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Why Did Select Comfort Fall ~9% on September 28?

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Price movement

Select Comfort (SCSS) has a market cap of $1.1 billion. It fell 9.2% to close at ~$22.8 per share on September 28, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -10.1%, -13.6%, and 6.6%, respectively, on the same day.

SCSS is now trading 10.9% below its 20-day moving average, 9.7% below its 50-day moving average, and 4.3% above its 200-day moving average.

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Related ETFs and peers

The Guggenheim Raymond James SB-1 Equity ETF (RYJ) invests 0.74% of its holdings in SCSS. The ETF tracks an equal-weighted index of US-listed stocks expected by analysts to achieve 15% total return and outperform S&P 500 over the next six to 12 months. The YTD price movement of RYJ was 11.5% on September 28.

The Shares Morningstar Small-Cap Growth ETF (JKK) invests 0.21% of its holdings in SCSS. The ETF tracks a market-cap-weighted index of US small-cap growth stocks. The index selects from the 70%–90% segment of the market cap based on five factors.

The market caps of Select Comfort’s competitors are as follows:

  • Tempur Sealy International (TPX): $3.4 billion
  • Leggett & Platt (LEG): $6.2 billion

Latest news on Select Comfort

Select Comfort fell ~9.2% on September 28, 2016, after its competitor Tempur Sealy International announced its projection for fiscal 2016. As we discussed in the previous part of this series, the company has projected a drop in sales for fiscal 2016 and 3Q16.

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Performance in fiscal 2Q16

Select Comfort reported fiscal 2Q16 net sales of $276.9 million, which is a rise of 0.58% over its net sales of $275.3 million in fiscal 2Q15. The company’s gross profit margin and operating income fell 0.11% and 85.5%, respectively, in fiscal 2Q16 over 2Q15.

The company’s net income and EPS (earnings per share) fell to $1.4 million and $0.03, respectively, in fiscal 2Q16, as compared to $11.0 million and $0.21 in fiscal 2Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $20.3 million in fiscal 2Q16, which is a rise of 34.1% over fiscal 2Q15.

SCSS’s cash and cash equivalents and inventories fell by 88.6% and 14.9%, respectively, in fiscal 2Q16 over fiscal 4Q15. Its current ratio fell to 0.72x, and its debt-to-equity ratio rose to 1.6x in fiscal 2Q16, as compared to a current ratio and a debt-to-equity ratio of 0.88x and 1.3x, respectively, in fiscal 4Q15.

Projection

The company has made the following projections for fiscal 2016:

  • sales growth in the low teens
  • EPS in the range of $1.25–$1.45
  • capital expenditure of ~$65 million

Now we’ll discuss Nike (NKE).

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