Sleep Number Corp (SNBR) Q2 2026 Earnings Summary

Executive Summary

Q2 FY2026 (quarter ended June 28, 2025): Revenue $327.9m (-19.7% y/y) modestly beat S&P consensus $322.6m*, gross margin held at 59.1% (flat y/y), Adjusted EBITDA $23.6m (7.2% margin), GAAP EPS -$1.09; comps -19% as management intentionally cut media ~30% to reset efficiency . Consensus: Revenue $322.6m*, EBITDA $22.8m* (3 ests) [GetEstimates].
Turnaround execution: management raised 2025 cost-out to >$130m (from $80–$100m), citing structural reductions across G&A/R&D and marketing; early marketing efficiency gains included +24% conversion in Q2 despite lower spend .
Guidance (introduced in Q2 and revised in Q3): FY25 net sales ~ $1.45b (Q2) → ~$1.4b (Q3); FY25 gross margin ~61% (Q2) → ~60% (Q3); FY25 OpEx ex-R&R ~$830m (Q2) → ~$825m (Q3); FY25 Adj. EBITDA now ~ $70m (Q3); H2’25 FCF: breakeven (Q2) → FY25 FCF ~ -$50m (Q3) .
Key catalysts/stock narrative: covenant flexibility (amendment later extended to 2027), disciplined cost actions, a 2026 product refresh and expanded distribution (digital-first, tests like HSN) to stabilize top line; near-term demand and leverage (4.56x EBITDAR TTM at Q2; 5.0x by Q3) remain focal risks .

What Went Well and What Went Wrong

What Went Well
- Gross margin resilience: 59.1% flat y/y despite volume deleverage, aided by product cost reductions and supplier negotiations .
- Structural cost takeout: 2025 cost-savings target increased to >$130m; Q2 OpEx (ex-R&R) down ~21% y/y as part of a deeper organizational reset .
- Early demand-quality signals: management reported a 24% conversion increase and improved CPA metrics as new marketing stack and channels rolled out; “We cut marketing spend dramatically in Q2… and are already seeing signs… our new, more efficient approach is working” .
What Went Wrong
- Top line contraction: Net sales -19.7% y/y on lower traffic and a reduced store base; Total Retail comps -19% .
- Wider loss: Net loss -$25.0m vs -$5.1m prior-year, including a $14m deferred tax valuation allowance increase; diluted EPS -$1.09 vs -$0.22 .
- Leverage still elevated: TTM Net Leverage Ratio under credit facility 4.56x at Q2 (later 5.0x in Q3), keeping balance sheet flexibility in focus despite subsequent covenant relief .

Financial Results

Metric	Q2 FY2025 (Jun 29, 2024)	Q1 FY2026 (Mar 29, 2025)	Q2 FY2026 (Jun 28, 2025)	Consensus Q2 FY2026
Revenue ($m)	$408.4	$393.0	$327.9	$322.6* (3 ests) [GetEstimates]
Gross Profit Margin %	59.1%	61.2%	59.1%	n/a
Net Income ($m)	-$5.1	-$8.6	-$25.0	n/a
Diluted EPS ($)	-$0.22	n/a	-$1.09	n/a
Adjusted EBITDA ($m)	$28.3	$22.0	$23.6	$22.8* [GetEstimates]
Adjusted EBITDA Margin %	6.9% (calc)	5.6% (calc)	7.2%	n/a

Notes: Consensus values marked with * are from S&P Global (S&P Global consensus). Revenue surprise: +$5.3m (~+1.7%) vs consensus; EBITDA surprise: +$0.8m (company-reported Adjusted EBITDA vs S&P consensus)*.

Segment breakdown: Sleep Number is managed and reported as one segment; CODM evaluates consolidated results and Adjusted EBITDA at the company level .
KPI highlights

KPI	Q1 FY2026	Q2 FY2026
Total Retail Comparable Sales YoY	n/a	-19%
Avg Revenue per Smart Bed Unit (ARU)	$5,940 (YTD)	$5,880 (Q2)
Store Count (period-end)	640→630 YTD	630
Net Cash from Ops ($m, quarter)	-$2.6	$1.2
Free Cash Flow ($m, quarter)	-$7.2	-$6.9
Net Leverage Ratio (EBITDAR)	4.46x (TTM)	4.56x (TTM)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance (Q2 FY2026)	Q3 FY2025 Update	Change
Net Sales	FY2025	None provided in Q1 FY2026	~ $1.45b	~ $1.4b	Introduced in Q2; revised lower in Q3
Gross Profit Margin	FY2025	None	~61%	~60%	Lowered in Q3
Operating Expenses (ex-R&R)	FY2025	None	~ $830m	~ $825m	Slightly lowered in Q3
Free Cash Flow	H2 2025 / FY2025	None	Breakeven H2’25	FY2025 ~ -$50m	Deteriorated on full-year basis
Adjusted EBITDA	FY2025	None	n/a in Q2	~ $70m	Introduced in Q3

Additional financing context: TTM Net Leverage Ratio at Q2 was 4.56x under the credit facility; subsequent to Q2, the company executed a bank amendment and extension to 2027 with revised covenant thresholds, improving flexibility to fund turnaround initiatives .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2026)	Current Period (Q2 FY2026)	Trend/Evolution
Marketing efficiency & spend	Organizational redesign, initial cost actions; caution on guidance	Media cut ~30%; conversion +24% y/y; opening new channels; leveraging AI to improve discovery	Efficiency up; spend intentionally reduced to reset; plan to rebuild with better ROI
Product & pricing	Evaluating product/value proposition (no specifics)	Simplification; new price points/features; broader TAM; launches start 2026	2026 product refresh central to demand recovery
Distribution strategy	n/a	Exploring digital-first/retail partnerships; evaluating footprint	Channel expansion beyond DTC while preserving margins
Capital structure & liquidity	Leverage 4.46x TTM; covenant focus	Active lender dialogue; targeting breakeven H2’25 cash flow	Subsequent 2027 amendment increased flexibility (post-Q2)
Macro/competition	n/a	Topline pressure acknowledged	Q3 call cited aggressive competitive behavior at Labor Day as headwind (post-Q2)

Note: Q3 FY2025 commentary included for trajectory beyond the quarter.

Management Commentary

“We cut marketing spend dramatically in Q2 because the old marketing strategy was inefficient… We are rebuilding this program and are already seeing signs that our new, more efficient approach is working.” — CEO Linda Findley .
“We now expect to remove over $130 million in operating expenses in 2025 compared to 2024, exceeding the plan we shared last quarter.” — CEO Linda Findley .
“Our reset is expected to deliver breakeven cash flow in the second half. Our first priority for any positive operating cash flow is to pay down debt.” — Interim CFO Bob Ryder .
“We are rethinking our position, price and distribution… You’ll start seeing the results of these changes in 2026.” — CEO Linda Findley .

Q&A Highlights

Cost savings composition: management declined exact breakdown; reiterated structural focus across G&A and R&D; marketing efficiencies intended to persist even as spend rebuilds .
Distribution expansion: pursuing digital-first retail partnerships and other channels that preserve margin while broadening reach; vertical model remains core .
Gross margin/tariffs: guidance embeds ~61% H2 GM (Q2 call); tariffs mitigated through supplier negotiations and prior pricing actions; no expected GM impact at current tariff posture .
Marketing cadence: media was ~32% lower in Q2/Q3; plan to lean in selectively with improved ROI and to rebuild the forward pipeline .
Same-store sales: company refrained from specific SSS outlook; indicated focus on maintaining a similar store footprint near term while optimizing .

Estimates Context

S&P Global consensus for Q2 FY2026: Revenue $322.6m* (3 estimates); EBITDA $22.8m*; EPS consensus was unavailable via S&P Global at time of analysis. Actuals: Revenue $327.9m (beat ~$5.3m, ~1.7%); Adj. EBITDA $23.6m (beat ~$0.8m) .
Implications: modest top-line/EBITDA outperformance against low expectations; EPS visibility remains limited; forward estimate revisions likely hinge on execution of H2 margin/OpEx targets and evidence of demand stabilization as spend normalizes.

Note: Values marked with * are from S&P Global.

Key Takeaways for Investors

Execution vs demand: Q2 print demonstrated margin durability and disciplined cost control; the investment debate now turns to how quickly the company can convert marketing efficiency into sustainable traffic/units without sacrificing gross margin .
FY25 bar reset: Guidance introduced in Q2 and lowered in Q3 derisks the near-term bar; delivery against ~60% GM and ~$825m OpEx (ex-R&R) is critical to achieving ~$70m FY25 Adj. EBITDA and stemming FCF burn .
Balance sheet watch: Though subsequent amendment (post-Q2) extended maturities to 2027, leverage remains elevated; cash generation remains prioritized for debt paydown .
2026 is the prove-out year: Product simplification/new price points, channel expansion (e.g., HSN test), and modernized marketing should be visible in early 2026; execution milestones will drive multiple re-rating .
Near-term trading setup: Modest beats vs muted expectations can support relief rallies, but competitive intensity and macro-sensitive demand keep risk asymmetry elevated; data points on Q3/Q4 traffic conversion and media elasticity are key.

Sources:

Q2 FY2026 8-K/press release and 10-Q: revenues/margins/EBITDA/OpEx/KPIs .
Q2 FY2026 earnings call transcript: strategy, marketing, guidance color .
Q1 FY2026 press release: baseline revenue/GM/loss/Adj. EBITDA/leverage .
Q3 FY2025 press release/call: guidance revisions, covenant extension, competitive backdrop .
Consensus estimates: S&P Global (values marked with *).