Shares of Select Comfort Corp. (SCSS) soared than 13 percent in extended trade on Wednesday after the mattress maker reported results for the third quarter that topped analysts' expectations. The company also raised earnings guidance for the full-year 2014.
The company also reported a profit for the quarter that increased from last year, despite lower margins, reflecting lower operating expenses and comparable store sales growth as demand for sleep number products drove traffic.
"Third-quarter results reflect the strength of our consumer-focused innovation strategy and the progress we are making with our growth initiatives. Connectivity through technology, like SleepIQ, is playing an increasingly important role in the consumer lifestyle brand we are building," President and CEO Shelly Ibach said in a statement.
The Minneapolis, Minnesota-based company reported net income of $23.55 million or $0.44 per share for the third quarter, higher than $20.26 million or $0.36 per share in the prior-year quarter.
On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.40 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter increased 23 percent to a record $323.37 million from $263.69 million in the same quarter last year, and topped eight Wall Street analysts' consensus estimate of $292.60 million.
Company-controlled comparable-store sales increased 16 percent. Sales growth was driven by 37 net new stores opened during the past 12 months, including eight net new stores opened during the quarter. Sales also benefited from a 13 percent growth in average revenue per unit (ARU) and 10 percent growth in units.
Operating margin for the quarter contracted 70 basis points to 10.9 percent from last year, as gross margins decreased 170 basis points to 61.4 percent from last year. Partially offset by a 100 basis point improvement in operating expenses, as a percentage of total sales.
The company also announced an increase in the outstanding share repurchase authorization to $250 million effective at the end of the fiscal third quarter.
Looking ahead to fiscal 2014, the company raised its earnings guidance to about $1.12 per share from the prior outlook of $1.07 per share. Street is currently looking for full-year 2014 earnings of $1.10 per share.
The company also expects to end the year with 463 stores, an increase of 23 net stores from the prior year-end.
SCSS closed Wednesday's regular trading session at $21.58, down $0.22 or 1.01% on a volume of 1.76 million shares. However, the stock surged $2.87 or 13.30% in after-hours trading.
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