Sleep Number Corporation (NASDAQ:SNBR) Q3 2023 Earnings Call Transcript

Shelly Ibach: Yes. As I said, we’re very focused on the differentiation and the value. So, making sure that consumers understand that our c2 starts at $1,000. And that is highly competitive, especially when you consider the adjustable firmness and the temperature benefits that are now — that now come with our c2 as of August when we introduced the new line. So, you’ll see us focus on, temperature claims, our adjustability at an affordable price, as well as great deals at the high-end.

Brad Thomas: Maybe just a couple of follow-ups on some of the earlier questions. I was wondering if you have the numbers on the financing side of things. I know that’s just an important part of your business. Is that higher or lower as a percentage of sales than a year ago? Again, we just get the question a lot and we’re hearing some tightening from the credit providers. And I’m just trying to understand, is that a smaller portion of sales here now for you?

Shelly Ibach: Well, we share this number on an annual basis. What I will hone in on is that we don’t believe that our financing strategy adjustments have really had a negative impact in the demand results. We’ve looked at this 100 different ways. And we see the greatest opportunity as the perceived price value of our smart beds. And that’s where we’re honing in on our messaging. And we like the improvement that we’ve seen in the demand trajectory since we’ve made the changes. So, we continue to iterate and test different actions, as the consumer’s very constrained in this macro environment. We are focused on 0% for longer duration periods than we had been earlier this year, to drive units while using the APR offers for other periods. But we’re making sure that it’s not a barrier to entry for our brand.

Brad Thomas: Maybe asking a little bit of another way. And again, we know there are many other companies that have called out slower results here of late. But if you look at the financing side of things, you don’t think that’s material for the pressure we’ve been seeing on sales here, the ability to offer just the financing. You don’t think that’s material?

Shelly Ibach: We don’t, Brad. I mean, we’ve done in-depth analysis, and, both internally and third-party to fully understand this. Matter of fact, we have used three different external resources on the consumer — understanding the consumer behavior during this time period, as well as our internal. And everything ties back to the value and the perceived value and the changes we’ve made, we’ve seen that reverse. So, we went back out and researched it again with the changes, and then of course, we have the results of, by focusing more on our differentiation at a price. We’re seeing the digital traffic improvements. We’re seeing unit growth in October. So, it’s moving in the right direction with the changes we’ve made.

Brad Thomas: Maybe I could squeeze one here for Francis. And Francis, welcome. Just as we as we think about the covenants, anything in particular we should be focused on in terms of, any methods that might reduce the capacity that you have, and how should we think about kind of the run rate here on interest expense? Any help for us would be great. Thank you.

Francis Lee: Hi, Brad. Thanks for the question. It’s nice to meet you. I think thinking about the covenants, it’s — we’re really thinking about the abrupt shift in the demand environment and the ongoing uncertainty in the future. And we worked closely with our bank teams to create a lot of capacity and leverage for us over a longer period of time to create flexibility for us. So, when we think about the covenant and the bank agreement, that’s really been the goal is to create flexibility over a longer period of time for us to work through our restructuring, generate cash and pay down debt. And we’re pleased with the additional clearance that we have to operate with more flexibility through the end of next year.

Operator: [Operator Instructions] Your next question comes from the line of Atul Maheswari with UBS. Please go ahead.