Select Comfort Wednesday, June 13, 2007
Posted by ei-forum in US Traded Stocks.trackback
Select Comfort (SCSS) is a developer, manufacturer and marketer of premium quality, adjustable-firmness beds. The air-chamber technology of its Sleep Number bed allows adjustable firmness on each side of the mattress and provides a sleep surface that is clinically proven. They are one of the leading brands of premium mattresses; one of the big three and have been a good growth story but the stock has been suffering lately.
Until now, the main drivers have been their focused management, superior products and a very good distribution system. Unfortunately, sales have started to slow and the current economic climate is not favorable to this industry, especially a producer of high-end premium products. Adding to all this, Select Comfort has been struggling with their marketing which seems to be one of their biggest weakness: compounded by their complicated product line-up.
We have started to question management effectiveness due to recent events like conference calls comments, failure to address the marketing issue and a recent interview with the CEO where he seems be focusing on international expansion and acquisitions, instead of fixing the difficult situation in the US (which he seems to be downplaying).
As the FT article suggested, we agree that the company could be a takeover target. A quick look at SCSS shows a great product, no debt, lots of cash, excellent distribution system, good returns and decreasing insider ownership. The main problem seems to be that management has lost overall focus and has repeatedly failed to solve the greater marketing issue.
Again, the fundamentals remain strong and we feel it is just a question of time before the stock price recovers. Trading under 17 USD and having hit 16.68 USD (52 week low) this company is definitely worth a look.
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I totally agree! I visited the Naples Fl Coastland Mall Store A good manager, an excellent sales presentation, good morale.
This is a high end product. The demographics, population growth,
eventual housing recovery, good overall economy, its good balance sheet, complete control of product marketing, arrangement with Radisson, buy back program, vulnerability to a buy out, and continued profitablity in difficult times for housing; make this an eventual winner.
I welcome intelligent feedback!
Thank you for the comment Stan,
As Mr. Buffett himself would say “…be fearful when others are greedy and to be greedy only when others are fearful.”
We are sure that it is just a matter of time before the stock price recovers, this is a company with a great product and strong financials… there is nothing structurally wrong here, just need management to get back on track!
Long SCSS.