Sleep Number sales slump as company plans to close 30 stores.

Low consumer confidence and high interest rates mean people are buying fewer beds, especially in premium categories.

Minneapolis-based Sleep Number sales fell 11% to $470 million in the first quarter and the maker of smart beds lost $7.5 million, or 33 cents a share, compared to earnings of $11.5 million, or 51 cents a share, in the same quarter last year.

On the company's earnings call Wednesday afternoon Shelly Ibach, Sleep Number's chairwoman, president and chief executive, said results were largely in line with the management team's expectations and pointed to the company's efficiency efforts as evidence that margins were improving.

"Our actions are positioning Sleep Number to greater resilience across a range of macroeconomic and industry environments," Ibach said.

The company did say it plans to close 30 of 672 stores by the end of the year. Those closings are expected to have a slight drag on sales but help with margin improvement goals.

The mattress industry has been in decline for more than a year. Peter Keith, a mattress industry analyst for Piper Sandler, wrote in his March Mattress Survey that the industry has had its fifth quarter in a row of mid-single digit sales declines.

"Consumers' purchasing power is limited due to elevated interest rates and record-high credit card debt," Ibach said. "As a result, consumers continue to scrutinize their spending and make near-term decisions based primarily on need, price and perceived value, and they are deferring higher ticket durable purchases."

Sleep Number did see some improvement in its margins from a favorable sales mix and by focusing on promotions. The company said its gross margin for the quarter was 58.7%, slightly less than the first quarter last year but trending positively compared to the back half of 2023.

Sleep Number expects second quarter sales to be down mid-single digits but to improve in the second half of 2024, after the company introduces a new smart bed in the third quarter. The C1 smart bed will be priced at $999, lower than existing beds.

Shares of Sleep Number were trading up slightly at $13.63 a share in early trading Thursday. Shares have ranged between $9 and $39.98 over the last 52 weeks.