在各種經濟環境中增強財務彈性。第三季度，我們的措施推動了廣泛的效率並將毛利率提高至60.8%，導致第三季調整後EBITDA 達到2,800 萬美元，即使在消費者需求持續疲軟的情況下，這也符合我們的預期。

I am proud of our team for their agility and stellar execution in delivering these results. This increased financial resilience, combined with our innovation superiority, position us to accelerate into the demand recovery when it comes. Sleep Number is fit, lean and generating cash in a challenging macroeconomic environment.

我為我們的團隊在實現這些成果方面的敏捷性和出色的執行力感到自豪。這種增強的財務彈性，加上我們的創新優勢，使我們能夠在需求復甦到來時加速進入。Sleep Number 在充滿挑戰的宏觀經濟環境中保持健康、精實並能產生現金。

With ongoing top-line pressure from the bedding industry's third year in a recession, we did not experience the demand improvement in Q3 we had expected and are furthermore not planning for improvement in the fourth quarter. As a result, we are lowering our full year adjusted EBITDA guidance to a range of $115 million to $125 million.

由於床上用品產業連續第三年陷入衰退，營收壓力持續存在，我們在第三季並沒有經歷預期的需求改善，也不打算在第四季實現改善。因此，我們將全年調整後 EBITDA 指引下調至 1.15 億美元至 1.25 億美元之間。

We are outpacing our 2024 targets of $40 million to $45 million in operating expense savings and 100 basis points of gross margin rate expansion. Our Q3 gross margin rate of 60.8% was 340 basis points better than prior year, and our year-to-date gross margin rate of 59.5% was 150 basis points above prior year. Q3 operating expenses were down $17 million year over year before restructuring costs, and year-to-date operating expenses were down $60 million.

我們正在超額完成 2024 年營運費用節省 4,000 萬至 4,500 萬美元和毛利率擴張 100 個基點的目標。第三季毛利率為 60.8%，比去年同期提高 340 個基點，年初至今毛利率為 59.5%，比去年同期提高 150 個基點。不計重組成本，第三季營運費用較去年同期下降 1,700 萬美元，年初至今營運費用下降 6,000 萬美元。

Our actions to transform our operating model are furthering flexibility and resilience in our cost of acquisition, cost of goods, cost to serve and R&D, G&A leverage. Highlights include deepening audience segmentation in our marketing strategies, sustaining material cost reductions in our go-forward gross margin rates, increasing demand-adjusted efficiencies in our manufacturing and end-to-end fulfillment network, and reducing R&D and indirect operating expenses, supported by our restructuring efforts towards more variable costs.

我們轉變營運模式的行動正在進一步提高我們的採購成本、商品成本、服務成本以及研發、一般管理費用槓桿的靈活性和彈性。亮點包括在我們的行銷策略中深化受眾細分，在我們的未來毛利率中持續降低材料成本，提高我們的製造和端到端履行網路中的需求調整效率，以及減少研發和間接營運費用，我們的重組努力旨在提高變動成本。

As a result of these rigorous actions, we now expect 2024 full-year operating expenses to be down approximately $75 million versus prior year, which will deliver a two-year operating expense improvement pre-restructuring costs approaching $160 million. We are confident in the sustainability of our more durable operating model as we continue to navigate this weak demand market. Consumer spending in our category and other high-ticket discretionary products remains disappointing, and it continues to lag macroeconomic metrics.

由於採取了這些嚴格的行動，我們現在預計 2024 年全年營運費用將比上年減少約 7,500 萬美元，這將使重組前的兩年營運費用改善接近 1.6 億美元。隨著我們繼續應對這個需求疲軟的市場，我們對更持久的營運模式的可持續性充滿信心。我們的類別和其他高價非必需產品的消費者支出仍然令人失望，並且繼續落後於宏觀經濟指標。

We believe consumers will require additional interest rate cuts that improve their financial position and increase their purchasing power before returning to spending on these categories. With the bedding industry and Sleep Number lapping two years of double-digit demand declines in the third quarter, we had expected a sequential improvement from the first half of the year.

我們認為，消費者在恢復這些類別的支出之前將需要進一步降息，以改善其財務狀況並提高購買力。隨著床上用品產業和 Sleep Number 在第三季經歷了兩年來的兩位數需求下降，我們原本預計今年上半年將會較上季改善。

However, our Q3 demand was largely unchanged from first half performance. The two strongest periods in the quarter were July 4 weekend and Labor Day weekend with low-single-digit growth. This concentration in the biggest sale weekends was much more marked these past two years than in prior years when consumer response was spread out over the weeks leading up to the event.

然而，我們第三季的需求與上半年的表現基本上沒有改變。本季最強勁的兩個時期是 7 月 4 日週末和勞動節週末，成長率為低個位數。過去兩年，這種集中在最大銷售週末的現像比前幾年更加明顯，當時消費者的反應分散在活動前的幾週內。

This cautious shopping behavior is representative of a more scrutinizing consumer who is budget conscious, needs more time to make a decision than in prior years and concentrates their purchases during promotional events for maximum value. We expect pressured sales trends to continue in the near term with the economy, US election and geopolitical conditions presenting ongoing uncertainty.

這種謹慎的購物行為代表了更仔細的消費者，他們對預算很敏感，需要比前幾年更多的時間來做出決定，並且會在促銷活動期間集中購買以獲得最大價值。我們預計，由於經濟、美國大選和地緣政治狀況帶來持續的不確定性，銷售壓力將在短期內持續。

In this environment, we are leaning into both our strong brand and innovation superiority. First, we are deepening initiatives focused on our brand differentiators in media and marketing segmentation to more effectively reach and activate the current limited number of intenders considering mattresses.

在這種環境下，我們正在依靠強大的品牌和創新優勢。首先，我們正在深化以媒體和行銷細分中的品牌差異化為重點的舉措，以更有效地接觸和激活目前有限數量的考慮床墊的意向者。

Second, we are strengthening our market leadership position in temperature-balancing sleep solutions to increase customer consideration and conversion. Earlier this month, we introduced the revolutionary ClimateCool smart bed. This new smart bed expands our assortment and price points of active temperature innovations, which includes our award-winning Climate360 smart bed and the DualTemp layer.

其次，我們正在加強我們在溫度平衡睡眠解決方案方面的市場領導地位，以提高客戶的考慮和轉換率。本月早些時候，我們推出了革命性的 ClimateCool 智慧床。這款全新智慧床擴展了我們主動溫度創新的品種和價位，其中包括我們屢獲殊榮的 Climate360 智慧床和 DualTemp 層。

This new Climate series, now set in all Sleep Number stores, addresses one of the most important issues affecting sleepers, temperature challenges. More than two-thirds of sleepers report they sleep too hot or too cold.

這個新的氣候系列現已在所有 Sleep Number 商店推出，解決了影響睡眠者的最重要問題之一，即溫度挑戰。超過三分之二的睡眠者表示他們睡得太熱或太冷。

In addition to addressing temperature fluctuations through active temperature management, the Climate series smart beds feature scientifically-backed cooling programs that are designed to provide deeper, more comfortable sleep. The Climate series smart beds are resonating with these target customers and are accretive to our gross margin rate.

除了透過主動溫度管理解決溫度波動問題外，Climate 系列智慧床還具有科學支援的冷卻程序，旨在提供更深、更舒適的睡眠。Climate系列智慧床引起了這些目標客戶的共鳴，並增加了我們的毛利率。

In summary, we are continuing to take actions that improve our financial resilience and durability, as we simultaneously lean into Sleep Number's clear competitive advantages, including proprietary sleep innovations that deliver proven quality sleep through our sleep wellness platform with millions of smart sleepers connected to our brand, and our vertically-integrated business model with exclusive direct-to-consumer selling in nearly 650 stores and online and an efficient manufacturing and fulfillment network.

總而言之，我們將繼續採取行動，提高我們的財務彈性和耐用性，同時利用Sleep Number 明顯的競爭優勢，包括專有的睡眠創新，透過我們的睡眠健康平台提供經過驗證的優質睡眠，數以百萬計的智慧睡眠者連接到我們的睡眠號碼。

Our transformation progress, combined with rigorous execution of our differentiated strategy, positions us when the market growth returns to capitalize on our innovation leadership, accelerate our profitable growth, generate strong free cash flow and deliver increased value for all stakeholders.

我們的轉型進展，加上嚴格執行差異化策略，使我們能夠在市場成長恢復時，利用我們的創新領先地位，加速我們的盈利增長，產生強勁的自由現金流，並為所有利益相關者提供更高的價值。

In closing, I want to thank our entire Sleep Number team for their passion, resilience and stellar execution in a difficult retail environment. Their dedication to our mission and best-in-class efforts are driving new innovations and financial results that serve as a strong foundation for a return to growth as market conditions improve.

最後，我要感謝我們整個 Sleep Number 團隊在困難的零售環境中表現出的熱情、韌性和出色的執行力。他們對我們使命的奉獻和一流的努力正在推動新的創新和財務業績，為隨著市場狀況改善而恢復成長奠定堅實的基礎。

Now, Francis will provide additional details about our performance and outlook for the year.

現在，弗朗西斯將提供有關我們今年的業績和展望的更多詳細資訊。

Thank you, Shelly. Let me say congratulations on your pending retirement and thank you for your leadership and partnership. Turning to the business, our third quarter results demonstrate our team's commitment to deliver against our controllables, while continuing to navigate a historically weak demand environment for the bedding industry.

謝謝你，雪莉。讓我對您即將退休表示祝賀，並感謝您的領導和合作。談到業務，我們第三季的業績證明了我們的團隊致力於根據我們的可控因素交付成果，同時繼續應對床上用品行業歷史上疲軟的需求環境。

Our ongoing cost control rigor and gross margin improvement initiatives resulted in us achieving our third quarter adjusted EBITDA guidance despite a softer-than-expected top line. We continue to focus on maximizing cash flow generation with year-to-date free cash flow up $50 million versus the same period last year.

儘管營收低於預期，但我們持續嚴格的成本控制和毛利率改善措施使我們實現了第三季調整後的 EBITDA 指引。我們繼續專注於最大限度地產生現金流，今年迄今的自由現金流比去年同期增加了 5,000 萬美元。

Now, let's turn to a review of our third quarter results. Third quarter net sales of $427 million were down 10% versus last year and 5 points below our expectations. Net sales for the quarter included a high-single-digit demand decline, a couple of percentage points of headwind from year-over-year backlog changes and 1 point of pressure from fewer stores. We delivered a 60.8% gross margin rate for the quarter, up 340 basis points versus the prior year, and we accomplished this even with deleverage from the year-over-year net sales decline.

現在，讓我們回顧一下我們第三季的業績。第三季淨銷售額為 4.27 億美元，比去年下降 10%，比我們的預期低 5 個百分點。該季度的淨銷售額包括高個位數的需求下降、積壓訂單同比變化帶來的幾個百分點的阻力以及商店數量減少帶來的 1 個百分點的壓力。我們本季的毛利率為 60.8%，比去年同期成長了 340 個基點，即使在淨銷售額年減的情況下，我們還是實現了這一目標。

Our year-to-date gross margin rate of 59.5% was up 150 basis points versus the same period last year and ahead of expectations, driven by broad-based gross margin initiatives, which, as a reminder, include material cost reductions, including redesign actions, reducing number of parts for selected products, ongoing supplier negotiations for all material components, year-over-year cost efficiencies in our home delivery and logistics operations, including a more flexible labor model, increased efficiency in home delivery truck utilization and savings from switching our primary parcel provider.

我們今年迄今的毛利率為 59.5%，比去年同期增長了 150 個基點，超出了預期，這得益於廣泛的毛利率舉措，其中包括材料成本削減（包括重新設計）行動，減少選定產品的零件數量，對所有材料部件進行持續的供應商談判，我們的送貨上門和物流業務的逐年成本效率，包括更靈活的勞動力模式，提高送貨卡車使用效率以及節省更換我們的主要包裹提供商。

Over the past several quarters, we have continued to streamline and align our cost structure with the ongoing weak demand environment. In the third quarter, we drove an additional $17 million in operating cost reductions year-over-year before restructuring costs with a year-to-date gross -- operating expense reduction of $60 million.

在過去的幾個季度中，我們繼續精簡成本結構，使其適應持續疲軟的需求環境。第三季度，我們在重組成本之前比去年多削減了 1,700 萬美元的營運成本，年初至今營運費用總額減少了 6,000 萬美元。

Third-quarter operating expense reductions were broad-based, including lower selling expenses with 25 fewer stores versus the prior year, lower marketing expenses, including paring back our media investment post Labor Day, and reduced R&D spend. Over the past 7 quarters, we have reduced operating expenses by $145 million. By year-end, we expect the total operating expense reduction over the last 2 years to approach $160 million pre-restructuring costs.

第三季營運費用的削減是廣泛的，包括銷售費用的降低（與上一年相比減少了 25 家商店）、行銷費用的降低（包括勞動節後削減我們的媒體投資）以及研發支出的減少。在過去 7 個季度中，我們減少了 1.45 億美元的營運費用。到年底，我們預計過去兩年營運費用減少總額將接近 1.6 億美元的重組前成本。

Maximizing adjusted EBITDA and free cash flow generation have remained our priorities this year. We generated $28 million of adjusted EBITDA in the quarter, up 11% versus the same period last year. Our third quarter adjusted EBITDA margin of 6.5% was up 120 basis points versus the prior year, driven by the 340 basis point increase in our gross margin rate and the $17 million reduction in operating expenses, partially offset by deleverage from the year-over-year net sales decline.

最大化調整後的 EBITDA 和自由現金流產生仍然是我們今年的首要任務。本季調整後 EBITDA 為 2,800 萬美元，比去年同期成長 11%。我們第三季調整後的EBITDA 利潤率為6.5%，比上年同期增長120 個基點，這得益於我們的毛利率增長340 個基點和運營費用減少1,700 萬美元，部分被去年同期的去槓桿化所抵銷。

Our adjusted EBITDA for the quarter was in line with our guidance range of $25 million to $30 million. For the third quarter, we generated $24 million of free cash flow, which is $29 million higher than the same period last year, with year-to-date free cash flow up $50 million year over year.

我們本季調整後的 EBITDA 符合我們 2,500 萬至 3,000 萬美元的指引範圍。第三季度，我們產生了 2,400 萬美元的自由現金流，比去年同期增加了 2,900 萬美元，年初至今的自由現金流年增了 5,000 萬美元。

For the full year, we now expect free cash flow of $10 million to $20 million, which includes the expectation of $15 million to $25 million negative free cash flow in the fourth quarter. Our updated free cash flow expectations for the year are primarily due to our reduced net sales guidance, which we expect to negatively impact our projected working capital position at year-end, along with lowering our full year adjusted EBITDA expectations. Our updated 2024 free cash flow outlook would represent a $75 million to $85 million improvement from last year.

目前，我們預計全年自由現金流為 1,000 萬至 2,000 萬美元，其中包括第四季 1,500 萬至 2,500 萬美元負自由現金流的預期。我們更新的今年自由現金流預期主要是由於我們減少了淨銷售指導，我們預計這將對我們年底的預計營運資本狀況產生負面影響，同時降低我們全年調整後的 EBITDA 預期。我們更新後的 2024 年自由現金流展望將比去年增加 7,500 萬至 8,500 萬美元。

Turning to our 2024 outlook. We are updating our full year adjusted EBITDA outlook to a revised range of $115 million to $125 million compared to our previous range of $125 million to $145 million.

轉向我們的 2024 年展望。我們將全年調整後 EBITDA 展望從先前的 1.25 億美元至 1.45 億美元調整為 1.15 億美元至 1.25 億美元。

The updated outlook reflects the ongoing weak bedding demand environment, which we do not expect to improve meaningfully in the fourth quarter. Let me provide some of the key assumptions included in our updated 2024 outlook, along with our fourth quarter expectations. We now expect net sales to be down approximately 10% for the year.

更新後的前景反映了床上用品需求環境持續疲軟，我們預計第四季度不會出現顯著改善。讓我提供我們更新的 2024 年展望中包含的一些關鍵假設以及我們第四季的預期。我們現在預計今年淨銷售額將下降約 10%。

Our full-year net sales guidance continues to assume 3 percentage points of headwind from year-over-year backlog changes and 1 percentage point of headwind from lower average store count. We expect at least 150 basis points of gross margin rate expansion in 2024 versus our previous expectations of at least a 100 basis point increase. We expect capital expenditures of approximately $25 million for the year, $5 million lower than our prior outlook.

我們的全年淨銷售指引繼續假設同比積壓變化帶來 3 個百分點的阻力，以及平均商店數量減少帶來 1 個百分點的阻力。我們預計 2024 年毛利率至少會成長 150 個基點，而我們先前的預期至少會成長 100 個基點。我們預計今年的資本支出約為 2500 萬美元，比我們之前的預期低 500 萬美元。

Turning to fourth-quarter performance. At the midpoint of our adjusted EBITDA outlook, we are expecting net sales to be down high-single digits versus the prior year's fourth quarter, similar to our year-to-date net sales performance.

轉向第四季的業績。在我們調整後的 EBITDA 展望的中點，我們預計淨銷售額將比去年第四季大幅下降個位數，這與我們今年迄今的淨銷售額表現類似。

We expect fourth quarter adjusted EBITDA to be a little more than $25 million at the midpoint of our outlook range compared to $18 million for last year's fourth quarter. Our leverage ratio on a trailing 12-month basis was 4.2 times EBITDAR at the end of the third quarter as planned compared to our covenant maximum of 5.0 times at quarter-end.

我們預計第四季度調整後 EBITDA 將略高於我們展望範圍的中點 2500 萬美元，而去年第四季為 1800 萬美元。按計劃，我們過去 12 個月的槓桿率為第三季末 EBITDAR 的 4.2 倍，而我們在季度末的約定最高槓桿率為 5.0 倍。

Our leverage ratio improved sequentially from the second quarter as we lowered our outstanding debt balance in the quarter, while slightly increasing our trailing 12-month EBITDAR. Based on our updated guidance, we now expect to end the year with a debt to EBITDAR leverage ratio of around 4.1 times or slightly better than the third quarter and well below our covenant maximum of 4.8 times at year-end.

由於我們降低了本季的未償債務餘額，同時我們的過去 12 個月 EBITDAR 略有增加，我們的槓桿率比第二季連續改善。根據我們更新的指引，我們現在預計到年底債務與 EBITDAR 槓桿率約為 4.1 倍，或略好於第三季度，遠低於我們在年底約定的最高水準 4.8 倍。

Last quarter, we provided some illustrative comments to indicate the minimum net sales required in 2025 to stay within the covenant levels based on our current cost structure. With the additional profitability improvements we have made, we now estimate net sales of approximately $1.7 billion would be sufficient to remain under the 4.0 times EBITDAR covenant throughout next year. As a reminder, we will provide our 2025 outlook on our year-end call.

上季度，我們提供了一些說明性​​意見，指出根據我們目前的成本結構，2025 年維持在契約水準所需的最低淨銷售額。隨著我們獲利能力的進一步提高，我們現在估計約 17 億美元的淨銷售額足以維持明年全年 4.0 倍 EBITDAR 的承諾。提醒一下，我們將在年終電話會議上提供 2025 年展望。

I am grateful for the tenacity, resilience, and dedication of our entire team. We continue to execute cost efficiencies across the business to help offset prolonged historic weakness in the bedding industry, and importantly, also leading to a more durable business model to help us thrive as demand recovers.

我感謝我們整個團隊的堅韌、韌性和奉獻精神。我們繼續在整個業務範圍內提高成本效率，以幫助抵消床上用品行業長期的歷史疲軟，重要的是，這也帶來了更持久的商業模式，幫助我們隨著需求的復甦而蓬勃發展。

With that, operator, please open the line for questions.

那麼，接線員，請開通提問線路。

(Operator Instructions) Bobby Griffin, Raymond James.

（操作員說明）鮑比·格里芬、雷蒙德·詹姆斯。

Good afternoon, everybody. Thanks for taking my questions, and Shelly, congrats on your pending retirement.

大家下午好。感謝您回答我的問題，雪莉，恭喜您即將退休。

Thanks, Bobby.

謝謝，鮑比。

So, I guess first up for me is just maybe unpacking a little bit more of just how the quarter played out. And maybe just in October, actually, we've heard of various reports heading into election, media spending is tough, businesses actually pulled back more. Just curious if you're seeing that and if, obviously, that's being reflected as part of the 4Q updated guidance.

所以，我想我首先要做的可能只是更多地了解本季的情況。實際上，也許就在十月份，我們就聽說了選舉前夕的各種報道，媒體支出很艱難，企業實際上縮減了更多。只是好奇您是否看到了這一點，以及顯然，這是否已反映為第四季度更新指南的一部分。

Yeah, Bobby, regarding the shape of the quarter, I gave a few highlights in my prepared remarks. We had low-single-digit growth on both holiday weekends, July 4 and the Labor Day weekend. And the rest of the quarter was challenging.

是的，鮑比，關於本季的情況，我在準備好的發言中強調了一些要點。我們在 7 月 4 日和勞動節週末這兩個假日週末都實現了低個位數成長。本季剩下的時間充滿挑戰。

And we particularly were somewhat -- we had spent media going into the Labor Day event in that August period, and the consumer really wasn't there. And we did pull back in media quite significantly after the Labor Day weekend, again, not seeing the consumer in the marketplace.

尤其是我們在八月的勞動節活動中花費了媒體，但消費者確實不在那裡。在勞動節週末之後，我們確實再次大幅縮減了媒體投放，沒有在市場上看到消費者。

And same with July. Early July, around the July 4th weekend, we had a low-single-digit growth, and then very minimal activity from the consumer outside of that period, and that has continued into October. And as we stated, we had about 5 points, 6 points of demand pressure greater than we had anticipated so far this year. It's been consistent all year. We expected a sequential improvement in the third quarter, and that didn't happen.

七月也一樣。7 月初，即 7 月 4 日週末左右，我們出現了較低的個位數增長，然後該時期之外的消費者活動非常少，並且這種情況一直持續到 10 月份。正如我們所說，今年迄今為止我們的需求壓力比我們的預期大了大約 5 到 6 個點。全年都保持穩定。我們預計第三季會出現連續改善，但這並沒有發生。

And that's how we're seeing it play out for Q4 as well, given the ongoing uncertainties and challenges our category is facing and big ticket in general.

考慮到我們的類別面臨的持續不確定性和挑戰以及總體上的大問題，我們也看到了第四季度的情況。

Okay. That's helpful. Shelly, just to put into context, the two holiday numbers seem very good. Is it fair to say those were at -- the holidays were in line with expectations, and it was just weaker during the non-holiday period? Or was the original plan and the spending for the holidays to actually even be stronger themselves than the low-single-digit growth you have?

好的。這很有幫助。雪莉，從上下文來看，這兩個假期數字似乎非常好。可以公平地說，假期期間的數據符合預期，只是非假期期間的數據較弱嗎？還是原來的計劃和假期支出實際上比低個位數的增長還要強勁？

No, you described it well. The consumer outside of the holiday weekends, we're just seeing a much more pronounced spending. It's consistent with the consumer behavior that we've been talking about. Not only are we dealing with a scrutinizing consumer, but she is also more delayed in her decision making than we've seen. And that's been particularly persistent here in the last -- well, since July, since the latter part of July, just less decisive, so yes, very pressured with all of the macro challenges.

不，你描述得很好。對於假日週末以外的消費者，我們看到了更明顯的支出。這與我們一直在談論的消費者行為是一致的。我們不僅面對的是一個挑剔的消費者，而且她的決策也比我們所看到的更延遲。去年以來，這種情況尤其持續——嗯，自 7 月以來，自 7 月下旬以來，只是不那麼果斷，所以是的，所有宏觀挑戰都給我們帶來了很大的壓力。

Okay. And then, secondly for me, you guys have made some store portfolio changes this year, closing some underperforming stores. And not -- I understand you're not going to give '25 guidance. But as we sit here today and look at the store portfolio, what are your thoughts on the size of it today, given the current demand environment? Does there need to be another round of closing?

好的。其次，對我來說，今年你們對商店組合進行了一些調整，關閉了一些表現不佳的商店。而不是 - 我知道你不會提供 '25 指導。但當我們今天坐在這裡審視商店組合時，考慮到當前的需求環境，您對今天的商店規模有何看法？是否需要進行另一輪收盤？

Is there negative four-wall EBITDA stores today? Just help me think about how we've made progress on that with some of these closings we've had this year.

今天四壁 EBITDA 商店是否為負數？請幫我思考一下我們在今年關閉的一些專案中是如何取得進展的。

Yes. Thanks for that question. As we went into the year, we -- overall, everyone was expecting the industry to be flattish. We expected it to be down low-single digits with about 1.5 points of pressure from store closures. And that's about what we still see, about 1.5 points from store closures.

是的。謝謝你提出這個問題。進入這一年，我們——總體而言，每個人都預計該行業將持平。我們預計，由於商店關閉帶來約 1.5 個百分點的壓力，該價格將下降至低個位數。這就是我們仍然看到的情況，距離商店關閉約 1.5 個百分點。

We were opportunistic when we decided on these store closures last year and took action around this time period. And we focused on underperforming stores, stores that were part of a test on density. We're really happy with the transfer rates, which are exceeding our expectations, over 50%. But also, like I said, we are quite selective in making those choices. We have a really healthy retail portfolio.

當我們去年決定關閉這些商店並在這個時期採取行動時，我們是機會主義的。我們專注於表現不佳的商店，這些商店是密度測試的一部分。我們對傳輸率非常滿意，超出了我們的預期，超過 50%。但正如我所說，我們在做出這些選擇時是非常有選擇性的。我們擁有非常健康的零售投資組合。

Our store portfolio across the country has been healthy, and we're happy with it. We think it's largely where it should be. And we can generate a lot of comp sales in our current retail portfolio. We'll be able to grow strongly with strong flow-through as the industry recovers. So I wouldn't characterize it as a store problem.

我們在全國各地的商店組合一直很健康，我們對此感到滿意。我們認為它基本上就在它應該在的地方。我們可以在目前的零售組合中產生大量的可比銷售。隨著產業的復甦，我們將能夠透過強勁的流通實現強勁成長。所以我不會將其描述為商店問題。

Okay. And then, lastly for me, Francis -- go ahead, I'm sorry.

好的。最後，弗朗西斯，請繼續，我很抱歉。

Yeah, Bobby, I was just going to add that we have an ongoing process where we look at our store profitability by DMA, and that's going to continue to be an ongoing process for us. So, as we plan into next year, we're confident we're going to continue to adapt and adjust our business with the active contingencies like we've done all year this year, and store closures or stores will be part of that. But there's -- as Shelly mentioned, we generally have a really healthy fleet right now.

是的，Bobby，我只是想補充一點，我們有一個持續的流程，我們透過 DMA 來查看我們商店的盈利能力，這對我們來說將繼續是一個持續的流程。因此，當我們計劃明年時，我們有信心繼續根據積極的突發事件調整我們的業務，就像我們今年全年所做的那樣，商店關閉或商店將成為其中的一部分。但正如雪莉所提到的，我們現在總體上擁有一支非常健康的機隊。

Okay. Thank you, Francis. And then, last one for me was just on gross margin. One of the bright spots this year has been some of the self-help that you guys have shown in the gross margin side of things. Can you -- Francis, can you unpack where we are in that journey? I guess, we got World Series going on.

好的。謝謝你，法蘭西斯。然後，最後一個對我來說只是毛利率。今年的亮點之一是你們在毛利率方面表現出的一些自助精神。你能－法蘭西斯，你能解開我們在這段旅程中的位置嗎？我想，我們正在進行世界大賽。

So maybe use a baseball analogy. Is there more self-help into 2025? Or is 2025 and the future gross margin really just going to be dependent on industry volumes and Sleep Number's volume?

所以也許可以用棒球來比喻。2025 年會有更多自助嗎？或者 2025 年和未來的毛利率真的只取決於行業銷量和 Sleep Number 的銷量嗎？

Yeah. I'd say we're -- using the analogy, we're along in the journey, but we're not -- we're nowhere near done. We've put in robust processes as part of our planning and inspection of all the planning that we do. And the actions that we put in place, we've given you some strong examples of those across product redesign, material cost-out, looking at how we deliver products. These are things that our team is doing on an ongoing basis through active planning.

是的。我想說的是，我們正在——打個比方，我們在旅途中，但我們沒有——我們還遠遠沒有完成。我們已經制定了健全的流程，作為我們規劃和檢查我們所做的所有規劃的一部分。我們所採取的行動，我們為您提供了一些強有力的例子，涉及產品重新設計、材料成本節約以及我們如何交付產品。這些是我們的團隊透過積極規劃持續做的事情。

And so, we'll have benefits next year, one, from anniversarying some of the initiatives and actions that came online partially through this year. And then, honestly, the ongoing activity and programs we have in place to not stop but look at this as just part of how we run our business is to have constant improvement and agility. That's going to be ongoing.

因此，明年我們將受益於今年部分上線的一些舉措和行動的周年紀念。然後，老實說，我們正在進行的活動和計劃不會停止，而是將其視為我們經營業務的一部分，目的是不斷改進和敏捷性。這將持續下去。

And then, it will be really fun as we get to growth in (multiple speakers)

然後，隨著我們的成長，這將非常有趣（多個發言者）

Yeah. At some point, it will turn. I'm waiting on it as well, Shelly. So thank you for answering my questions.

是的。到了某個時候，它就會轉向。我也在等它，雪莉。所以謝謝你回答我的問題。

Thanks, Bobby. I keep saying when, when it turns.

謝謝，鮑比。我一直在說什麼時候，什麼時候才輪到。

Exactly.

確切地。

Brad Thomas, KeyBanc Capital Markets.

Brad Thomas，KeyBanc 資本市場。

Thanks for taking my question, and Shelly, wish you all the best as you move on to other things here.

感謝您提出我的問題，雪莉祝您在繼續討論其他事情時一切順利。

Thank you.

謝謝。

I wanted to maybe first just start as maybe a follow-up on the consumer weakness that we're seeing out there. Could you just talk a little bit more about what you're seeing when you run promotions and maybe how you're thinking about weaving in promotional activity or what new products might be needed in the assortment if this tough environment continues?

我想首先作為我們看到的消費者疲軟的後續行動開始。您能否多談談您在進行促銷活動時所看到的情況，以及您如何考慮開展促銷活動，或者如果這種艱難的環境持續下去，產品類別中可能需要哪些新產品？

Yeah. Great. Well, I'll start with the end of your question. The new products that need to be introduced are exactly what we're doing. Super proud of the team, both executing the operating model transformation, but also advancing our innovation, go-to-market with our new Climate series.

是的。偉大的。好吧，我將從你問題的結尾開始。需要推出的新產品正是我們正在做的。我們為團隊感到超級自豪，他們既執行了營運模式轉型，又推進了我們的創新，將我們的新氣候系列推向市場。

This is -- the Climate series gives a range of price points and addresses one of the most significant issues of temperature fluctuation that consumers deal with. And it's really exciting to be able to offer solutions of active temperature management at a range of price points.

這是——氣候系列提供了一系列價格點，並解決了消費者面臨的最重要的溫度波動問題之一。能夠以各種價位提供主動溫度管理解決方案真是令人興奮。

And we're -- our teams are really excited, and customers are highly responsive. So addressing these segments of consumers that are responsive, that's an area of focus for us in this environment. We absolutely need to find ways to be more and more efficient with our media spend when there are far less customers in queue for purchasing a mattress right now.

我們的團隊非常興奮，客戶的反應也非常正面。因此，解決這些反應靈敏的消費者群體是我們在這種環境下關注的領域。當現在排隊購買床墊的顧客少很多時，我們絕對需要找到越來越有效率的媒體支出方法。

And that's where our focus is -- in marketing is deeper marketing segmentation, more tailored messages, working to get greater efficiency. As you know, we've been more conservative than others on our media spend as we've prioritized our EBITDA dollars this year, which we're not going to overspend in this area.

這就是我們的重點所在——在行銷中，更深入的行銷細分、更有針對性的訊息，努力獲得更高的效率。如您所知，我們在媒體支出方面比其他人更加保守，因為我們今年優先考慮了 EBITDA 資金，我們不會在這一領域超支。

And we experienced a little bit of that in August, where we spent more media looking at historically how consumers have behaved. But they're more concentrated around the holiday periods, and we have to pay attention to that and make sure we're honing into those periods more selectively. I would say the other change in the consumer is this delayed decision making.

我們在八月經歷了一些這樣的情況，我們花了更多的媒體來觀察歷史上消費者的行為方式。但它們更集中在假期期間，我們必須注意這一點，並確保我們更有選擇性地針對這些時期。我想說消費者的另一個改變是決策的延遲。

Being direct-to-consumer with all of our stores, we see and hear pretty immediately how the consumer is behaving. And she just wants to wait until we see what happens with the election and other factors. So there's some real hesitancy out there to part with money, and then, a little pressure on the financing in the quarter as well from approval and usage.

我們所有的商店都直接面向消費者，因此我們可以立即看到並聽到消費者的行為。她只是想等到我們看看選舉和其他因素會發生什麼。因此，對於是否要花錢確實存在一些猶豫，然後，本季的融資以及審批和使用方面也面臨一些壓力。

That makes sense. And just to follow up on that approval usage comment, Synchrony is such an important partner for you. And I know you're one of their better partners is how you've always described your importance to them and what you see out of them. But if I heard you right, you're saying that the approval rates and perhaps the usage and maybe the dollar values being approved, are those lower year over year for you with Synchrony?

這是有道理的。為了跟進批准使用評論，Synchrony 對您來說是一個非常重要的合作夥伴。我知道你是他們更好的伴侶之一，因為你總是描述你對他們的重要性以及你從他們身上看到的東西。但如果我沒聽錯的話，您是說，Synchrony 的批准率、使用情況以及批准的美元價值是否逐年降低？

Slightly.

輕微地。

Yeah. Okay. Maybe just one last housekeeping, if I could. I don't think you have big China exposure, but could you characterize for us, as we think about your inputs, how much of them and how much of maybe cost of goods sold might be subject to incremental tariffs if those come to fruition next year in China?

是的。好的。如果可以的話，也許只是最後一次家事服務。我不認為你們在中國有很大的業務，但是當我們考慮你們的投入時，你們能否為我們描述一下，如果接下來這些投入實現，其中有多少以及可能銷售的商品成本有多少可能會受到增量關稅的影響在中國的那一年？

Yeah, minimal. But as we've talked before, with the semiconductor chip challenge that we experienced a few years ago, even a few things can create some pressure. That was a shortage issue. But the overall -- it's a small percentage to the total, but it's all important.

是的，最小的。但正如我們之前談到的，隨著我們幾年前經歷的半導體晶片挑戰，即使是一些事情也會產生一些壓力。那是一個短缺問題。但總體而言——雖然只佔總數的一小部分，但很重要。

Great. Thank you so much.

偉大的。太感謝了。

Peter Keith, Piper Sandler.

彼得·基思，派珀·桑德勒。

Hi. Thanks. Good evening. Shelly, congratulations on retirement. We'll probably have you for a couple more quarters here, but wish you all the best, of course.

你好。謝謝。晚安.雪莉，恭喜你退休。我們可能會在這裡再待幾個季度，但當然祝您一切順利。

Great. Thank you.

偉大的。謝謝。

Just trying to frame up the industry backdrop. I think we're all pretty aware that it's been a challenging period. And what I'm really trying to ascertain is if Q3 was actually more challenging than first half of the year. Shelly, I think you said the demand comp is similar to first half. Then Francis, I thought, later in the script, you said it was down 9% versus first half, which was down mid-single.

只是試圖建立行業背景。我想我們都非常清楚這是一個充滿挑戰的時期。我真正想確定的是第三季是否真的比上半年更具挑戰性。雪莉，我想你說過需求比較跟上半年相似。然後弗朗西斯，我想，在劇本的後面，你說它比上半場下降了 9%，下降到單曲中段。

So maybe just a straight-up question, do you think it was a worse quarter for the industry than perhaps the first half of the year?

所以也許只是一個直截了當的問題，您認為這個行業的季度是否比上半年更糟？

Yeah, I believe we -- yes, we see it as in line with -- the third quarter was in line with the first half of the year, and that's how we're thinking about the fourth quarter demand as well. And we're going to be prudent about and cautious about calling a demand improvement until we see it. I would characterize it as we didn't get the step-up we expected. We were down double digits, the industry was and we were for 2 years in third quarter.

是的，我相信我們 - 是的，我們認為它與 - 第三季度與今年上半年一致，這也是我們對第四季度需求的看法。在我們看到需求改善之前，我們將謹慎對待需求改善。我認為這是因為我們沒有得到我們預期的提升。我們的業績下滑了兩位數，整個產業和我們在第三季的業績連續兩年下滑。

So we all expected a sequential improvement, and that did not happen. So it remained very similar to the first half, and that's what we're seeing and expect to see in the fourth quarter. And that's why we adjusted our guidance. And at the same time, we continue to advance our initiatives in gross margin and EBITDA to deliver on the range that we shared.

所以我們都期望連續改善，但這並沒有發生。因此，它與上半年非常相似，這就是我們在第四季度看到並期望看到的情況。這就是我們調整指導的原因。同時，我們繼續推進毛利率和 EBITDA 方面的舉措，以實現我們共享的範圍。

Okay. Very good. And then, just pivoting over to the gross margin, which was obviously quite strong for Q3. So, Francis, in the guidance now for gross margin to be up 150 basis points, it implies Q4 in turn, I guess, would be up about 150 basis points, so a step-down from Q3. Are there any initiatives that are starting to, I guess, get lapped?

好的。非常好。然後，我們轉向毛利率，第三季的毛利率顯然相當強勁。因此，弗朗西斯，在現在毛利率上升 150 個基點的指導中，我猜這意味著第四季度將上升約 150 個基點，因此比第三季度有所下降。我猜是否有任何舉措開始受到關注？

Or is it more challenging or just want to be prudent on how you're thinking about the gross margin expansion?

還是更具挑戰性，還是只是想謹慎對待毛利率擴張？

Yeah. I think for Q4, you can anticipate a gross margin rate of around 59% to 60%. Seasonally, our Q4 tends to be lower than Q3 sequentially. But on a year-over-year basis, we're going to have a significant step-up versus last year's Q4.

是的。我認為第四季的毛利率預計在 59% 到 60% 左右。從季節性來看，我們的第四季往往低於第三季。但與去年同期相比，我們將比去年第四季有顯著的進步。

Okay. Very helpful. Thanks so much.

好的。非常有幫助。非常感謝。

Yeah. Thank you, Peter.

是的。謝謝你，彼得。

Michael Lasser, UBS.

麥可拉瑟，瑞銀集團。

Hi, everyone. This is Dan Silverstein on for Michael. Thanks for taking our question.

大家好。我是麥可的丹‧西爾弗斯坦。感謝您提出我們的問題。

Hello.

你好。

Congratulations, Shelly, as well from our team. Just two quick questions. Maybe to start on 4Q, the sales guide is for trends to get a little bit better. Is that just a function of less of a backlog impact?

恭喜雪莉，還有我們團隊的祝賀。只是兩個簡單的問題。也許從第四季開始，銷售指南是為了讓趨勢變得更好一些。這只是積壓影響較小的結果嗎？

Or is there any other texture there that you can provide, just given all the distractions the consumer will be facing?

或者考慮到消費者將面臨的所有乾擾，您是否可以提供任何其他紋理？

Yes. You're speaking to net sales?

是的。你說的是淨銷售額嗎？

Yes.

是的。

Yeah. Thanks, Dan. This is Dave. So if you think about our guide for Q4, we've talked about sales at the midpoint of the guide being down high-single digits. Year-to-date for the first nine months of the year, we're down 10%.

是的。謝謝，丹。這是戴夫。因此，如果您考慮我們第四季度的指南，我們已經討論過指南中點的銷售額下降了高個位數。今年前 9 個月迄今為止，我們下跌了 10%。

So high-single versus 10%, I'd say, they're quite similar. So we're not expecting any dramatic difference. There will be probably a little less backlog pressure in Q4 than what we saw in Q3, maybe call it 1 point or 2 points. So there'll be a little less backlog pressure. But overall, we aren't expecting a material difference in demand trends from where we were first nine months of the year versus the fourth quarter.

所以我想說，高單率和 10% 是非常相似的。因此，我們預計不會出現任何顯著差異。第四季的積壓壓力可能會比我們在第三季看到的要小一些，也許可以稱之為 1 點或 2 點。所以積壓壓力會小一點。但總體而言，我們預計今年前九個月的需求趨勢與第四季相比不會出現重大差異。

Okay. Thank you. And then, our second question, appreciate the commentary about the revenue base needed next year to avoid triggering the debt covenants. I understand you'll be giving '25 guidance next quarter, but I think the covenants start to kick in at 4.0 times in 1Q. So the question is, A, is that correct? And B, is there anything else you're preparing in terms of mitigating actions if demand remains significantly challenged or gets even a little bit worse?

好的。謝謝。然後，我們的第二個問題，請欣賞有關明年所需收入基礎的評論，以避免觸發債務契約。我知道您將在下個季度給出 25 年的指導，但我認為契約在第一季的 4.0 倍開始生效。所以問題是，A，這是正確的嗎？B，如果需求仍然受到重大挑戰或變得更糟，您是否還準備採取其他緩解措施？

Yeah. Your read on the covenants is correct. At the end of Q1, the covenants go to 4.0 times. So, a couple of things. One is, with the changes to our cost structure and our gross margin rate advancements, we expect to remain within our leverage covenants through 2025.

是的。您對聖約的解讀是正確的。在第一季末，契約達到 4.0 倍。所以，有幾件事。一是，隨著我們成本結構的變化和毛利率的提高，我們預計到 2025 年仍將維持在槓桿契約範圍內。

And based on our current cost structure, that is what would keep us require that minimum net sales of approximately $1.7 billion. We continue to evaluate all of our alternatives as part of our ongoing processes to supplement and/or work within our existing credit line. But importantly, we've got a lot of the elements of our transformation in place. We have made significant progress against our cost structure, our gross margin rate. And these are going to be ongoing tailwinds for us as we plan into the year next year.

根據我們目前的成本結構，這將使我們保持約 17 億美元的最低淨銷售額。我們將繼續評估所有替代方案，作為我們持續流程的一部分，以補充和/或在我們現有的信貸額度內發揮作用。但重要的是，我們已經掌握了轉型的許多要素。我們在成本結構和毛利率方面取得了重大進展。當我們計劃明年時，這些將成為我們持續的動力。

I I think, Dan, maybe just to add a comment on Q1 -- this is Dave again. So, if you think about Q1, as we go into Q1, we're going to be up against a sub-59% gross margin rate in Q1. We're also -- Q1 of this year, we didn't have the benefits of all the cost actions that we've continued to execute all year long.

我想，丹，也許只是對第一季添加評論——這又是戴夫。因此，如果您考慮第一季度，當我們進入第一季時，我們將面臨第一季毛利率低於 59% 的情況。今年第一季度，我們也沒有從全年持續執行的所有成本行動中受益。

So we would expect exiting the year, call it, an EBITDA ratio of around 4.1 times. We would expect that to improve in Q1 based on just the ongoing execution of our expense initiatives and certainly exceeding last year's -- or I should say, this year's Q1 gross margin rate.

因此，我們預計今年的 EBITDA 比率約為 4.1 倍。我們預計，基於我們費用計劃的持續執行，第一季的毛利率將會有所改善，並且肯定會超過去年——或者我應該說，今年第一季的毛利率。

So just a couple of items to think about as we move into Q1, specifically, when the covenant does drop down to 4.0x.

因此，當我們進入第一季時，特別是當契約確實下降到 4.0 倍時，需要考慮幾個事項。

Very helpful. Thank you.

非常有幫助。謝謝。

And that concludes our Q&A session. I will now turn the conference back over to the company for closing remarks.

我們的問答環節到此結束。我現在將把會議轉回公司進行閉幕致詞。

Thank you for joining us today. I also want to congratulate Shelly on her retirement announcement and wish her all the best as she embarks on her next chapter in her life. Well deserved, Shelly. Sleep well and dream big.

感謝您今天加入我們。我還要祝賀雪莉宣布退休，並祝福她在開啟人生的下一個篇章時一切順利。當之無愧，雪莉。睡個好覺，夢想遠大。

And this concludes today's conference call. You may now disconnect.

今天的電話會議到此結束。您現在可以斷開連線。