The operating profit margin was 9.0 percent of net sales in the third quarter, down 150 basis points from 10.5 percent in the third quarter of last year on higher fixed costs associated with the increased number of stores.
This was partially offset by lower media spending, which totaled $26.8 million, and reduced general and administrative expenses, which totaled $14.9 million, largely reflecting lower incentive compensation. Fourth quarter media spending is expected to increase nearly 15 percent as compared to fourth quarter last year.
Cash flows from operating activities on a year-to-date basis totaled $56.2 million, compared to $57.4 million in the same nine-month period last year. The strong cash flow performance reflects management's ongoing focus on working capital management and the inherent efficiencies that result from the company's vertically integrated, build-to-order business model.
As of Sept. 29, 2007, cash and cash equivalents totaled $8.5 million and outstanding debt totaled $21.9 million. Year to date, the company has returned $132 million to shareholders through the repurchase of 7.6 million shares of common stock, including $37.6 million to repurchase 2.3 million shares in the third quarter. The company's remaining stock repurchase authorization currently stands at $207 million.
For the first nine months of 2007, net sales totaled $608.6 million, compared to $608.0 million in the first nine months of 2006. Net income totaled $25.5 million, or $0.52 per diluted share, compared to $36.4 million, or $0.65 per diluted share for the first nine months of 2006.
Outlook:
The company has lowered its full-year 2007 outlook in anticipation of a slower recovery in its retail sales. The company expects net sales of between $820 million and $830 million and earnings of between $0.75 and $0.81 per diluted share, compared to the previous forecast for net sales of between $840 million and $860 million and earnings of between $0.87 and $0.93 per diluted share.
This outlook reflects a continued improvement over third quarter same-store sales, consistent with recent trends, along with increased media investments and other costs in the fourth quarter designed to benefit 2008 sales and margins.
Select Comfort Corporation
marketing@alchempro.com
