Sleep Number (NASDAQ:SNBR) reported first-quarter 2026 results that reflected continued pressure on sales but improving demand trends late in the period, as management highlighted a recent lender agreement intended to provide liquidity while the company works on a longer-term capital structure solution.
President and CEO Linda Findley said the company reached an agreement with existing lenders on April 27 that provides near-term relief from certain financial covenants and adds $55 million of incremental liquidity, including a new $25 million term loan. Findley said the agreement should allow Sleep Number to continue executing its turnaround plan and selling its new products “without disruption,” while giving the company time to evaluate strategic and financing options.
First-Quarter Sales Decline, But March Demand Improves
Sleep Number reported first-quarter net sales of $319 million, down 19% from the same period a year earlier. Chief Financial Officer Amy O’Keefe said the results were consistent with expectations shared on the company’s prior earnings call. She noted that media investment was down 21% in the quarter and that demand in January and early February was soft, reflecting weather and macroeconomic conditions.
Findley said demand improved as the quarter progressed, with March demand increasing approximately 6% year over year on a comparable basis. She said that marked the company’s first comparable year-over-year demand growth in two years. The improvement was driven by the launch of ComfortMode, updated marketing and promotions designed to clear legacy inventory.
Because Sleep Number recognizes revenue when beds are delivered, Findley said much of the sales impact from the company’s broader new product launch, which occurred mostly on March 23, will be reflected in the second quarter rather than the first.
The company reported adjusted EBITDA of $5.8 million, down $16 million from the prior-year period but ahead of its internal plan. Gross profit margin was 57.9%, down 329 basis points from a year earlier. O’Keefe said the decline was primarily driven by mix shift toward ComfortMode and discounting of legacy inventory. In response to an analyst question, she said discounting accounted for less than 100 basis points of the year-over-year margin decline, while mix shift represented closer to half of the change.
New Product Line Shows Early Signs of Traction
Findley said Sleep Number completed a full product reset across all stores in less than four weeks, while manufacturing and home delivery teams transitioned to the new lineup without disruption. During the launch period, stores set with the new lineup generated 12% higher average revenue per unit than stores still carrying previous products.
ComfortMode, the first new bed launched in January, has shown improvement in customer satisfaction, Findley said. Overall net promoter score improved by 15 points, and compared with the prior entry-level C Series mattresses, net promoter score improved by 27 points. She also said ComfortMode has produced a 100-basis-point reduction in return rate versus historical return rates for the products it replaces.
Findley also pointed to early traction in Sleep Number’s premium ComfortNext line, which includes its Tribrid technology. She said ComfortNext Lux, priced at approximately $4,000 for a queen size, is now the company’s top-selling bed and is selling at a healthy margin.
“The new beds have a better average margin profile than the beds they replaced,” Findley said. She added that the planned product mix should allow the company to return to historical gross margin levels after one-time launch and clearance cost pressures subside.
The company also conducted in-home user testing during the rollout. Findley said that compared with users’ original mattresses, nine in 10 people slept better, eight in 10 got more sleep and eight in 10 experienced less pain on a Sleep Number bed.
Marketing, Digital Improvements and Costco Test
Management said Sleep Number continues to update its marketing and digital experience. Findley said website improvements have increased organic search visibility and simplified the purchase process. E-commerce demand grew approximately 5% year over year in April, which she said was partly attributable to that work. She also said the company’s work on AI discoverability improved AI citations by about 25% year to date.
Sleep Number launched a new integrated brand campaign, “To a Good Life’s Sleep,” to support the product rollout. Findley said early response is positive and trending above category benchmarks. The company also launched its first Travis Kelce content and expanded influencer activity to drive awareness and store traffic. Findley said the Travis Kelce video received more than 7 million views and generated strong engagement, particularly in shares and saves.
The company is also testing expanded distribution. Findley said Sleep Number launched an exclusive online bed at Costco.com, with early indications encouraging through direct sales and increased visibility in the company’s stores.
Lender Agreement Provides Short-Term Relief
O’Keefe said the lender agreement was part of a three-part plan to address risks to continuing operations: executing the turnaround strategy, negotiating with lenders for covenant relief and working with financial advisors to identify additional capital or broader solutions.
The credit agreement amendment includes a new $25 million senior secured term loan facility due June 30, 2026; relief from the $30 million minimum liquidity covenant through June 30, 2026; and forbearance by lenders from exercising rights related to specified covenant defaults as of April 4.
O’Keefe said Sleep Number continues to work with advisors on a strategic transaction intended to maximize stakeholder value. In response to a question from Piper Sandler analyst Peter Keith, management indicated that a recapitalization or other financial plan is expected by the June 30 maturity date, with lenders holding the company accountable for progress.
At the end of the first quarter, total liquidity, including cash and revolver capacity, was $40 million. Free cash flow was a use of $13.2 million, more than $20 million favorable to expectations but $6 million unfavorable versus the prior year. Capital expenditures totaled $5.4 million.
Second-Quarter Outlook Remains Cautious
For the second quarter, O’Keefe said Sleep Number expects net sales to be down in the low single digits to flat versus the prior year. She said April demand was in line with internal expectations and seasonal trends, while net sales showed sequentially improved year-over-year performance despite a promotional comparison headwind.
O’Keefe said the company’s media investment in the second quarter is expected to be roughly flat with the first quarter but up significantly from the prior-year period, which she described as a trough. Given the company’s engagement of Guggenheim Securities to evaluate strategic and financing options, Sleep Number is not providing further financial guidance at this time.
Management also addressed input cost pressures. Findley said the recently launched product line was priced using current data, including considerations related to tariffs and macroeconomic conditions. O’Keefe said the company expects some headwind from input costs, but that it has not changed internal performance expectations. Sleep Number is also continuing cost savings initiatives, with Findley saying the company has identified more than $235 million of annualized savings since the start of 2025, of which $200 million has already been executed.
Findley said the company remains conservative given consumer uncertainty and macro volatility, but encouraged by early customer response to the new products and refreshed marketing.
About Sleep Number (NASDAQ:SNBR)
Sleep Number Corporation (NASDAQ: SNBR) is a Minneapolis‐based company specializing in the design, manufacture and retail of adjustable air mattresses and bedding products. The company’s flagship Sleep Number® bed features dual air chambers that allow each side of the mattress to be tailored to an individual’s preferred firmness, supported by integrated SleepIQ® technology. This proprietary monitoring system tracks biometric data such as heart rate, breathing and motion, delivering personalized sleep insights through a connected app.
Founded in 1987 as Select Comfort, the business pioneered adjustable air mattress technology and has since grown into a direct-to-consumer retailer.
