Sleep Number (SNBR) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2026 were $319 million, down 19% year-over-year, reflecting lower demand and reduced store count.

• Adjusted EBITDA was $5.8 million to $6 million, ahead of internal plan but down significantly from the prior year.

• Net loss widened to $50 million ($2.19 per share), compared to $9 million ($0.38 per share) in Q1 2025, driven by lower sales and higher restructuring costs.

• The company is advancing a turnaround strategy focused on product and brand reset, cost savings, and capital structure solutions, including the "Sleep Number Shifts" initiative.

• Early positive metrics from new product launches and marketing campaigns, with improved customer satisfaction and engagement.

Financial highlights

• Gross profit margin was 57.9%, down from 61.2% year-over-year, mainly due to product mix shift and legacy inventory discounting.

• Adjusted operating expenses before restructuring were $195 million, down 18% year-over-year.

• Adjusted EBITDA margin fell to 1.8%, down 380 basis points year-over-year.

• Free cash flow was a use of $13.2 million, worse than last year but better than expectations.

• Operating loss was $37 million, compared to $2 million operating income in Q1 2025.

Outlook and guidance

• No forward-looking financial guidance provided due to ongoing strategic and financing review.

• Q2 net sales expected to be down low single digits to flat year-over-year.

• Management expresses substantial doubt about the company's ability to continue as a going concern due to anticipated non-compliance with credit covenants beyond July 2026.

• Ongoing actions include executing the turnaround strategy, engaging with lenders, and seeking additional capital or strategic alternatives.

• Continued conservative planning due to consumer uncertainty and macro volatility.