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UPDATE 2-Select Comfort says advertising expenses to rise further
July 17, 2013 / 9:04 PM / 4 years ago

UPDATE 2-Select Comfort says advertising expenses to rise further

* Second-quarter earnings $0.18/share vs est $0.24/share

* Revenue $207.4 mln vs est $210.8 mln

* Marketing costs rise 12 pct, R&D costs double

* Shares fall as much as 9 pct post-market

By Sagarika Jaisinghani

July 17 (Reuters) - Specialty mattress maker Select Comfort Corp said advertising expenses would rise further in the second half of 2013, after reporting quarterly results that missed analysts’ expectations due to a jump in marketing and research costs.

Shares of Select Comfort, known for its Sleep Number line of adjustable-firmness mattresses, fell as much as 9 percent in post-market trading.

The company’s marketing and research costs spiked after it reverted to its earlier marketing strategy as a shift only reduced its exposure to already cautious customers.

“We are increasing media (expenses) in the second half to build awareness, support the local market development and certainly support product innovation,” Chief Executive Shelly Ibach said on a post-earnings conference call.

Media costs - the amount Select Comfort spends for advertising on TV, radio and digital media - have risen 7 percent so far in 2013.

The company did not specify how much expenses would rise, but Chief Financial Officer Wendy Schoppert said it would be a sizeable increase from the 7 percent.

Marketing costs jumped 12 percent to $98.4 million in the second quarter, while cost of research and development doubled to $2.6 million.

Net income fell 42 percent to $9.9 million, or 18 cents per share, from $17 million, or 30 cents per share, a year earlier. Revenue rose 1 percent to $207.4 million.

Analysts on average expected earnings of 24 cents per share on revenue of $210.8 million, according to Thomson Reuters I/B/E/S.

Select Comfort reaffirmed its full-year earnings of $1.30 to$1.45 per share. The company cut its guidance in April after sales were hit due to its new advertising strategy.

Specialty bedding retailer Mattress Firm Holding Corp reported higher-than-expected quarterly results in June, helped by sales at new and acquired stores which more than offset a 5.2 percent decline in same-store sales.

Mattress maker Tempur Sealy International Inc is scheduled to report second-quarter results next week.

Shares of Select Comfort were down 8 percent at $24.50 in post-market trading.

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