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What changed in Sleep Number Corp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sleep Number Corp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+435 added−209 removedSource: 10-K (2025-03-07) vs 10-K (2024-02-23)

Top changes in Sleep Number Corp's 2025 10-K

435 paragraphs added · 209 removed · 153 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

84 edited+244 added−36 removed56 unchanged
Biggest changeSleep Number’s mission-driven sleep experts use digital technology and a best-in-class, relationship-based selling process, which is continually tested and refined, to meet the changing consumer priorities. Processes are designed to match the right sleep solutions and right price point for its customers – wherever and whenever they want to shop.
Biggest changeThe Company offers an engaging and dynamic online experience to educate consumers and advance their purchase path, 6 | 2024 FORM 10-K SLEEP NUMBER CORPORATION driving highly-qualified traffic to all of its retail touchpoints. Sleep Number’s mission-driven sleep experts use digital technology and a best-in-class, relationship-based selling process, which is continually tested and refined to meet the changing consumer priorities.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized sleep wellness platform, a network of highly engaged Smart Sleepers, a vertically integrated operating model, and a culture of individuality, with an ambitious vision to become one of the world’s most beloved brands.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized, digital sleep wellness platform, a network of highly engaged Smart Sleepers, a vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the world’s most beloved brands.
The Company also makes available, free of charge on its website, the charters of the Audit Committee, Management Development and Compensation Committee and Corporate Governance and Nominating Committee, as well as its Code of Business Conduct (including any amendment to, or waiver from, a provision of its Code of Business Conduct) adopted by the Company’s Board.
The Company also makes available, free of charge on its website, the charters of the Audit Committee, Management Development and Compensation Committee and Corporate Governance and Nominating Committee, as well as its Code of Business Conduct (including any amendment to, or waiver from, a provision of its Code of Business Conduct) adopted by the Company’s Board of Directors (Board) .
The 2023 U.S. mattress unit levels are the lowest annual levels since 2015 and per capita spending on mattresses is also at historic lows approaching levels not seen since the 2008/2009 great recession. These data points signal the potential for pent-up demand as the sector recovers. The retail bedding industry is commoditized and highly competitive.
The 2024 U.S. mattress unit levels are the lowest annual levels since 2015 and per capita spending on mattresses is also at historic lows approaching levels not seen since the 2008/2009 great recession. These data points signal the potential for pent-up demand as the sector recovers. The retail bedding industry is commoditized and highly competitive.
Sleep Number’s exclusive distribution meets its customers whenever and wherever they choose – through digital and in-store touchpoints – to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions to bring the power of 24 billion hours of longitudinal sleep data to sleep science and research.
Sleep Number’s exclusive distribution meets its customers whenever and wherever they choose – through digital and in-store touchpoints – to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions to bring the power of 31 billion hours of longitudinal sleep data to sleep science and research.
Embedded digital sensors learn the sleep needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart bed to keep the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for both sleepers and solves a prevalent sleep challenge.
Embedded digital sensors learn the sleep needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart bed to keep the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for each sleeper and solves a prevalent sleep challenge.
With over 800 patents and patent applications pending worldwide, Sleep Number’s innovation pipeline is robust. The combination of trademark individualized comfort and adjustability features – with AI, biometric analysis and other digital tools – creates the sleep wellness platform, which is the foundation of a long-term value proposition.
With over 900 patents and patent applications pending worldwide, Sleep Number’s innovation pipeline is robust. The combination of trademark individualized comfort and adjustability features – with AI, biometric analysis and other digital tools – creates the sleep wellness platform, which is the foundation of a long-term value proposition.
National Football League (NFL) As the Official Sleep and Wellness Partner of the NFL since 2018, the partnership broadens Sleep Number’s brand reach, deepens its brand relevance and amplifies the benefits of its proprietary innovations. The partnership has led to unparalleled product adoption: 80% of NFL players have a Sleep Number smart bed*.
National Football League (NFL) As the Official Sleep and Wellness Partner of the NFL since 2018, the partnership broadens Sleep Number’s brand reach, deepens its brand relevance and amplifies the benefits of its proprietary innovations. The partnership has led to unparalleled product adoption: 83% of NFL players have a Sleep Number smart bed*.
Ibach was Senior Vice President and General Merchandise Manager for Macy’s home division. From 1982 to 2005, Ms. Ibach held various leadership and executive positions within Target Corporation. FRANCIS K. LEE, 52, Executive Vice President and Chief Financial Officer (Joined the Company in August 2023) Francis K.
Ibach was Senior Vice President and General Merchandise Manager for Macy’s home division. From 1982 to 2005, Ms. Ibach held various leadership and executive positions within Target Corporation. FRANCIS K. LEE, 53 Executive Vice President and Chief Financial Officer (Joined the Company in August 2023) Francis K.
HELLFELD, 45 Executive Vice President and Chief Legal and Risk Officer and Secretary (Joined the Company in 2013 and was promoted to current role in March 2022) Samuel R. Hellfeld, Sleep Number ® setting 65, serves as the Executive Vice President and Chief Legal and Risk Officer and Secretary and leads legal, internal audit, corporate security and asset protection.
HELLFELD, 46 Executive Vice President and Chief Legal and Risk Officer and Secretary (Joined the Company in 2013 and was promoted to current role in March 2022) Samuel R. Hellfeld, Sleep Number ® setting 65, serves as Executive Vice President and Chief Legal and Risk Officer and Secretary and leads legal, internal audit, corporate security and asset protection.
IBACH, 64 Chair, President and Chief Executive Officer (Joined the Company in April 2007, was promoted to President and CEO in June 2012 and became Chair of the Board of Directors in May 2022) Shelly R. Ibach, Sleep Number ® setting 40, serves as the Chair, President and Chief Executive Officer (CEO) for Sleep Number (Nasdaq: SNBR).
IBACH, 65 Chair, President and Chief Executive Officer (Joined the Company in April 2007, was promoted to President and CEO in June 2012 and became Chair of the Board of Directors in May 2022) Shelly R. Ibach, Sleep Number ® setting 40, serves as the Chair, President and Chief Executive Officer (CEO) for Sleep Number (Nasdaq: SNBR).
Barra held leadership positions in the U.S. and internationally in process reengineering, finance, strategic alliances and corporate development for Best Buy, Grupo Futuro S.A., Citibank and GE Capital. ANDREA L. BLOOMQUIST, 54 Executive Vice President and Chief Innovation Officer (Joined the Company in 2008 and was promoted to current role in December 2020) Annie L.
Barra held leadership positions in the U.S. and internationally in process reengineering, finance, strategic alliances and corporate development for Best Buy, Grupo Futuro S.A., Citibank and GE Capital. ANDREA L. BLOOMQUIST, 55 Executive Vice President and Chief Innovation Officer (Joined the Company in 2008 and was promoted to current role in December 2020) Andrea L.
Bloomquist was the Senior Vice President and Chief Product Officer from June 2012 to December 2020 and Chief Merchandising Officer from June 2011 to June 2012. Ms. Bloomquist joined Sleep Number in May 2008 as Vice President and General Merchandise Manager. Prior to Sleep Number, Ms.
Bloomquist was the Senior Vice Presid ent and Chief Product Officer from June 2012 to December 2020 and Chief Merchandising Officer from June 2011 to June 2012. Ms. Bloomquist joined Sleep Number in May 2008 as Vice President and General Merchandise Manager. Prior to Sleep Number, Ms.
To date, the Company has leveraged and learned from more than 24 billion hours of sleep data gathered from over 3 billion real-world sleep sessions, generating comprehensive longitudinal and ecologically-valid data to improve sleep quality.
To date, the Company has leveraged and learned from more than 31 billion hours of sleep data gathered from over 3 billion real-world sleep sessions, generating comprehensive longitudinal and ecologically-valid data to improve sleep quality.
MELISSA BARRA, 52 Executive Vice President and Chief Sales and Services Officer (Joined the Company in 2013 and was promoted to current role in December 2020) Melissa Barra, Sleep Number ® setting 30, serves as the Executive Vice President and Chief Sales and Services Officer. Ms.
MELISSA BARRA, 53 Executive Vice President and Chief Sales and Services Officer (Joined the Company in 2013 and was promoted to current role in December 2020) Melissa Barra, Sleep Number ® setting 30, serves as Executive Vice President and Chief Sales and Services Officer. Ms.
These systems are primarily comprised of packaged applications licensed from various software vendors plus a limited number of internally developed programs and digital solutions. See Item 1C. Cybersecurity for further information regarding the Company’s cybersecurity risk management program.
These systems are primarily comprised of packaged applications licensed from various software vendors plus a limited number of internally developed programs and digital solutions. See “Part 1, Item 1C. Cybersecurity ” for further information regarding the Company’s cybersecurity risk management program.
Each of these facilities are combined with an assembly distribution center. There are five additional assembly distribution centers (Ontario, CA; Tampa, FL; Dallas, TX; Cincinnati, OH; and Minneapolis, MN) and one former assembly distribution center now used as a distribution center (Baltimore, MD).
Each of these facilities are combined with an assembly distribution center (ADC). There are five additional ADCs (Ontario, CA; Tampa, FL; Minneapolis, MN; Cincinnati, OH; and Dallas, TX) and one former assembly distribution center now used as a distribution center (Baltimore, MD).
By enabling a longitudinal view of sleep habits for organizations that otherwise may not have access, Sleep Number believes current partnerships and collaborations with physicians, researchers and institutions – including the Mayo Clinic, American Cancer Society, Northwestern University, University of Pittsburgh and Sleep Number’s own Scientific Advisory Board – will deliver meaningful health solutions.
By enabling a longitudinal view of sleep habits for organizations that otherwise may not have access, Sleep Number believes current partnerships and collaborations with physicians, researchers and institutions – including the Mayo Clinic, ACS , Northwestern University, University of Pittsburgh and Sleep Number’s own Scientific Advisory Board – will deliver meaningful health solutions.
ITEM 1. BUSINESS Overview Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and distribution of highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of society through higher quality sleep; to date, it has improved the lives of over 15 million people.
ITEM 1. BUSINESS Overview Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and distribution of highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of society through higher quality sleep; to date, it has improved the lives of approximately 16 million people.
Together, these teams are the driving force of the entire smart bed ecosystem including all smart beds, adjustable base designs and bedding solutions, and are comprised of experts in mechanical engineering, comfort, adjustability, temperature, anthropometrics and test systems. The Company’s research and development expenses were $56 million in 2023.
Together, these teams are the driving force of the entire smart bed ecosystem including all smart beds, adjustable base designs and bedding solutions, and are comprised of experts in mechanical engineering, comfort, adjustability, temperature, anthropometrics and test systems. The Company’s research and development expenses were $45 million in 2024 compared to $56 million in 2023 .
With contributions from Sleep Number’s proprietary sleep data, American Cancer Society will conduct research over six years, which may lead to improved sleep outcomes for cancer patients and survivors. Additionally, Sleep Number supports cancer patients and caregivers through donations of sleep solutions to American Cancer Society Hope Lodges across the country.
With contributions from Sleep Number’s proprietary sleep data, ACS will conduct research over six years, which may lead to improved sleep outcomes for cancer patients and survivors. Additionally, Sleep Number supports cancer patients and caregivers through donations of sleep solutions to ACS’s Hope Lodges across the country.
The traditional view of the U.S. bedding industry, including mattresses and foundations (static and adjustable), is measured through data provided by the International Sleep Products Association (ISPA). According to ISPA*, the industry has grown by approximately 4% annually over the last 20 years, including 4% annually, on average, over the past five years.
The traditional view of the U.S. bedding industry, including mattresses and foundations (static and adjustable), is measured through data provided by the International Sleep Products Association (ISPA). According to ISPA*, the industry has grown by approximately 4% annually over the last 20 years.
Patent and Trademark Office, including Sleep Number ® , SleepIQ ® , Sleep Number 360 ® , 360 ® , the Double Arrow logo, Select Comfort ® , AirFit ® ,Climate360 ® , Comfortaire ® , Does Your Bed Do That? ® , the DualTemp logo, the DualAir Technology Inside logo, FlexTop ® , HealthIQ ® , IndividualFit ® , Know Better Sleep ® , Pillow[ology] ® , PillowFit ® , Responsive Air ® , Sleep Is Training ® , Sleep Number Inner Circle ® , Sleep30 ® , Smart Sleeper SM ,Tech-e ® , This Is Not A Bed ® , and We Make Beds Smart ® .
Patent and Trademark Office, including Sleep Number ® , SleepIQ ® , Sleep Number 360 ® , 360 ® , the Double Arrow logo, Select Comfort ® , AirFit ® , Climate360 ® , Comfortaire ® , Dreamaire ® , DualTemp®, the DualTemp logo, the DualAir Technology Inside logo, FlexTop ® , HealthIQ ® , IndividualFit ® , Know Better Sleep ® , Pillow[ology] ® , PillowFit ® , Responsive Air ® , Sleep Is Training ® , Sleep Number Inner Circle ® , Sleep30 ® , Smart Sleeper SM ,Tech-e ® , This Is Not A Bed ® , We Make Beds Smart ®, and WhisperFlo®.
In 2023, Sleep Number had partnerships with five clubs — Super Bowl LIV, LVII and LVIII Champion Kansas City Chiefs, Super Bowl LVI Champion Los Angeles Rams, the Dallas Cowboys, Minnesota Vikings and Cincinnati Bengals— which add to its national media and community-activation efforts. These partnerships allow for focused communications in some of Sleep Number’s most important markets.
In 2024, Sleep Number had partnerships with four clubs — Super Bowl LIV, LVII and LVIII Champion Kansas City Chiefs, Super Bowl LVI Champion Los Angeles Rams, the Dallas Cowboys, and the Minnesota Vikings — which add to its national media and community-activation efforts. These partnerships allow for focused communications in some of Sleep Number’s most important markets.
As the sleep-health economy continues to evolve, Sleep Number intends to play a role in the digital health market as consumers look for products and reliable data sources to address their overall wellbeing. The digital health market is $77 billion in the U.S. alone; $211 billion globally with markets expecting to expand by 4x by 2030.
As the sleep-health economy continues to evolve, Sleep Number intends to play a role in the digital health market as consumers look for products and reliable data sources to address their overall wellbeing. The digital health market is estimated at $ 81 billion in the U.S. alone; $241 billion globally with markets expecting to expand by 4x by 2030 .
Paired with personalized insights and details about each sleeper’s heart rate, breath rate, HRV, circadian rhythm and more, the Sleep Number app is an invaluable tool in helping Smart Sleepers better understand how to improve their sleep health and wellbeing.
Paired with personalized insights and details about each sleeper’s heart rate, breath rate, heart rate variability , c ircadian rhythm and more, the Sleep Number app is an invaluable tool in helping Smart Sleepers better understand how to improve their sleep health and wellbeing.
Sleep Number is pairing data and innovations with meaningful collaborations with world-leading partners in sleep, leveraging the potential of the Company’s research and technology to advance sleep science and to develop new products, services and synergistic interactions. 7 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Partnerships and Collaborations Strategic partnerships amplify the effectiveness, impact and scale of Sleep Number’s brand and marketing efforts.
Sleep Number is pairing data and innovations with meaningful collaborations with world-leading partners in sleep, leveraging the potential of the Company’s research and technology to advance sleep science and to develop new products, services and synergistic interactions. Partnerships and Collaborations Strategic partnerships amplify the effectiveness, impact and scale of Sleep Number’s brand and marketing efforts.
Sleep Number competes against regional and local specialty bedding retailers, bedding manufacturers, home furnishing stores, mass merchants, national discount stores and online marketers. Furniture Today, a furniture industry trade publication, has ranked Sleep Number as the third largest U.S. bedding retailer and etailer for 2022, with an estimated 9% market share of industry retail revenue.
Sleep Number competes against regional and local specialty bedding retailers, bedding manufacturers, home furnishing stores, mass merchants, national discount stores and online marketers. Furniture Today, a furniture industry trade publication, has ranked Sleep Number as the third largest U.S. bedding retailer and e-tailer for 2023, with an estimated 8% market share of industry retail revenue.
Since 2010, the Company has invested to reposition a large percentage of its mall stores to stronger, optimally-sized, non-mall locations, adding stores in both existing and new markets. As of December 30, 2023, the Company operated 672 Sleep Number ® stores, with locations in all 50 states.
Since 2010, the Company has invested to reposition a large percentage of its mall stores to stronger, optimally-sized, non-mall locations, adding stores in both existing and new markets. As of December 28, 2024 , the Company operated 640 Sleep Number ® stores, with locations in all 50 states.
Further, the Company’s manufacturing, distribution, delivery and other business operations and facilities are subject to additional federal, state or local laws or regulations including supply chain transparency, conflict minerals sourcing and disclosure, end-of-life disposal, recycling and packaging requirements, transportation, electrification of the Company’s vehicle fleet and other laws or regulations relating to environmental protection and health and safety requirements.
Further, the Company’s manufacturing, distribution, delivery and other business operations and facilities are subject to additional federal, state or local laws or regulations including supply chain transparency, 11 | 2024 FORM 10-K SLEEP NUMBER CORPORATION conflict minerals sourcing and disclosure, end-of-life disposal, recycling and packaging requirements, transportation, electrification of the Company’s vehicle fleet and other laws or regulations relating to environmental protection and health and safety requirements.
Through ongoing interactions with customers via phone, email, chat and social media, the customer service team also provides a unique opportunity to benefit from insights that help the Company continuously improve its products and strengthen its service quality and innovation. This integration enables operational synergies and organizational efficiencies.
Through ongoing interactions with customers via phone, email, chat and social media, the customer service team also provides a unique opportunity to benefit from insights that help the Company continuously improve its 7 | 2024 FORM 10-K SLEEP NUMBER CORPORATION products and strengthen its service quality and innovation. This integration enables operational synergies and organizational efficiencies.
Krusmark also served as Interim CFO. Prior to being promoted to his Chief Human Resources Officer role in July 2020, Mr. Krusmark served as Sleep Number’s Vice President of Sales Operations, Field Services and Training where he led retail and home delivery operations and wholesale business development. From June 2005 to October 2015, Mr.
From January 2023 through August 2023, Mr. Krusmark also served as Interim CFO. Prior to being promoted to his Chief Human Resources Officer role in July 2020, Mr. Krusmark served as Sleep Number’s Vice President of Sales Operations, Field Services and Training where he led retail and home delivery operations and wholesale business development.
Operations Integrated Sourcing and Logistics The Company completed a multi-year evolution of its supply chain network in 2022. Now, 100% of its smart beds are pre-assembled in its assembly distribution centers prior to delivery versus being assembled in customers’ homes by Sleep Number delivery technicians.
Operations Integrated Sourcing and Logistics The Company completed a multi-year evolution of its supply chain network in 2022. Now, 100% of its smart beds are pre-assembled in its assembly distribution centers prior to delivery versus being assembled in customers’ homes by Sleep Number delivery technicians. Sleep Number's evolved network delivers improved visibility, efficiency and waste reduction.
Bloomquist held leadership positions in general management, sourcing, buying, development and planning at Macy’s and The Department Stores for Target Corporation. 15 | 2023 FORM 10-K SLEEP NUMBER CORPORATION KEVIN K. BROWN, 55 Executive Vice President and Chief Marketing Officer (Joined the Company in 2014 and was promoted to current role in December 2020) Kevin K.
Bloomquist held leadership positions in general management, sourcing, buying, development and planning at Macy’s and The Depart ment Stores for Target Corporation. 14 | 2024 FORM 10-K SLEEP NUMBER CORPORATION KEVIN K. BROWN, 56 Executive Vice President and Chief Marketing Officer (Joined the Company in 2014 and was promoted to current role in December 2020) Kevin K.
According to ISPA* and the Company’s estimates, industry wholesale shipments of mattresses and foundations (including imported products and adjustable bases) were approximately $12 billion in 2022 (approximately $23 billion at retail). The U.S. bedding industry has experienced recessionary demand levels for the past two years.
According to ISPA* and the Company’s estimates, industry wholesale shipments of mattresses and foundations (including imported products and adjustable bases) were approximately $11 billion in 2023 (approximately $22 billion at retail). The U.S. bedding industry has experienced recessionary demand levels for the past three years.
More than 35% of its stores (including remodels) are less than five years old and approximately 50% are less than seven years old. The Company’s Stores accounted for 87% of net sales in 2023. Average annual net sales per store in 2023 based on Total Retail, was $2.9 million.
More than 30% of its stores (including remodels) are less than five years old and approximately 50% are less than seven years old. The Company’s Stores accounted for 88% of net sales in 2024 . Average annual net sales per store in 2024 , based on Total Retail, was $2.6 million .
The Company’s operations are subject to federal, state and local labor laws including, but not limited to, those relating to occupational health and safety, employee privacy, wage and hour, overtime pay, pay transparency, harassment and 11 | 2023 FORM 10-K SLEEP NUMBER CORPORATION discrimination, equal opportunity and employee leaves and benefits.
The Company’s operations are subject to federal, state and local labor laws including, but not limited to, those relating to occupational health and safety, employee privacy, wage and hour, overtime pay, pay transparency, harassment and discrimination, equal opportunity and employee leaves and benefits.
Sleep Number is delivering the improved sleep performance customers have been seeking. The Sleep Number ® Rewards loyalty program drives significant brand engagement. After the launch of the program, the Company welcomed over one million members who participated in over 5 million engagements with over 1,100 activities on its digital platform.
The Sleep Number ® Rewards loyalty program drives significant brand engagement. After the launch of the program, the Company welcomed over one million members who participated in over 5 million engagements with over 1,100 activities on its digital platform.
And, as part of the Crucial Catch partnership, Sleep Number inspired tens of thousands of NFL fans to learn more about cancer risks and prevention by driving activation of The Defender. In 2023, Sleep Number was named American Cancer Society’s Corporate Partner of the Year.
And, as part of the Crucial Catch partnership, Sleep Number inspired tens of thousands of NFL fans to learn more about cancer risks and prevention by driving activation of The Defender. In 2023, Sleep Number was named American Cancer Society’s Corporate Partner of the Year and won the 2024 “Golden Halo Award” for Best Intersectional Initiative.
It enables control of the smart bed and smart adjustable base from one’s mobile device. It also provides a nightly score – a SleepIQ ® score – that indicates how sleepers slept against their personal best metrics and goals.
It enables control of the smart bed and smart adjustable base from one’s mobile device. 5 | 2024 FORM 10-K SLEEP NUMBER CORPORATION It also provides a nightly score – a SleepIQ ® score – that indicates how sleepers slept against their personal best metrics and goals.
More than 433,000 individuals in its Smart Sleeper SM community — and counting — have opted in to participate in ongoing sleep research and advance the science of sleep and health.
More than 5 06,00 0 individuals in its Smart Sleeper SM Community — and counting — have opted in to participate in ongoing sleep research and advance the science of sleep and health.
Additional information is available in the Company’s Corporate Sustainability Report, posted within the Investor Relations section of the Sleep Number website.
Additional information is available in the Company’s Corporate Sustainability Report, posted within the Investor Relations section of the Sleep Number website at http://ir.sleepnumber.com.
After peaking at 33 million mattress units in 2020, the U.S. bedding industry has experienced an estimated 25% decline in units to end 2023 at approximately 25 million mattress units.
After peaking at 33 million mattress units in 2020, the U.S. bedding industry has experienced an estimated 28% decline in units to end 2024 at an estimated 24 million mattress units.
It may be accessed at www.sleepnumber.com: select the “Investors” link, the “ESG” link and then “Sustainability Reports.” The information contained on the Company’s website or connected to its website is not incorporated by reference into this Form 10-K and should not be considered part of this report. 14 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Information about the Company’s Executive Officers SHELLY R.
Select the “ESG” link and then “Sustainability Reports.” The information contained on the Company’s website or connected to its website is not incorporated by reference into this Form 10-K and should not be considered part of this report. 13 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Information about the Company’s Executive Officers SHELLY R.
Newer brands like Purple, Casper, and Nectar, which started online have now moved into traditional retail channels for growth. *2023 ISPA industry information had not been published at the time of this report. Seasonality The Company’s business is modestly impacted by seasonal influences inherent in the U.S. bedding industry and general retail shopping patterns.
Newer brands like Purple, Casper and Nectar, which started online have now moved into traditional retail channels for growth. Seasonality The Company’s business is modestly impacted by seasonal influences inherent in the U.S. bedding industry and general retail shopping patterns.
KRUSMARK, 44 Executive Vice President and Chief Human Resources Officer (Joined the Company in 2005, was promoted to Chief Human Resources Officer in July 2020) Chris Krusmark, Sleep Number ® setting 55, serves as the Executive Vice President and Chief Human Resources Officer, where he leads all human resources, training and learning functions. From January 2023 through August 2023, Mr.
KRUSMARK, 45 Executive Vice President and Chief Human Resources Officer (Joined the Company in 2005 and was promoted to Chief Human Resources Officer in July 2020 ) Christopher D. Krusmark, Sleep Number ® setting 55, serves as Executive Vice President and Chief Human Resources Officer, where he leads all human resources, training and learning functions.
In 2023, 65% of Stores open for a full year generated net sales of greater than $2 million, and 24% of Stores open for a full year generated more than $3 million in net sales. In 2023, Online, Phone, Chat and Other sales accounted for 13% of net sales.
In 2024, 57% of Stores open for a full year generated net sales of greater than $2 million, and 18% of Stores open for a full year generated more than $3 million in net sales. In 2024 , Online, Phone, Chat and Other sales accounted for 12% of net sales.
Lee, Sleep Number ® setting 45, joined Sleep Number in 2023, and leads the Company’s teams to drive sustainable, profitable growth and strengthen total shareholder return. Mr. Lee is a global finance and strategy leader with extensive experience across consumer product, retail, and technology companies.
Le e, Sleep Number ® setting 45, serves as Executive Vice President and Chief Financial Officer. Mr Lee leads the Company’s teams to drive sustainable, profitable growth and strengthen total shareholder return. Mr. Lee is a global finance and strategy leader with extensive experience across consumer product, retail, and technology companies.
Sleep Number has numerous U.S. patents, expiring at various dates between November 2025 and March 2042, and numerous U.S. patent applications pending. The Company also has numerous foreign patents, expiring at various dates between September 2026 and June 2045 and foreign patent applications pending.
Sleep Number has numerous U.S. patents expiring at various dates between November 2025 and December 2042, and numerous U.S. patent applications pending. The Company also has 9 | 2024 FORM 10-K SLEEP NUMBER CORPORATION numerous foreign patents expiring at various dates between September 2026 and June 2047, and foreign patent applications pending.
The breakdown of team members by area was as follows: 2,125 in retail sales and support, 490 in field services, 372 in customer service, 423 in manufacturing and logistics, and 735 in technology, corporate, management and administrative positions. Forty-two percent of team members are racially diverse and 40% are women.
The breakdown of team members by area was as follows: 2,059 in retail sales and support, 421 in field services, 147 in customer service, 365 in manufacturing and logistics, and 662 in technology, corporate, management and administrative positions. Forty percent of team members are racially diverse and 38% are women .
As the NFL is expanding its schedule of international games, Sleep Number works directly with team training staff on integrating sleep into the teams’ schedule to ensure best on-field performance during and after international travel. Additionally, the Company also offers 1:1 coaching for players, deepening their engagement with their smart bed and quality sleep.
As the NFL is expanding its schedule of international games, Sleep Number works directly with team training staff on integrating sleep into the teams’ schedule to ensure best on-field performance during and after international travel.
Sleep Number is advancing the science of sleep by funding several Mayo Clinic research projects, including: • Research to investigate the prevalence of disordered sleep (sleep apnea, insomnia and short sleep) in patients with Somali heritage and the implications for cardiovascular risk; • Research to explore the relationship between disrupted sleep and markers of aging (telomeres, senescence, chronological EKG based on AI); and • Research to explore excessive daytime sleepiness (EDS) and its cardiovascular implications. 8 | 2023 FORM 10-K SLEEP NUMBER CORPORATION In 2022, Sleep Number formed a partnership with the American Cancer Society to study the connection between cancer and sleep quality, with the goal of developing the first-ever sleep strategies and guidance for cancer patients and survivors.
Sleep Number is advancing the science of sleep by funding several Mayo Clinic research projects, including: • Research to investigate the prevalence of disordered sleep (sleep apnea, insomnia and short sleep) in patients with Somali heritage and the implications for cardiovascular risk; • Research to explore the relationship between disrupted sleep and markers of aging (telomeres, senescence, chronological EKG based on AI); and • Research to explore excessive daytime sleepiness (EDS) and its cardiovascular implications.
The Company’s most dedicated Smart Sleepers regularly interact with branded content – including video, web, email and blog content – which educates them about Sleep Number ® products and sleep expertise, adding value to their investment.
The Company’s most dedicated Smart Sleepers regularly interact with branded content – including video, web, email and blog content – which educates them about Sleep Number ® products and sleep expertise, adding value to their investment. They actively write product reviews and post on social media, further activating the marketing flywheel and advancing the Company’s purpose.
Innovation Sleep Number’s global research and development (R&D) team is comprised of onshore teams in Minneapolis, MN and San Jose, CA and offshore teams in Europe and Asia.
In 2024, Sleep Number outsourced a portion of its customer service operations for greater efficiency. Innovation Sleep Number’s global research and development (R&D) team is comprised of onshore teams in Minneapolis, MN and San Jose, CA and offshore teams in Europe and Asia.
With sleep at the center, Sleep Number’s culture supports the wellbeing of its team members across the pillars of physical, emotional, financial, career and community, and connects their work to the Sleep Number mission and goals. Founded on the premise that “one size doesn’t fit all,” Sleep Number celebrates individuality in its team members’ and customers’ lives.
With sleep at the center, Sleep Number’s culture supports the wellbeing of its team members across the pillars of physical, emotional, financial, career and community, and connects their work to the Sleep Number mission and goals.
Sleep Number smart beds are delivered and installed by Sleep Number delivery technicians or by trained third-party service providers. This blended model enables the Company to efficiently deliver a strong customer experience. Customer Service Sleep Number provides comprehensive post-purchase support that improves Smart Sleepers’ experience and supports its business.
Home Delivery Service Sleep Number’s home delivery teams are another direct touchpoint with its customers. Sleep Number smart beds are delivered and installed by Sleep Number delivery technicians or by trained third-party service providers. This blended model enables the Company to efficiently deliver a strong customer experience.
Copies of any of the above-referenced information will also be made available, free of charge, upon written request to: Sleep Number Corporation Investor Relations Department 1001 Third Avenue South Minneapolis, MN 55404 17 | 2023 FORM 10-K SLEEP NUMBER CORPORATION
Copies of any of the above-referenced information will also be made available, free of charge, upon written request to: Sleep Number Corporation Investor Relations Department 1001 Third Avenue South Minneapolis, MN 55404 ITEM 1A. RISK FACTORS An investment in Sleep Number’s common stock involves a high degree of risk.
Sleep Number’s consumer innovation strategy with proprietary sleep innovations and exclusive direct-to-consumer distribution is highly differentiated, resulting in lifelong customer relationships and contributing to the Company’s continued profitable growth. Manufacturers in the bedding industry mostly compete through national and regional retail partners, regional manufacturing verticals, and online direct-to-consumer.
Sleep Number’s consumer innovation strategy with proprietary sleep innovations and exclusive direct-to-consumer distribution is highly differentiated resulting in lifelong customer relationships . *2024 ISPA industry information had not been published at the time of this report. 10 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Manufacturers in the bedding industry mostly compete through national and regional retail partners, regional manufacturing verticals and online direct-to-consumer.
The Company included ACS in its brand communications to Smart Sleepers, in its work with the NFL, across its social media and more.
The Company included ACS in its brand communications to Smart Sleepers, in its work with the NFL, across its social media and more. Together, Sleep Number and ACS won the “Golden Halo Award” for Best Intersectional Initiative in 2024.
Krusmark held a variety of leadership roles in finance at Sleep Number supporting sales, real estate, marketing and product. Prior to joining Sleep Number, Mr. Krusmark worked on the financial audit staff of EY and Arthur Andersen. J.
From June 2005 to October 2015, Mr. Krusmark held a variety of leadership roles in finance at Sleep Number supporting sales, real estate, marketing and product. Prior to joining Sleep Number, Mr.
The assembly distribution centers fulfill customer orders that are made-to-order daily and assemble final mattress and order kitting with bases and accessories for shipment. The Company also operates a bedding fulfillment center at the same location as its Cincinnati, OH assembly distribution center. The Company sources the raw materials and components used in its products from third parties.
The Company also operates a bedding fulfillment center at the same location as its Cincinnati, OH assembly distribution center. The Company sources the raw materials and components used in its products from third parties.
Sleep Number is not liable to Synchrony Bank for its customers’ credit defaults. In connection with all purchases financed under these arrangements, Synchrony Bank pays the Company an amount equal to the total amount of such purchases, net of promotional related discounts, upon delivery to the customer.
In connection with all purchases financed under these arrangements, Synchrony Bank pays the Company an amount equal to the total amount of such purchases, net of promotional related discounts, upon delivery to the customer. Information Systems The Company uses information technology systems to operate, analyze and manage its business, to reduce operating costs and to enhance its customers’ experience.
The Company has taken, and continues to take, various measures to mitigate the potential impact of supply disruptions, including strengthening relationships with primary suppliers, identifying new alternate suppliers, redesigning products, exploring alternative components and maintaining safety stocks. The Company expects the general supply environment to remain challenged through 2024 as the global environment remains uncertain.
The Company has taken, and continues to take, various measures to mitigate the potential impact of supply disruptions, including strengthening relationships with primary suppliers, identifying new alternate suppliers, redesigning products, exploring alternative components and maintaining safety stocks. Sleep Number is leveraging the flexibility, visibility and resilience of its vertically-integrated model to respond nimbly as conditions change.
In the United States, sleep disorders have been declared a public health epidemic by the U.S. Center for Disease Control. Sleep Number is focused on innovations that will address this growing problem. The total U.S. sleep-health economy was estimated to be over $30 billion in a 2017 report published by McKinsey & Company.
Industry and Competition Up to 50% of the developed world’s population experiences sleep deficiencies. In the United States, sleep disorders have been declared a public health epidemic by the U.S. Center for Disease Control. Sleep Number is focused on innovations that will address this growing problem.
This reflects the traditional view of the bedding industry, which includes the sales of mattresses and foundations, as well as emerging solutions for insufficient sleep such as routine modifications and therapeutic treatments.
The total U.S. sleep-health economy was estimated to be over $30 billion in a 2017 report published by McKinsey & Company. This reflects the traditional view of the bedding industry, which includes the sales of mattresses and foundations, as well as emerging solutions for insufficient sleep such as routine modifications and therapeutic treatments.
Under the terms of the agreement, Synchrony Bank sets the minimum acceptable credit ratings, interest rates, fees and all other terms and conditions of the customers’ accounts, including collection policies and procedures. As the receivables are owned by Synchrony Bank, at no time are the receivables purchased or acquired from the Company.
The Company pays Synchrony Bank a fee for extended credit promotional financing offers. Under the terms of the agreement, Synchrony Bank sets the minimum acceptable credit ratings, interest rates, fees and all other terms and conditions of the customers’ accounts, including collection policies and procedures.
This “sell-from-anywhere” model supports customers’ shopping preferences and results in new customer acquisition, sustained repeat and referral, high conversion and strong revenue per smart bed unit – all of which drive sales and profitable growth. As the exclusive distributor of Sleep Number ® products, the Company has a nationwide portfolio of retail stores.
Processes are designed to match the right sleep solutions and right price point for its customers – wherever and whenever they want to shop. This “sell-from-anywhere” model supports customers’ shopping preferences and results in new customer acquisition, sustained repeat and referral, high conversion and strong revenue per smart bed unit – all of which drive future sales and profitable growth.
Sleep Number’s NFL partnership also includes partnership with the NFL Players Association (NFLPA) and the Professional Football Athletic Trainers Society (PFATS) which helps drive greater engagement on and off the field. Through Sleep Number content, seminars, and team sleep education meetings, the trainers and football medical personnel qualify for continuing education credits, the only of its kind for this community.
Through Sleep Number content, seminars and team sleep education meetings, the trainers and football medical personnel qualify for continuing education credits, the only education of its kind for this community.
Saklad held finance leadership roles at Ford Motor Company and Visteon. 16 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Available Information Sleep Number is subject to the reporting requirements of the the Securities Exchange Act of 1934, as amended (Exchange Act) and its rules and regulations.
Krusmark worked on the financial audit staff of EY and Arthur Andersen. 15 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Available Information Sleep Number is subject to the reporting requirements of the the Securities Exchange Act of 1934, as amended (Exchange Act) and its rules and regulations.
Across its customer touchpoints, defined as Total Retail (Stores, Online, Phone and Chat), it delivers a value-added retail experience that seamlessly integrates Sleep Number’s digital and physical experiences to meet customer needs. The Company offers an engaging and dynamic online experience to educate consumers and advance their purchase path, driving highly-qualified traffic to all of its retail touchpoints.
Exclusive Direct-to-Consumer Distribution Sleep Number’s exclusive, direct-to-consumer distribution model supports lifelong relationships with its customers. Across its customer touchpoints, defined as Total Retail (Stores, Online, Phone and Chat), it delivers a value-added retail experience that seamlessly integrates Sleep Number’s digital and physical experiences to meet customer needs.
In 2023, Sleep Number ranked #1 in Customer Satisfaction with Mattresses Purchased In-Store according to the J.D. Power 2023 U.S. Mattress Satisfaction Study. The Company targets high-quality, convenient and visible store locations based on several factors, including each market’s overall sales and profit potential, store geography, demographics and proximity to other brand experiences.
As the exclusive distributor of Sleep Number ® products, the Company has a nationwide portfolio of retail stores. The Company targets high-quality, convenient and visible store locations based on several factors, including each market’s overall sales and profit potential, store geography, demographics and proximity to other brand experiences.
Approximately 48% of net sales in 2023 were financed by Synchrony Bank. The Company’s current agreement with Synchrony Bank expires December 31, 2028, subject to earlier termination upon certain events. The Company pays Synchrony Bank a fee for extended credit promotional financing offers.
The Credit Agreement matures in December 2026 . Qualified customers are offered revolving credit to finance purchases through a private-label consumer credit facility provided by Synchrony Bank. Approximately 45% of net sales in 2024 were financed by Synchrony Bank. The Company’s current agreement with Synchrony Bank expires December 31, 2028 , subject to earlier termination upon certain events.
The Credit Agreement contains an accordion feature that allows the Company to increase the amount of the credit facility from $685 million up to $1.0 billion in total availability, subject to Lenders’ approval. The Credit Agreement matures in December 2026. Qualified customers are offered revolving credit to finance purchases through a private-label consumer credit facility provided by Synchrony Bank.
The Company’s Credit Agreement provides a revolving credit facility for general corporate purposes with net aggregate availability of $678 million . The Credit Agreement contains an accordion feature that allows the Company to increase the amount of the credit facility from $678 million up to $1.0 billion in total availability, subject to Lenders’ approval.
Sleep Number embraces every individual’s unique talents, perspectives and experiences, and strives to create an environment where team members can each be their best self. Valuing diversity, equity and inclusion makes Sleep Number stronger and smarter, and fuels its innovation and teamwork.
Sleep Number embraces every individual’s unique talents, perspectives and experiences, and strives to create an environment where team members can each be their best self, which fuels innovation and teamwork. At December 28, 2024 , Sleep Number employed a total of 3,654 team members, of which 67 were classified as part- time and 7 were employed on a temporary basis.
Sleep Number also has other intellectual property rights related to its products, processes and technologies, including trade secrets, trade dress and copyrights. The Company protects and enforces its intellectual property rights, including through litigation, as necessary. 9 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Industry and Competition Up to 50% of the developed world’s population experiences sleep deficiencies.
Several of the Company’s trademarks have been registered, or are the subject of pending applications for registration, in various foreign countries. Sleep Number also has other intellectual property rights related to its products, processes and technologies, including trade secrets, trade dress and copyrights. The Company protects and enforces its intellectual property rights, including through litigation, as necessary.
Each registered mark is renewable indefinitely as long as the mark remains in use and/or is not deemed to be invalid or canceled. The Company also has a number of common law trademarks, including ActiveComfort™, Clima-Temp™, Comfortable. Adjustable.
The Company has several trademarks that are the subject of pending applications, including Auto Snore™, BreatheIQ™, BreatheIQ+™, the BreatheIQ logo, the BreatheIQ+ logo, ClimateCool™, EnviroIQ™, FlexFit™, HeartIQ™, Individualized Sleep Experiences™, RespiratoryIQ™, and WellnessIQ™. Each registered mark is renewable indefinitely as long as the mark remains in use and/or is not deemed to be invalid or canceled.
The U.S. bedding industry generally experiences lower sales demand in the second quarter of the calendar year and increased sales demand during selected holiday or promotional periods. 10 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Working Capital The Company is able to operate with minimal working capital requirements because it sells directly to customers, utilizes both “make-to-order” and “make-to-stock” production processes and operates retail stores that serve mainly as showrooms.
Working Capital The Company is able to operate with minimal working capital requirements because it sells directly to customers, utilizes both “make-to-order” and “make-to-stock” production processes and operates retail stores that serve mainly as showrooms. Sleep Number has historically generated sufficient cash flows to self-fund operations through an accelerated cash-conversion cycle.
The Company’s promotional strategy focuses on simplicity and relevance, driving consumers to the brand at the time when they are seeking a sleep solution. With the challenging consumer landscape in 2023, Sleep Number evolved its brand messaging to reflect consumer needs and desires.
The Company’s promotional strategy focuses on simplicity and relevance, driving consumers to the brand at the time when they are seeking a sleep solution. The Company’s individualized messaging and brand marketing strategies are designed to emotionally connect with consumers while highlighting the value and relevancy of Sleep Number’s innovations to help solve consumers’ most pressing sleep challenges.
The Company measures its repeat and referral business, which accounts for approximately 50% of its business. 4 | 2023 FORM 10-K SLEEP NUMBER CORPORATION An important part of the smart bed ecosystem, the Sleep Number app puts the “brand in the hand” of the Company’s loyal Smart Sleepers every day.
The Company’s innovation roadmap supports ongoing engagement initiatives within this ecosystem for future growth . An important part of the smart bed ecosystem, the Sleep Number app, puts the “brand in the hand” of the Company’s loyal Smart Sleepers every day.
Brand health metrics indicate that despite significant headwinds in 2022 and 2023 – including low levels of consumer sentiment – Sleep Number continues to be thought of as a sleep innovation, sleep health and sleep science leader. The Company’s individualized messaging and brand marketing strategies are designed to emotionally connect with consumers.
Brand health metrics indicate that despite significant headwinds in 2023 and 2024 – including low levels of consumer sentiment – Sleep Number continues to be thought of as a sleep innovation, sleep health and sleep science leader. *Based on average SleepIQ ® data from sleepers who engaged with their Sleep Number ® setting, SleepIQ® data and FlexFit TM adjustable base versus sleepers who had those same features but did not similarly engage with them.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company maintains controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Audit Committee in a timely manner.
Biggest changeThe Company engages in an ongoing revie w of all cybersecurity events and threats to assess the materiality of each event, if any. 30 | 2024 FORM 10-K SLEEP NUMBER CORPORATION The Company maintains controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Audit Committee in a timely manner.
This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties. The Company also contractually requires the key third parties it engages to implement security programs commensurate with their risk. The Company regularly reminds its team members and contractors of the importance of handling and protecting customer and employee data.
This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties. The Company also contractually requires third parties it engages to implement security programs commensurate with their risk. The Company regularly reminds its team members and contractors of the importance of handling and protecting customer and employee data.
The CIO, together with the Vice President of Information Security and Architecture – who has 20 years of cybersecurity experience and has maintained a Certified Information Systems Security Professional (CISSP) certification since 2008 – and the Chief Legal and Risk Officer have primary responsibility for assessing and managing material cybersecurity risks.
The CIO, together with the Vice President of Information Security, Infrastructure and Architecture – who has 20 years of cybersecurity experience and has maintained a Certified Information Systems Security Professional (CISSP) certification since 2008 – and the Chief Legal and Risk Officer have primary responsibility for assessing and managing material cybersecurity risks.
This enables the Company to leverage specialized knowledge, experience and insights, to help ensure its cybersecurity strategies and processes remain current. • The Company has cybersecurity operations and engineering capabilities that provide comprehensive monitoring to detect and respond to cyber threats and alerts and execute cyber incident response playbooks.
This enables the Company to leverage specialized knowledge, experience and insights, to help ensure its cybersecurity strategies and processes remain current. • The Company has cybersecurity operations and security engineering capabilities that provide comprehensive monitoring to detect and respond to cyber threats and alerts and execute cyber incident response playbooks.
The VP of Information Security and Architecture, and their team, provide regular reports to senior management, the Audit Committee, and other relevant teams on various cybersecurity threats, assessments and findings.
The VP of Information Security, Infrastructure and Architecture, and their team, provide regular reports to senior management, the Audit Committee, and other relevant teams on various cybersecurity threats, assessments and findings.
The Company’s information technology (IT) security team--led by the VP of Information Security and Architecture and Chief Information Officer--reviews cybersecurity risks on an ongoing basis. IT security team members who support its information security program have relevant educational and industry experience.
The Company’s information technology (IT) security team--led by the VP of Information Security, Infrastructure and Architecture and Chief Information Officer--reviews cybersecurity risks on an ongoing basis. IT security team members who support the Company’s information security program have relevant educational and industry experience.
The IT Security team has established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats, which are also identified and assessed through the Company’s overall risk management program, including quarterly assessments of IT systems, cybersecurity and related risks.
The IT Security team has established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats (including Generative AI associated risks), which are also identified and assessed through the Company’s overall risk management program, including quarterly assessments of IT systems, cybersecurity and related risks.
The Company has not experienced any material security incidents or data breaches as a result of a compromise of its information systems and is not aware of any cybersecurity incidents that have had a material impact, or are reasonably likely to materially effect, on its business strategy, operating results, or financial condition. 32 | 2023 FORM 10-K SLEEP NUMBER CORPORATION
The Company has not experienced any material security incidents or data breaches as a result of a compromise of its information systems and is not aware of any cybersecurity incidents that have had a material impact, or are reasonably likely to materially effect, its business strategy, operating results, cash flows and financial condition. 32 | 2024 FORM 10-K SLEEP NUMBER CORPORATION
The Company employs a wide array of industry-leading security platforms and tools. • The Company has retained data security and data privacy legal counsel whose practices focus on data breach response, information security compliance, and compliance with the data privacy laws in the various jurisdictions in which the Company operates. • In addition, the Company engages specialized consultants and third-party managed service providers on a project-specific basis to assist it with projects that will improve the Company’s IT infrastructure, strengthen its security posture and cyber incident investigations, and improve its cyber readiness. 31 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Management’s Role The Chief Information Officer (CIO) has primary operational responsibility for the Company’s cybersecurity function.
The Company employs a wide array of industry-leading security platforms and tools. • The Company has retained data security and data privacy legal counsel whose practices focus on data breach response, information security compliance, and compliance with the data privacy laws in the various jurisdictions in which the Company operates. • In addition, the Company engages specialized consultants and third-party managed service providers on a project- specific basis to assist it with projects that will improve the Company’s IT infrastructure, strengthen its security posture and cyber incident investigations, and improve its cyber readiness .
The Audit Committee receives regular reports from the CIO and the Vice President of Information Security and Architecture about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security threats and risks.
The Audit Committee receives regular reports from the CIO and the Vice President of Information Security, Infrastructure and Architecture about the prevention, detection, 31 | 2024 FORM 10-K SLEEP NUMBER CORPORATION mitigation, and remediation of cybersecurity incidents, including material security risks and information security threats and risks .
The CIO has served in various roles in information technology and information security for over 28 years with nine years’ experience specifically in cybersecurity.
Management’s Role The C hief Information Officer (CIO) has primary operational responsibility for the Company’s cybersecurity function. The CIO has served in various roles in information technology and information security for over 28 years with nine years’ experience specifically in cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes the geographic locations of Sleep Number’s 672 retail stores as of December 30, 2023: Retail Stores Retail Stores Retail Stores Alabama 10 Kentucky 9 North Dakota 2 Alaska 1 Louisiana 11 Ohio 22 Arizona 14 Maine 3 Oklahoma 6 Arkansas 9 Maryland 16 Oregon 8 California 74 Massachusetts 11 Pennsylvania 26 Colorado 15 Michigan 19 Rhode Island 1 Connecticut 7 Minnesota 16 South Carolina 10 Delaware 2 Mississippi 6 South Dakota 2 District of Columbia 1 Missouri 13 Tennessee 17 Florida 47 Montana 4 Texas 64 Georgia 25 Nebraska 5 Utah 9 Hawaii 2 Nevada 7 Vermont 1 Idaho 3 New Hampshire 4 Virginia 20 Illinois 25 New Jersey 14 Washington 19 Indiana 13 New Mexico 4 West Virginia 4 Iowa 6 New York 22 Wisconsin 12 Kansas 6 North Carolina 23 Wyoming 2 Total 672 Manufacturing, Distribution and Headquarters The Company leases its 238,000 square-foot corporate headquarters in Minneapolis, MN.
Biggest changeThe following table summarizes the geographic locations of Sleep Number’s 640 retail stores as of December 28, 2024 : Retail Stores Retail Stores Retail Stores Alabama 10 Louisiana 11 Ohio 20 Alaska 1 Maine 3 Oklahoma 6 Arizona 15 Maryland 16 Oregon 8 Arkansas 8 Massachusetts 10 Pennsylvania 25 California 68 Michigan 20 Rhode Island 1 Colorado 15 Minnesota 16 South Carolina 10 Connecticut 6 Mississippi 5 South Dakota 2 Delaware 2 Missouri 12 Tennessee 15 Florida 46 Montana 4 Texas 58 Georgia 23 Nebraska 5 Utah 7 Hawaii 2 Nevada 6 Vermont 1 Idaho 3 New Hampshire 4 Virginia 20 Illinois 24 New Jersey 15 Washington 18 Indiana 14 New Mexico 4 West Virginia 3 Iowa 6 New York 21 Wisconsin 12 Kansas 5 North Carolina 21 Wyoming 2 Kentucky 9 North Dakota 2 Total 640 Manufacturing, Distribution and Headquarters T he Company leases its 238,000 square-foot corporate headquarters in Minneapolis, MN.
The leases include one or two, three- to five-year option renewals. The Company also operates a bedding fulfillment center at the same location as its Cincinnati, OH assembly distribution center. 33 | 2023 FORM 10-K SLEEP NUMBER CORPORATION
The leases include one or two, three- to five-year option renewals. The Company also operates a bedding fulfillment center at the same location at its Cincinnati, OH assembly distribution center. 33 | 2024 FORM 10-K SLEEP NUMBER CORPORATION

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company’s legal proceedings are discussed in Note 13, Commitments and Contingencies, Legal Proceedings , in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 | 2023 FORM 10-K SLEEP NUMBER CORPORATION PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS The Company’s legal proceedings are discussed in Note 14, Commitments and Contingencies, Legal Proceedings , of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K . ITEM 4.
Added
MINE SAFETY DISCLOSURES Not applicable. 34 | 2024 FORM 10-K SLEEP NUMBER CORPORATION PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation concerning share repurchases completed during the fourth quarter of fiscal 2023 is set forth below: Period Total Number of Shares Purchased (1)(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) October 1, 2023 through October 28, 2023 247 $ 18.02 — $ 348,071,000 October 29, 2023 through November 25, 2023 236 $ 11.65 — 348,071,000 November 26, 2023 through December 30, 2023 1,784 $ 16.19 — 348,071,000 Total 2,267 $ 15.92 — $ 348,071,000 ____________________ (1) Sleep Number did not repurchase any shares during the three months ended December 30, 2023 under its Board-approved $600 million share repurchase program (effective April 4, 2021).
Biggest changeInformation concerning share repurchases completed during the fourth quarter of fiscal 2024 is set forth below: Period Total Number of Shares Purchased (1)(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) September 29, 2024 through October 26, 2024 205 $ 14.65 — $ 348,071,000 October 27, 2024 through November 23, 2024 1,530 $ 12.34 — 348,071,000 November 24, 2024 through December 28, 2024 891 $ 19.84 — 348,071,000 Total 2,626 $ 15.07 — $ 348,071,000 ____________________ (1) Sleep Number did not repurchase any shares during the three months ended December 28, 2024 under its Board-approved $600 million share repurchase program (effective April 4, 2021 ).
Any repurchased shares are constructively retired and returned to an unissued status. 35 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Comparative Stock Performance The graph below compares the total cumulative shareholder return on Sleep Number’s common stock over the last five years to the total cumulative return on the Standard and Poor’s (S&P) 400 Specialty Stores Index and The Nasdaq Stock Market (U.S.) Index assuming a $100 investment made on December 29, 2018.
Any repurchased shares are constructively retired and returned to an unissued status. 35 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Comparative Stock Performance The graph below compares the total cumulative shareholder return on Sleep Number’s common stock over the last five years to the total cumulative return on the Standard and Poor’s (S&P) 400 Specialty Stores Index and The Nasdaq Stock Market (U.S.) Index assuming a $100 investment made on December 28, 2019 .
At December 30, 2023, the Company exceeded the 3.00:1:00 leverage ratio. Sleep Number has not historically paid, and has no current plans to pay, cash dividends on the Company’s common stock.
At December 28, 2024 , the Company exceeded the 3.00:1:00 leverage ratio. Sleep Number has not historically paid, and has no current plans to pay, cash dividends on the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Sleep Number’s common stock trades on The Nasdaq Stock Market LLC (Nasdaq Global Select Market) under the symbol “SNBR.” As of January 27, 2024, there were approximately 188 holders of record of Sleep Number common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Sleep Number’s common stock trades on The Nasdaq Stock Market LLC (Nasdaq Global Select Market) under the symbol “SNBR.” As of January 25, 2025 , there were approximately 181 holders of record of Sleep Number common stock.
(2) In connection with the vesting of employee restricted stock grants, the Company repurchased 2,267 shares of its common stock at a cost of $36 thousand during the three months ended December 30, 2023. (3) There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase program.
(2) In connection with the vesting of employee restricted stock grants, the Company repurchased 2,626 shares of its common stock at a cost of $39 thousand during the three months ended December 28, 2024 . (3) There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase program.
The information contained in this “Comparative Stock Performance” section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically requests that it be treated as soliciting material or incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. 12/29/18 12/28/19 01/02/21 01/01/22 12/31/22 12/30/23 Sleep Number Corporation $ 100 $ 154 $ 255 $ 238 $ 81 $ 46 S&P 400 Specialty Stores Index $ 100 $ 113 $ 134 $ 195 $ 183 $ 224 The Nasdaq Stock Market (U.S.) Index $ 100 $ 137 $ 199 $ 243 $ 163 $ 233 36 | 2023 FORM 10-K SLEEP NUMBER CORPORATION
The information contained in this “Comparative Stock Performance” section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically requests that it be treated as soliciting material or incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. 12/28/19 01/02/21 01/01/22 12/31/22 12/30/23 12/28/24 Sleep Number Corporation $ 100 $ 165 $ 154 $ 52 $ 30 $ 31 S&P 400 Specialty Stores Index $ 100 $ 119 $ 173 $ 162 $ 199 $ 195 The Nasdaq Stock Market (U.S.) Index $ 100 $ 145 $ 177 $ 118 $ 170 $ 223 36 | 2024 FORM 10-K SLEEP NUMBER CORPORATION ITEM 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+36 added−20 removed24 unchanged
Biggest changeThese risks and uncertainties include, among others: • Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending; • Increases in interest rates, which have increased the cost of servicing the Company’s indebtedness; • Availability of attractive and cost-effective consumer credit options; • Ability to achieve savings and efficiencies from cost savings plans related to business restructuring actions and to avoid unexpected adverse effects; • Dependence on, and ability to maintain working relationships with key suppliers and third parties; • Fluctuations in commodity costs or third-party delivery or logistics costs and other inflationary pressures; • Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics, labor challenges, foreign currency fluctuations, inflation, and climate or other disasters, and resulting supply shortages and production and delivery delays and disruptions; • Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages; • The effectiveness of the Company’s marketing strategy and promotional efforts; • The execution of Sleep Number’s Total Retail distribution strategy; • Ability to achieve and maintain high levels of product quality and to improve and expand the product line; • Ability to protect the Company’s technology, trademarks, and brand and the adequacy of its intellectual property rights; • Ability to effectively compete; • Risks of disruption in the operation of any of the Company’s facilities and operations, including manufacturing, assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer service operations; • Ability to comply with existing and changing government regulations and laws; • Pending or unforeseen litigation and the potential for associated adverse publicity; • The adequacy of the Company’s and third-party information systems and costs and disruptions related to upgrading or maintaining these systems; • The Company’s ability to identify and withstand cyber threats that could compromise the security of its systems, result in a data breach or business disruption; • Risks associated with advancements in or adoption of artificial intelligence technologies; • Sleep Number’s ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and effective personnel; • The volatility of Sleep Number stock, its removal from various stock indices, and the potential negative effects of shareholder activism or of changes in coverage by securities analysts; • Environmental, social and governance risks, including increasing regulation and stakeholder expectations; and • The Company’s ability to adapt to climate change and readiness for legal or regulatory responses thereto. 41 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Additional information concerning these and other risks and uncertainties is contained under the caption “Risk Factors” in this Annual Report on Form 10-K.
Biggest changeThese risks and uncertainties include, among others: • Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending; • Interest rates remain elevated, and may further increase and impact the cost of servicing the Company’s indebtedness; • Access to alternative financing options may depend on factors beyond the Company’s control or require the Company to accept unfavorable terms; • Availability of attractive and cost-effective consumer credit options; • Ability to achieve cost savings, efficiencies and other benefits from its business restructuring actions and to avoid adverse effects; • Effectiveness and efficiency of the Company’s marketing strategy and promotions; • Ability to execute Sleep Number’s Total Retail distribution strategy; • Ability to compete effectively; • Ability to achieve and maintain high levels of product and service quality; • Ability to improve and expand the product line and execute new product introductions; • Ability to protect the Company’s technology, trademarks and brand, and the adequacy of its intellectual property rights; • Dependence on, and ability to maintain working relationships with key suppliers and third parties, including some that are the only source of supply or services currently used by the Company; • Fluctuations in commodity costs or third-party delivery or logistics costs and other inflationary pressures; • Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics, labor challenges, foreign currency fluctuations, inflation, climate or other disasters and resulting supply shortages, and production and delivery delays and disruptions; • Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages; • Risks of disruption in the operation of any of the Company’s facilities and operations, including manufacturing, assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer service operations; • Ability to effectively complete potential future acquisitions and business combinations; • Sleep Number’s ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and effective personnel; • Ability to comply with existing and changing government regulations and laws, and to commercialize new products and innovations that meet those existing and changing government regulations and laws; • Ability to identify and withstand cyber threats that could compromise the security of the Company’s systems or those of third parties upon which it relies and could result in a data breach or business disruption; • Risks associated with advancements in or adoption of artificial intelligence technologies; 37 | 2024 FORM 10-K SLEEP NUMBER CORPORATION • Adequacy of the Company’s and third-party information systems, and costs and disruptions related to upgrading or maintaining these systems; • Volatility of Sleep Number stock, its removal from various stock indices and the potential negative effects of shareholder activism or of changes in coverage by securities analysts; • Unfavorable tax treatment; • Environmental, social and governance risks, including increasing scrutiny and evolving regulatory and stakeholder expectations; and • Ability to adapt to climate change and readiness for legal or regulatory responses thereto.
The Company’s MD&A is presented in the following sections: • Overview • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements Overview Business Overview Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and distribution of highly innovative sleep solutions.
The Company’s MD&A is presented in the following sections: • Overview • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements Business Overview Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and distribution of highly innovative sleep solutions.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized sleep wellness platform, a network of highly engaged Smart Sleepers, a vertically integrated operating model, and a culture of individuality, with an ambitious vision to become one of the world’s most beloved brands.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized, digital sleep wellness platform, a network of highly engaged Smart Sleepers, a vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the world’s most beloved brands.
Sleep Number’s exclusive distribution meets its customers whenever and wherever they choose – through digital and in-store touchpoints – to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions to bring the power of 24 billion hours of longitudinal sleep data to sleep science and research.
Sleep Number’s exclusive distribution meets its customers whenever and wherever they choose – through digital and in-store touchpoints – to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions to bring the power of 31 billion hours of longitudinal sleep data to sleep science and research.
This Tenth Amendment, among other things: (a) decreased the total aggregate commitment under the Credit Agreement from $825 million to $685 million; (b) decreased the $625 million revolving loan commitment to $485 million; (c) decreased the accordion from $400 million to $342.5 million; (d) increased the Applicable Commitment Fee Rate to 50 basis points when the Net Leverage Ratio is greater than or equal to 3.50 to 1.00 (as each is defined in the Credit Agreement); (e) increased the Applicable Margin by 25 to 75 basis points for each respective range of Net Leverage Ratios (as each is defined in the Credit Agreement); (f) deemed the Company’s Net Leverage Ratio as greater than or equal to 4.00 to 1.00 but less than 4.50 to 1.00 as of the Tenth Amendment effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the compliance certificate for the quarterly reporting period ending December 30, 2023; (g) amends the definition of Consolidated EBITDA (as defined in the Credit Agreement) to include cash add backs, capped at $30 million for the quarterly reporting periods ending December 30, 2023, March 30, 2024, June 29, 2024, September 28, 2024, and December 28, 2024 and capped at $20 million for each quarterly reporting period ending thereafter; (h) amends the definitions of each of Net Leverage Ratio and Senior Secured Leverage Ratio (as each is defined in the Credit Agreement) to include the total operating lease liabilities of borrower, as calculated in accordance with ASC 842 accounting guidance (as of the end of the most recently completed quarterly reporting period) replacing the prior language of six multiplied by Consolidated Rent Expense (for the most recently completed four quarterly reporting periods); (i) adjusts the permissible maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 5.00 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 5.50 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 5.00 to 1.00 for the quarterly reporting period ending September 28, 2024, (IV) 4.80 to 1.00 for the quarterly reporting period ending December 28, 2024, and (V) 4.00 to 1.00 for each quarterly reporting period occurring thereafter; (j) adjusts the permissible maximum Interest Coverage Ratio (as defined in the Credit Agreement) to (I) 1.50 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 1.25 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 1.50 to 1.00 for the quarterly reporting periods ending September 28, 2024 and December 28, 2024, and (IV) 3.00 to 1.00 for each quarterly reporting period occurring thereafter; and (k) decreased the requisite Net Leverage Ratio from 3.75 to 1.00 down to 3.00 to 1.00 (under the new applicable definitions) before any Acquisitions (with the exception of the Specified Acquisition) or Restricted Payments (as each is defined in the Credit Agreement) may be made.
The amendment, among other things: (a) decreased the total aggregate commitment under the Credit Agreement from $825 million to $685 million ; (b) decreased the $625 million revolving loan commitment to $485 million ; (c) decreased the accordion from $400 million to $343 million ; (d) increased the Applicable Commitment Fee Rate to 50 basis points when the Net Leverage Ratio is greater than or equal to 3.50 to 1.00 (as each is defined in the Credit Agreement); (e) increased the Applicable Margin by 25 to 75 basis points for each respective range of Net Leverage Ratios (as each is defined in the Credit Agreement); (f) deemed the Company’s Net Leverage Ratio as greater than or equal to 4.00 to 1.00 but less than 4.50 to 1.00 as of the amendment effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the compliance certificate for the quarterly reporting period ending December 30, 2023; (g) amended the definition of Consolidated EBITDA (as defined in the Credit Agreement) to include cash add backs, capped at $30 million for the quarterly reporting periods ending December 30, 2023, March 30, 2024, June 29, 2024, September 28, 2024, and December 28, 2024 and capped at $20 million for each quarterly reporting period ending thereafter; (h) amended the definitions of each of Net Leverage Ratio and Senior Secured Leverage Ratio (as each is defined in the Credit Agreement) to include the total operating lease liabilities of borrower, as calculated in accordance with ASC 842 accounting guidance (as of the end of the most recently completed quarterly reporting period) replacing the prior language of six multiplied by Consolidated Rent Expense (for the most recently completed four quarterly reporting periods); (i) adjusted the permissible maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 5.00 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 5.50 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 5.00 to 1.00 for the quarterly reporting period ending September 28, 2024, (IV) 4.80 to 1.00 for the quarterly reporting period ending December 28, 2024, and (V) 4.00 to 1.00 for each quarterly reporting period occurring thereafter; (j) adjusted the permissible minimum Interest Coverage Ratio (as defined in the Credit Agreement) to (I) 1.50 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 1.25 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 1.50 to 1.00 for the quarterly reporting periods ending September 28, 2024 and December 28, 2024, and (IV) 3.00 to 1.00 for each quarterly reporting period occurring thereafter; and (k) decreased the requisite Net Leverage Ratio from 3.75 to 1.00 down to 3.00 to 1.00 (under the new applicable definitions) before any Acquisitions (with the exception of the Specified Acquisition) or Restricted Payments (as each is defined in the Credit Agreement) may be made.
The Company’s purpose is to improve the health and wellbeing of society through higher quality sleep; to date, it has improved the lives of over 15 million people. Sleep Number’s Smart Sleepers benefit from individualized sleep experiences, night after night, and are experiencing the physical, mental and emotional benefits of life-changing sleep.
The Company’s purpose is to improve the health and wellbeing of society through higher quality sleep; to date, it has improved the lives of approximately 16 million people. Sleep Number’s Smart Sleepers benefit from individualized sleep experiences, night after night, and are experiencing the physical, mental and emotional benefits of life-changing sleep.
Comparison of 2022 and 2021 For a discussion of the Company’s 2022 versus 2021 results, see its 2022 Form 10-K. 46 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Liquidity and Capital Resources Managing the Company’s liquidity and capital resources is an important part of its commitment to deliver superior shareholder value over time.
Comparison of 2023 and 2022 For a discussion of the Company’s 2023 versus 2022 results, see its 2023 Form 10-K. 42 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Liquidity and Capital Resources Managing the Company’s liquidity and capital resources is an important part of its commitment to deliver superior shareholder value over time.
However, if actual results are not consistent with its estimates or assumptions, the Company may be exposed to additional losses or gains in future periods. A 10% change in its sales returns allowance at December 30, 2023 would have affected net (loss) income by approximately $1.7 million in 2023. Recent Accounting Pronouncements See “Part II, Item 8.
However, if actual results are not consistent with its estimates or assumptions, the Company may be exposed to additional losses or gains in future periods. A 10% change in its sales returns allowance at December 28, 2024 would have affected net loss by approximately $1.5 million in 2024 . Recent Accounting Pronouncements See “Part II, Item 8.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1, Business and Summary of Significant Accounting Policies - “New Accounting Pronouncements ” for recent accounting pronouncements that may affect the Company’s financial reporting.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1 , Business and Summary of Significant Accounting Policies - “ Recently Adopted and Recently Issued Accounting Pronouncements ” for recent accounting pronouncements that may affect the Company’s financial reporting.
The Company’s primary sources of liquidity are cash flows provided by operating activities and cash available under its $685 million revolving credit facility. As of December 30, 2023, the Company did not have any off-balance sheet financing other than its $7 million in outstanding letters of credit.
The Company’s primary sources of liquidity are cash flows provided by operating activities and cash available under its $678 million revolving credit facility. As of December 28, 2024 , the Company did not have any off-balance sheet financing other than its $7 million in outstanding letters of credit.
Research and development expenses Research and development (R&D) expenses decreased by $6 million to $56 million in 2023, compared with $62 million in 2022 on lower outside services and headcount. While the Company’s consumer innovation pipeline remains robust, it is re-prioritizing R&D resources in this highly constrained environment.
Research and development expenses Research and development (R&D) expenses decreased by $11 million to $45 million in 2024 , compared with $56 million in 2023 on lower outside services and headcount. While the Company’s consumer innovation pipeline remains robust, it is re-prioritizing R&D resources in this highly constrained environment.
The cash generated from ongoing operations and cash available under its revolving credit facility are expected to be adequate to maintain operations and fund anticipated expansion, strategic initiatives and contractual obligations such as lease payments and capital commitments for new retail store locations for the foreseeable future.
The cash generated from ongoing operations and cash available under its revolving credit facility are expected to be adequate to maintain operations and fund anticipated expansion, strategic initiatives and contractual obligations such as lease payments and capital commitments for new retail store locations over the next twelve months .
However, if actual results are not consistent with its estimates or assumptions, the Company may be exposed to losses or gains that could be material. A 10% change in its warranty liability at December 30, 2023, would have affected net (loss) income by approximately $0.7 million in 2023.
However, if actual results are not consistent with its estimates or assumptions, the Company may be exposed to losses or gains that could be material. A 10% change in its warranty liability at December 28, 2024 , would have affected net loss by approximately $0.5 million in 2024 .
The G&A expenses rate increased by 0.6 ppt. in 2023, compared with 2022 due to the items discussed above in addition to the deleveraging impact of the 11% net sales decrease.
The G&A expenses rate increased by 1.1 ppt. in 2024 , compared with 2023 due to the items discussed above in addition to the deleveraging impact of the 11% net sales decrease.
A 10% change in its stock-based compensation expense for the year ended December 30, 2023, would have affected net (loss) income by approximately $1.1 million in 2023. 49 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Warranty Liabilities The Company provides a limited warranty on most of the products it sells.
A 10% change in its stock-based compensation expense for the year ended December 28, 2024 , would have affected net loss by approximately $0.9 million in 2024 . 47 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Warranty Liabilities The Company provides a limited warranty on most of the products it sells.
Amounts may not add due to rounding differences. 2023 2022 2021 $ % of Net Sales $ % of Net Sales $ % of Net Sales Net sales $ 1,887.5 100.0 % $ 2,114.3 100.0 % $ 2,184.9 100.0 % Cost of sales 799.0 42.3 % 912.0 43.1 % 866.1 39.6 % Gross profit 1,088.5 57.7 % 1,202.3 56.9 % 1,318.8 60.4 % Operating expenses: Sales and marketing 847.4 44.9 % 919.6 43.5 % 905.4 41.4 % General and administrative 146.6 7.8 % 153.3 7.2 % 161.4 7.4 % Research and development 55.8 3.0 % 61.5 2.9 % 58.5 2.7 % Restructuring costs 15.7 0.8 % — — % — — % Total operating expenses 1,065.6 56.5 % 1,134.4 53.7 % 1,125.3 51.5 % Operating income 22.9 1.2 % 67.9 3.2 % 193.5 8.9 % Interest expense, net 42.7 2.3 % 19.0 0.9 % 6.2 0.3 % (Loss) income before income taxes (19.8) (1.0 %) 48.9 2.3 % 187.3 8.6 % Income tax (benefit) expense (4.5) (0.2 %) 12.3 0.6 % 33.5 1.5 % Net (loss) income $ (15.3) (0.8 %) $ 36.6 1.7 % $ 153.7 7.0 % Net (loss) income per share: Basic $ (0.68) $ 1.63 $ 6.40 Diluted $ (0.68) $ 1.60 $ 6.16 Weighted-average number of common shares: Basic 22.4 22.4 24.0 Diluted 22.4 22.9 24.9 The percentage of the Company’s total net sales, by dollar volume, was as follows: 2023 2022 2021 Retail stores 86.8 % 86.3 % 87.1 % Online, phone, chat and other 13.2 % 13.7 % 12.9 % Total Company 100.0 % 100.0 % 100.0 % The components of total net sales change, including comparable net sales changes, were as follows: Net Sales Increase/(Decrease) 2023 2022 2021 Retail comparable-store sales (1) (12 %) (8 %) 19 % Online, phone and chat (1) (15 %) 4 % 4 % Total Retail comparable sales change (1) (12 %) (6 %) 17 % Net opened/closed stores, other and 53rd week 1 % 3 % 1 % Total Company (11 %) (3 %) 18 % ____________________ (1) Stores are included in the comparable-store calculation in the 13th full month of operations.
Amounts may not add due to rounding differences. 2024 2023 2022 $ % of Net Sales $ % of Net Sales $ % of Net Sales Net sales $ 1,682.3 100.0% $ 1,887.5 100.0 % $ 2,114.3 100.0 % Cost of sales 679.5 40.4% 799.0 42.3 % 912.0 43.1 % Gross profit 1,002.8 59.6% 1,088.5 57.7 % 1,202.3 56.9 % Operating expenses: Sales and marketing 766.6 45.6% 847.4 44.9 % 919.6 43.5 % General and administrative 150.0 8.9% 146.6 7.8 % 153.3 7.2 % Research and development 45.3 2.7% 55.8 3.0 % 61.5 2.9 % Restructuring costs 18.1 1.1% 15.7 0.8 % — — % Total operating expenses 979.9 58.2% 1,065.6 56.5 % 1,134.4 53.7 % Operating income 22.9 1.4% 22.9 1.2 % 67.9 3.2 % Interest expense, net 48.4 2.9% 42.7 2.3 % 19.0 0.9 % (Loss) income before income taxes (25.5) (1.5%) (19.8) (1.0 %) 48.9 2.3 % Income tax (benefit) expense (5.2) (0.3%) (4.5) (0.2 %) 12.3 0.6 % Net (loss) income $ (20.3) (1.2%) $ (15.3) (0.8 %) $ 36.6 1.7 % Net (loss) income per share: Basic $ (0.90) $ (0.68) $ 1.63 Diluted $ (0.90) $ (0.68) $ 1.60 Weighted-average number of common shares: Basic 22.6 22.4 22.4 Diluted 22.6 22.4 22.9 The percentage of the Company’s total net sales, by dollar volume, was as follows: 2024 2023 2022 Retail stores 87.6 % 86.8 % 86.3 % Online, phone, chat and other 12.4 % 13.2 % 13.7 % Total Company 100.0 % 100.0 % 100.0 % The components of total net sales change, including comparable net sales changes, were as follows: Net Sales Increase/(Decrease) 2024 2023 2022 Retail comparable-store sales (1) (9%) (12%) (8%) Online, phone and chat (1) (17%) (15%) 4% Total Retail comparable sales change (1) (10%) (12%) (6%) Net opened/closed stores and other (1%) 1% 3% Total Company (11%) (11%) (3%) ____________________ (1) Stores are included in the comparable-store calculation in the 13th full month of operations.
Net cash used in investing activities was $58 million for the fiscal year ended December 30, 2023, compared with $71 million in 2022. Investing activities in 2023 included $57 million of property and equipment purchases, compared with $69 million last year.
Net cash used in investing activities was $26 million for the fiscal year ended December 28, 2024 , compared with $58 million in 2023 . Investing activities in 2024 included $24 million of property and equipment purchases, compared with $57 million last year.
The 2023 gross profit rate increased to 57.7% of net sales, compared with 56.9% for the prior-year period.
The 2024 gross profit rate increased to 59.6% of net sales, compared with 57.7% for the prior-year period.
As of December 30, 2023, the Company had $540 million of borrowings under its revolving credit facility, $7 million in outstanding letters of credit and net liquidity available under the credit facility of $138 million.
As of December 28, 2024 , the Company had $547 million of borrowings under its revolving credit facility, $7 million in outstanding letters of credit and net liquidity available under the credit facility of $124 million .
Total Retail smart bed unit sales decreased 16% compared with the prior year. Average revenue per smart bed unit in Total Retail increased by 7% to $5,755, compared with $5,403 in the prior-year period. Gross profit Gross profit for 2023 of $1.09 billion decreased by $114 million, or 9%, compared with $1.20 billion in 2022.
Total Retail smart bed unit sales decreased 12% compared with the prior year. Average revenue per smart bed unit in Total Retail increased to $5,818 , compared with $5,755 in the prior-year period. Gross profit Gross profit for 2024 of $1.0 billion decreased by $86 million , or 8% , compared with $1.09 billion in 2023 .
Amounts may not add due to rounding differences: 2023 2022 Total cash (used in) provided by: Operating activities $ (9,028) $ 36,138 Investing activities (58,352) (70,607) Financing activities 68,127 33,872 Net increase (decrease) in cash and cash equivalents $ 747 $ (597) Cash used in operating activities for the fiscal year ended December 30, 2023 was $9 million compared with net cash provided by operating activities of $36 million for the fiscal year ended December 31, 2022.
Amounts may not add due to rounding differences: 2024 2023 Total cash provided by (used in): Operating activities $ 27,143 $ (9,028) Investing activities (26,291) (58,352) Financing activities (1,441) 68,127 Net (decrease) increase in cash and cash equivalents $ (589) $ 747 Cash provided by operating activities for the fiscal year ended December 28, 2024 was $27 million , compared with net cash used in operating activities of $9 million for the fiscal year ended December 30, 2023 .
The foregoing description of the Tenth Amendment is qualified in its entirety by reference to the complete terms of the Tenth Amendment, which is filed as an exhibit to this Quarterly Report on Form 10-Q.
The foregoing description of the Tenth Amendment is qualified in its entirety by reference to the complete terms of the Tenth Amendment, which is filed as an exhibit to this Annual Report on Form 10-K. The Company amended the Credit Agreement on March 3, 2025.
The $7 million decrease in G&A expenses mainly consisted of the following: (i) a $8.2 million reduction in employee compensation on lower headcount; (ii) a $3.1 million benefit from favorable legal settlements (iii) a $0.9 million reduction in professional and consulting fees; (iv) a $0.7 million decrease in travel and training expenses; and (v) a $1.2 million decrease in other miscellaneous expenses; partially offset by (vi) a $4.0 million increase in company-wide, performance-based incentive compensation due to the achievement of first half of the fiscal year performance targets in the current year; and (vi) a $3.5 million increase in technology investments.
The $3 million increase in G&A expenses mainly consisted of the following: (i) an increase in miscellaneous other expense of $4.8 million, which benefited during the prior year from legal and insurance settlements of $4.1 million; (ii) $4.6 million increase in company- wide, performance-based incentive compensation due to the achievement of fiscal year performance targets in the current year; partially offset by (iii) a $5.9 million reduction in employee compensation on lower headcount; and (iv) a $1.0 million benefit from a decrease in other occupancy expenses.
Income tax (benefit) expense Income tax benefit was $4 million for the year ended December 30, 2023, compared with income tax expense of $12 million for the same period one year ago. The effective income tax rate for the year ended December 30, 2023 was 22.6% compared with 25.1% for the year ended December 31, 2022.
Income tax (benefit) expense Income tax benefit was $5 million for the year ended December 28, 2024 , compared with $4 million for the same period one year ago. The effective income tax rate for the year ended December 28, 2024 was 20.2% compared with 22.6% for the year ended December 30, 2023 .
The $227 million net sales decrease compared with the same period one year ago was primarily comprised of: (i) a $206 million decrease in the Company’s Total Retail comparable net sales; (ii) a $42 million decrease from phone, online and chat; offset by (iii) a $21 million increase resulting from net store openings.
The $205 million net sales decrease compared with the same period one year ago was primarily comprised of: (i) a $144 million decrease in the Company’s Total Retail comparable net sales; (ii) a $41 million decrease from phone, online and chat; (iii) a $21 million decrease resulting from net opened/closed stores in the past 12 months; (iv) offset by a $1 million increase in wholesale/other.
These actions support $40 to $45 million of incremental operating expense reductions in 2024. Interest expense, net Interest expense, net increased to $43 million for the year ended December 30, 2023, compared with $19 million for the same period one year ago. The $24 million increase was primarily related to a higher weighted-average interest rate during 2023 compared with 2022.
Interest expense, net Interest expense, net increased to $48 million for the year ended December 28, 2024 , compared with $43 million for the same period one year ago. The $6 million increase was primarily related to a higher weighted-average interest rate during 2024 compared with 2023 .
During the fiscal year ended December 30, 2023, the Company repurchased $4 million of its common stock (in connection with the vesting of employee restricted stock grants), compared with $64 million in 2022 (based on settlement dates, $55 million under its Board-approved share repurchase program and $9 million in connection with the vesting of employee restricted stock grants).
During 2024 , the Company repurchased $1 million of its stock compared with $4 million (based on settlement dates, in connection with the vesting of employee restricted stock awards ) in 2023 . The Company made no share repurchases under its Board-approved share repurchase program in either fiscal year .
The sales and marketing expense rate increased to 44.9% of net sales, compared with 43.5% for the same period one year ago.
Sales and marketing expenses Sales and marketing expenses decreased to $767 million in 2024 , compared with $847 million last year. The sales and marketing expense rate increased to 45.6% of net sales, compared with 44.9% for the same period one year ago.
Total Retail comparable sales in 2020 have been adjusted to remove the estimated impact of the additional week. 44 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Other sales metrics were as follows: 2023 2022 2021 Average sales per store ($ in thousands) (1)(4) $ 2,853 $ 3,281 $ 3,600 Average sales per square foot (1)(4) $ 926 $ 1,081 $ 1,212 Stores > $2 million in net sales (2)(4) 65 % 76 % 84 % Stores > $3 million in net sales (2)(4) 24 % 36 % 48 % Average revenue per smart bed unit – Total Retail (3) $ 5,755 $ 5,403 $ 5,102 ____________________ (1) Trailing-twelve months Total Retail comparable sales per store open at least one year.
Stores that have been remodeled or repositioned within the same shopping center remain in the comparable-store base. 40 | 2024 FORM 10-K SLEEP NUMBER CORPORATION Other sales metrics were as follows: 2024 2023 2022 Average sales per store ($ in thousands) (1) $ 2,601 $ 2,853 $ 3,281 Average sales per square foot (1) $ 841 $ 926 $ 1,081 Stores > $2 million in net sales (2) 57 % 65 % 76 % Stores > $3 million in net sales (2) 18 % 24 % 36 % Average revenue per smart bed unit – Total Retail (3) $ 5,818 $ 5,755 $ 5,403 ____________________ (1) Trailing-twelve months Total Retail comparable sales per store open at least one year.
The number of retail stores operating was as follows: 2023 2022 2021 Beginning of period 670 648 602 Opened 36 49 77 Closed (34) (27) (31) End of period 672 670 648 Comparison of 2023 and 2022 Net sales Net sales in 2023 decreased 11% to $1.9 billion, compared with $2.1 billion in 2022.
The number of retail stores operating was as follows: 2024 2023 2022 Beginning of period 672 670 648 Opened 12 36 49 Closed (44) (34) (27) End of period 640 672 670 Comparison of 2024 and 2023 Net sales Net sales in 2024 decreased 11% to $1.7 billion , compared with $1.9 billion in 2023 due to t he ongoing weakness in the mattress industry and consumers continuing to scrutinize their spending.
At December 30, 2023, the company’s leverage ratio as defined in the credit agreement was 4.1x versus the permissible net leverage ratio of 48 | 2023 FORM 10-K SLEEP NUMBER CORPORATION 5.0x, the weighted-average interest rate on borrowings under the credit facility was 8.5% and the Company was in compliance with all financial covenants.
At December 28, 2024 , the company’s leverage ratio as defined in the Credit Agreement was 4.2 x versus the permissible net leverage ratio of 4.8x, the weighted-average interest rate on borrowings under the credit facility was 7.6% and the Company was in compliance with all financial covenants.
Net loss per diluted share decreased to $0.68, compared with net income per diluted share of $1.60 per diluted share in 2022. • The Company achieved a return on invested capital (Adjusted ROIC) of 7.8% in 2023, compared with 17.6% in 2022. • Cash used in operating activities in 2023 decreased to $9 million, compared with cash provided by operating activities of $36 million for the prior year.
Net loss per diluted share increased to $0.90 , compared with $0.68 in 2023 . • The Company’s adjusted return on invested capital (Adjusted ROIC) was 7.6% in 2024 , compared with 7.8% in 2023 . • The Company generated $27 million in cash from operating activities in 2024 , compared with cash used in operating activities of $9 million in 2023 .
The 0.8 ppt. increase in the gross profit rate was mainly due to: (i) favorable pricing actions taken over the past twelve months that increased the rate by 2.0 ppt.; (ii) improvement in commodity prices and operating efficiencies increased the rate by 1.5 ppt.; partially offset by (iii) product mix of FlexFit smart adjustable bases, pressured the rate by 1.6 ppt.; (iv) higher returns and warranty costs, primarily related to the returnability of the integrated adjustable base as part of the Climate360 smart bed, decreased the rate by 0.7 ppt; and (v) lower delivered smart bed volume deleveraged the rate by 0.3 ppt.
The 1.9 ppt. increase in the gross profit rate was mainly due to: (i) year-over-year product cost reductions through value engineering and ongoing supplier negotiations that increased the rate by 1.1 ppt; (ii) efficiency gains in home delivery and logistics operations increased the rate by 1.0 ppt; (iii) favorable pricing actions taken over the past twelve months that increased the rate by 0.8 ppt; (iv) lower returns costs increased the rate by 0.3 ppt; partially offset by (v) product mix of FlexFit smart adjustable bases, which pressured the rate by 0.8 ppt; and (vi) lower delivered smart bed volume deleveraged the rate by 0.5 ppt.
(2) Trailing-twelve months for stores open at least one year (excludes Online, Phone and Chat sales). (3) Represents Total Retail net sales divided by Total Retail smart bed units. (4) Fiscal 2020 included 53 weeks, as compared to 52 weeks in fiscal 2023, 2022 and 2021. The additional week in 2020 was in the fiscal fourth quarter.
(2) Trailing-twelve months for stores open at least one year (excludes Online, Phone and Chat sales). (3) Represents Total Retail net sales divided by Total Retail smart bed units.
Critical Accounting Policies and Estimates The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). In connection with the preparation of its financial statements, the Company is required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, sales, expenses and the related disclosures.
In connection with the preparation of its financial statements, the Company is required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, sales, expenses and the related disclosures. Predicting future events is inherently an imprecise activity and as such requires the use of judgment.
On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from the Company’s assumptions and estimates, and such differences could be material.
However, because future events and their effects cannot be determined with certainty, actual results could differ from the Company’s assumptions and estimates, and such differences could be material.
Net cash provided by financing activities was $68 million for the fiscal year ended December 30, 2023, compared with $34 million in 2022.
Net cash used in financing activities was $1 million for the fiscal year ended December 28, 2024 , compared with net cash provided by financing activities of $68 million in 2023 . The decrease in cash provided by financing activities is primarily due to a $74 million decrease in cash provided by short-term borrowings.
Predicting future events is inherently an imprecise activity and as such requires the use of judgment. The Company bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its consolidated financial statements are prepared.
The Company bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with GAAP.
The Company generates revenue by marketing and selling its innovative smart beds directly to new and existing customers through its vertically integrated, exclusive, direct-to-consumer retail touch points including Stores, Online, Phone, and Chat (Total Retail). 42 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Results of Operations Fiscal 2023 Summary Financial highlights for fiscal 2023 were as follows: • Net sales for 2023 decreased 11% to $1.9 billion, compared with $2.1 billion in 2022.
The Company generates revenue by marketing and selling its innovative smart beds directly to new and existing customers through its vertically integrated, exclusive, direct-to-consumer retail touch points including Stores, Online, Phone, and Chat (Total Retail).
Restructuring costs In fiscal 2023, the Company incurred $15.7 million of restructuring costs. In light of the demand trajectory change in August 2023, the Company initiated business restructuring actions. Charges comprised of contract termination costs, severance and employee-related benefits, professional fees and other, and asset impairment charges.
Charges incurred related to this initiative were comprised of contract termination costs, severance and employee-related benefits, professional fees and other, and asset impairment charges and are included in the restructuring costs line in the Company’s consolidated statement of operations.
Financing activities for both years reflect the cash proceeds from the exercise of employee stock options. 47 | 2023 FORM 10-K SLEEP NUMBER CORPORATION In the second quarter of fiscal 2022, the Company suspended share repurchases under its Board-approved share repurchase program.
The Company also paid $2 million for debt issuance costs associated with the Credit Agreement amendment incurred during 2023 . Financing activities for 2023 reflect the cash proceeds from the minimal exercise of employee stock options. There was no option exercise activity during 2024 . The Company suspended share repurchases under its Board-approved share repurchase program during fiscal 2022.
For additional details, see the components of total net sales growth on page 44 . • Sales per store in 2023 (sales for stores open at least one year, Total Retail, including Online, Phone and Chat) on a trailing twelve-month basis totaled $2.9 million, 13.0% lower than 2022. • 2023 operating income of $23 million decreased by $45 million compared with $68 million in the prior year, driven by the decrease in net sales and lower gross margin; partially offset by a $69 million reduction in total operating expense that included $16 million of restructuring costs in the fourth quarter.
For additional details, see the components of total net sales change on page 39 . • Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat) for the year ended December 28, 2024 totaled $2.6 million , compared with $2.9 million for the same period last year. • Operating income for both 2024 and 2023 was $23 million .
The Company’s 2023 operating income rate decreased to 1.2% of net sales, compared with 3.2% of net sales in 2022. Its 2023 operating income rate was impacted by the deleveraging impact of the 11% decrease in net sales. • Net loss in 2023 of $15 million, compared with net income of $37 million in 2022.
Operating income was pressured by the decrease in net sales that was partially offset by the Company’s $86 million reduction in total operating expense that included $18 million of restructuring costs during 2024 . The Company’s 2024 operating income rate increased to 1.4% of net sales, compared with 1.2% of net sales in 2023 .
General and administrative expenses General and administrative (G&A) expenses decreased $7 million to $147 million in 2023, compared with $153 million in the prior year, and increased to 7.8% of net sales, compared with 7.2% of net sales one year ago.
The current-year sales and marketing expense rate increase of 0.7 ppt. was primarily due to the deleveraging impact of an 11% net sales decrease offset by a 10% decrease in expenses including a 9% lower media spend. 41 | 2024 FORM 10-K SLEEP NUMBER CORPORATION General and administrative expenses General and administrative (G&A) expenses increased $3 million to $150 million in 2024 , compared with $147 million in the prior year, and increased to 8.9% of net sales, compared with 7.8% of net sales one year ago.
Purchases of property and equipment for 2023 was $57 million, compared with $69 million in 2022. • The Company ended 2023 with $540 million of borrowings under its credit facility, compared with $460 million at the end of 2022. Net liquidity available under the credit facility was $138 million at December 30, 2023.
Purchases of property and equipment for 2024 was $24 million , compared with $57 million in 2023 . • Free cash flow provided $4 million for the year ended December 28, 2024 , compared with using $66 million for the same period last year. • The Company ended 2024 with $547 million of borrowings under its revolving credit facility, compared with $540 million at the end of 2023 . 39 | 2024 FORM 10-K SLEEP NUMBER CORPORATION The following table sets forth the Company’s results of operations expressed as dollars and percentages of net sales.
Significant changes in cash and cash equivalents during 2023 included $73 million increase in short-term borrowings, which were offset by $57 million of cash used to purchase property and equipment, $9.0 million of cash used by operating activities and $4 million of cash used to repurchase the Company’s common stock (in connection with the vesting of employee restricted stock grants).
Significant changes in cash and cash equivalents during 2024 included $27 million of cash provided by operating activities, which was offset by $24 million of cash used to purchase property and equipment and $3 million used in the issuance of a note receivable. The following table summarizes the Company’s cash flows (dollars in millions).
Significant components of the $45 million year-over-year decrease in cash from operating activities included: (i) a $52 million decrease in net (loss) income in 2023 compared with 2022; (ii) $32 million fluctuation in customer prepayments due to the timing of customer deliveries; (iii) a $25 million change in prepaid expenses and other current assets primarily due to amount and timing of rebate payments; (iv) a $24 million fluctuation in accounts payable due to lower expenses in the current year’s fourth quarter and timing of payments; and (v) a $17 million fluctuation in accrued compensation and benefits primarily related to year-over-year changes in company-wide performance-based compensation that was earned in 2021 and paid in the first quarter of 2022, compared with no company-wide performance-based compensation earned in 2022 and paid in the first quarter of 2023.
Significant components of the $36 million year-over-year increase in cash from operating activities included: (i) a $22 million fluctuation in customer prepayments due to the timing of customer deliveries; (ii) a $14 million fluctuation in inventory due to lower sales volumes and operational improvements; (iii) a $13 million fluctuation in accounts payable due to lower expenses in the current year’s fourth quarter and timing of payments; (iv) a $10 million fluctuation in accounts receivable due to lower sales volumes and timing of orders at the end of fiscal 2024 compared with 2023 ; partially offset by (v) a $15 million fluctuation in other accruals and liabilities due to timing of store buyout costs; (vi) an $8 million decrease in depreciation and amortization due to recent lower capital spending levels and restructuring related fixed asset impairments.
See Notes 7, Leases , and 13, Commitments and Contingencies , for further details on the Company’s contractual obligations. Cash and cash equivalents totaled $2.5 million and $1.8 million at December 30, 2023 and December 31, 2022, respectively.
Cash and cash equivalents totaled $2.0 million and $2.5 million at December 28, 2024 and December 30, 2023 , respectively.
Removed
And Sleep Number’s 4,100 purpose-driven team members are dedicated to the Company’s mission of improving lives by individualizing sleep experiences. Sleep Number is focused on cost improvement through broad-based restructuring actions to become a stronger, more durable company, poised for accelerating growth and superior shareholder returns as the bedding industry demand environment improves.
Added
Additional information concerning these and other risks and uncertainties is contained under the caption “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
Removed
Demand was impacted by ongoing macro challenges with consumers’ increased focus on price to value as their purchasing power reached a record low in August of 2023.
Added
And Sleep Number’s 3,700 purpose-driven team members are dedicated to the Company’s mission of improving lives by individualizing sleep experiences. The bedding in dustry has been in a sector level recession for three years with mattress industry unit volumes returning to an estimated 24 million units in 2024, the lowest level since 2015.
Removed
The bedding industry remains at recessionary levels with low consumer sentiment. • The 11% net sales decrease consisted of a 12% comparable sales decrease in Total Retail, partially offset by 1 percentage points (ppt.) of sales growth from net opened/closed stores in the past 12 months.
Added
Consumer sentiment remains well below historical averages and high interest rates are putting ongoing pressure on the housing market. Consumers continue to scrutinize spending, with inflation and other factors weighing on their purchasing power.
Removed
The Company’s net leverage ratio as defined in its Credit Agreement was 4.1x as of December 30, 2023. The maximum net leverage ratio under its Credit Agreement is 5.0x for the three quarterly reporting periods ending December 30, 2023. • The Company suspended share repurchases under the Board-approved share repurchase program in the second quarter of fiscal 2022.
Added
Since initiating the Company’s operating 38 | 2024 FORM 10-K SLEEP NUMBER CORPORATION model transformation in the back-half of 2023, the Company has executed structural changes to reduce fixed expenses, while prioritizing improving margins and generating cash to create greater financial resilience across market cycles.
Removed
As of December 30, 2023, the remaining authorization under its Board-approved share repurchase program was $348 million. 43 | 2023 FORM 10-K SLEEP NUMBER CORPORATION The following table sets forth the Company’s results of operations expressed as dollars and percentages of net sales. Figures are in millions, except percentages and per share amounts.
Added
Results of Operations Financial Highlights for Fiscal 2024 were as follows: • Net sales for 2024 decreased 11% to $1.7 billion , compared with $1.9 billion in 2023 .
Removed
Stores that have been remodeled or repositioned within the same shopping center remain in the comparable-store base. Fiscal 2020 included 53 weeks, as compared to 52 weeks for the periods presented.
Added
Demand was impacted by the ongoing weakness in the mattress industry and consumers continuing to scrutinize their spending. • The net sales change resulted from a 10% comparable sales decrease in Total Retail.
Removed
Total Retail comparable sales have been adjusted to remove the estimated impact of the additional week in 2020.
Added
Its 2024 operating income rate was impacted by the deleveraging impact of the 11% decrease in net sales. • Adjusted EBITDA for 2024 was $120 million , compared to $127 million in 2023 due to year-over-year net sales decline offset by ongoing gross margin improvements and cost reduction actions. • Gross profit rate of 59.6% was 1.9 percentage points (ppt.) higher than the prior-year.
Removed
Demand was impacted by ongoing macro challenges with consumers’ increased focus on price to value as their purchasing power reached a record low in August of 2023. The bedding industry remains at recessionary levels with low consumer sentiment.
Added
The increase was primarily due to year-over-year product cost reductions through value engineering and ongoing supplier negotiations and efficiency gains in home delivery and logistics operations.
Removed
The 11% net sales decrease was driven by a 12% comparable sales decrease in Total Retail, partially offset by 1 percentage points (ppt.) of growth from net opened/closed stores in the past 12 months, and other.
Added
For additional details, see the gross profit discussion on page 40 . • The $86 million year-over-year reduction in the Company’s operating expenses was due to lower sales and marketing of $81 million and decreased research and development expenses of $11 million , partly offset by slight increases in general and administrative expenses and restructuring costs when compared to 2023 . • Net loss in 2024 was $20 million , compared with $15 million in 2023 .
Removed
Online, Phone and Chat sales (included in comparable sales noted above) made up 13.2% and 13.7% of total net sales in 2023 and 2022, respectively, as consumers embraced transacting remotely with Sleep Number as well as in its stores. For additional details, see the components of total net sales growth on page 44 .
Added
Figures are in millions, except percentages and per share amounts.
Removed
In addition, the Company’s gross profit rate will fluctuate from year to year due to a variety of other factors, including changes in manufacturing and supply chain operations and changes in performance-based incentive compensation. 45 | 2023 FORM 10-K SLEEP NUMBER CORPORATION Sales and marketing expenses Sales and marketing expenses decreased to $847 million in 2023, compared with $920 million last year.
Added
The net sales change consisted primarily of a 10% Total Retail comparable sales decrease. For additional details, see the components of total net sales growth on page 39 .
Removed
The current-year sales and marketing expenses rate increase of 1.4 ppt. was primarily due to: (i) deleveraging impact of the 11% net sales decrease; partially offset by (ii) a decrease in consumer financing costs as the Company adjusted promotional offers to mitigate increased costs associated with the higher interest rate environment resulting in 0.3 ppt. of leverage; and (iii) a 12% decrease in media spend year-over-year resulting in 0.2 ppt. of leverage.
Added
Restructuring costs In fiscal 2024 , the Company incurred $18.1 million of restructuring costs compared with $15.7 million in 2023 . In the fourth quarter of 2023 , the Company initiated business restructuring actions.
Removed
The following table summarizes the Company’s cash flows (dollars in millions).
Added
The Company expects an additiona l $5 million to $7 million of restructuring costs to be incurred during 2025, primarily due to lease contract termination costs.
Removed
Short-term borrowings increased by $73 million during 2023 due to a $80 million increase in borrowings under its credit facility to $540 million, offset by a $6 million decrease in book overdrafts which are included in the net change in short-term borrowings.
Added
See Note 11, Restructuring Costs , of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for further information on restructuring costs.
Removed
Short-term borrowings increased by $98 million during 2022 due to a $77 million increase in borrowings under its credit facility to $460 million, in addition to a $21 million increase in book overdrafts.
Added
The Company regularly assesses the likelihood that its deferred tax assets will be recovered from future Company earnings. The Company considers projected future taxable earnings and ongoing tax planning strategies in assessing the amount of the valuation allowance necessary.
Removed
During 2022, the Company repurchased 1.0 million shares at a cost of $55 million (based on trade dates, $57.46 per share). As of December 30, 2023, the remaining authorization under its Board-approved share repurchase program was $348 million. There is no expiration date governing the period over which the Company can repurchase shares.
Added
If the Company’s earnings decline over an extended period of time, it may not be able to utilize its deferred tax assets and it may need to record a valuation allowance against them.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf overall interest rates were one percentage point higher than current rates, its annual net (loss) income would decrease by $4.1 million based on the $540 million of borrowings under its credit facility at December 30, 2023. The Company does not manage its interest-rate volatility risk through the use of derivative instruments. 50 | 2023 FORM 10-K SLEEP NUMBER CORPORATION
Biggest changeIf overall interest rates were one percentage point higher than current rates, its annual net (loss) income would decrease by $4.2 million based on the $547 million of borrowings under its credit facility at December 28, 2024 .
Added
The Company does not manage its interest-rate volatility risk through the use of derivative instruments. 48 | 2024 FORM 10-K SLEEP NUMBER CORPORATION

Other SNBR 10-K year-over-year comparisons