Over the last few years, Sleep Number, a well-recognized company in the sleep industry, has faced significant financial challenges. The impacts have been broad and deep, affecting the company’s workforce, retail footprint, and overall bottom line. This piece will give you an understanding of the circumstances that led to the company’s cost-cutting measures, including considerable layoffs and store closures.
The 2024 Layoffs at Sleep Number
In 2024, Sleep Number made the tough decision of reducing its workforce by about 10%. This meant that around 500 employees, spread across various departments, had to leave the company. The layoffs were not concentrated in one specific area but spanned across all organizational sectors, including corporate and research and development departments. This move was a part of the company’s cost-reduction strategy, which also included plans to close down between 40 to 50 stores by the end of 2024.
The decision came after a period of financial decline for the company. In the third quarter of 2023, Sleep Number reported a net loss of more than $2.3 million, a stark contrast to the net income of over $5 million in the same quarter the previous year. The company’s net sales also followed a similar downward trend, declining by 13% year-over-year to $472.6 million.
A Look At Sleep Number’s 2023 Layoffs
However, the financial challenges of 2024 were not the first time Sleep Number faced such difficulties. Even in 2023, the company had to take several cost-cutting measures, including layoffs, to navigate the economic downturn. In addition to the workforce reduction, Sleep Number also planned to slow down the rate of new store openings, optimize costs in its manufacturing and home delivery network, and reduce operating expenses by up to $50 million.
These financial challenges and the subsequent decisions taken by the company’s management and board drew criticism from Stadium Capital Management, an activist investor. The investor called out the management for their decisions, applying pressure on the company to rethink its strategies. Responding to this, Sleep Number expanded its board with two new members and established a new committee to review the company’s use of capital.
Despite the financial turmoil and the pressure from stakeholders, Sleep Number’s CEO, Shelly Ibach, remained confident about the company’s future. She believed in the strategic direction set by the company and expected the restructuring initiatives to lead to a more sustainable operating model. The hope was that these changes would improve profitability and cash flows, setting the company on a path towards recovery and growth.
Sleep Number Overview
If you’re not familiar with Sleep Number, it’s a company that’s well-known in the sleep industry for its innovative products. Founded in 1987, the Minnesota-based firm has been on a mission to improve lives by individualizing sleep experiences. Its commitment to quality sleep solutions has won it a loyal customer base over the years. However, recent times have been rough for the company. Financial challenges have led Sleep Number to make a series of tough decisions, including significant layoffs and store closures.
The Reasons Behind These Layoffs
Understanding the reasons behind these drastic measures requires a peek into the company’s recent financial performance. In 2023, the situation started to look grim for Sleep Number. The company reported a net loss of over $2.3 million in the third quarter, a sharp drop from the net income of $5 million in the same period the previous year. Net sales weren’t faring any better, with a year-over-year decline of 13% to $472.6 million.
This financial downturn prompted the company to take harsh cost-cutting measures. In 2024, Sleep Number decided to reduce its workforce by about 10%, leading to around 500 employees losing their jobs. These layoffs weren’t isolated to a single department but spread across the entire organization, affecting both corporate and research and development roles. The company also announced plans to close between 40 to 50 stores by the end of 2024.
But financial challenges weren’t the only hurdles Sleep Number had to overcome. The company also faced pressure from Stadium Capital Management, an activist investor. The investor criticized the company’s management and board, questioning their decisions and demanding a change in strategy. In response, Sleep Number expanded its board with two new members and established a new committee to review the company’s use of capital.
Can We Expect More Layoffs in the Future?
With the significant layoffs and store closures in recent years, it’s natural to wonder what the future holds for Sleep Number. Will there be more layoffs? More store closures?
While it’s impossible to predict the future, we can look at the company’s current strategy and leadership sentiments for hints. Sleep Number CEO, Shelly Ibach, remains optimistic about the company’s future. She firmly believes in the strategy set by the company and views the restructuring initiatives as a path towards a more sustainable operating model. According to her, these changes should improve profitability and cash flows, setting the company on a course towards recovery and growth.
However, the success of these measures will largely depend on the company’s ability to navigate these turbulent times. It will need to effectively manage its resources, respond to market dynamics, and meet customer expectations. Only time will tell how successful Sleep Number will be in its recovery efforts and whether it can avoid further layoffs in the future.
For now, it’s a waiting game. The company, its employees, and its stakeholders can only hope for the best while preparing for the worst. After all, as the saying goes, “hope for the best, but prepare for the worst.”
Financial Performance Of Sleep Number
Financial performance is a crucial indicator of a company’s health, and for Sleep Number, it’s been a challenging journey. The third quarter of 2023 was particularly tough, with the company reporting a net loss of over $2.3 million. Just a year earlier in the same quarter, Sleep Number had recorded a net income of over $5 million. This drastic change in fortunes was a clear sign that the company was facing significant financial challenges.
Net sales also showed a worrying trend. The figures declined by 13% year-over-year, dropping to $472.6 million. Such a decline in sales can be a real concern for any business, impacting its ability to operate profitably. For Sleep Number, this decrease in sales contributed to the decision to implement cost-cutting measures.
The Layoffs Impact on Employees
Job cuts are never easy, and for Sleep Number, laying off about 10% of its workforce was a decision made out of necessity rather than choice. The move affected approximately 500 employees, creating a wave of uncertainty and concern. What made matters worse was that these layoffs were not confined to a single department. They were spread across the whole organization, affecting many different roles.
From corporate to research and development, no area of the company was left untouched. This wide-scale retrenchment likely left a significant impact on the remaining employees too. With colleagues losing their jobs, morale might have taken a hit, potentially affecting productivity and overall company culture.
Store closures were another part of the cost-cutting strategy, with plans announced to shut down between 40 to 50 stores by the end of 2024. This decision not only affected the employees working in these stores but might also have frustrated customers who rely on these physical locations to try out and buy Sleep Number products.
Conclusion
Sleep Number has had to make some tough decisions in recent years, driven by a challenging financial situation. The company’s financial performance in 2023 and 2024 showed clear signs of struggle, with a significant net loss and declining sales. This led to the difficult decision to lay off a substantial portion of the workforce and close several stores.
These measures have undoubtedly had a profound impact on employees, both those who were let go and those who remained with the company. With the uncertainty of the situation and the company’s future, it’s been a trying time for everyone involved. However, despite these challenges, the leadership at Sleep Number remains confident.
CEO Shelly Ibach stands firmly behind the company’s strategy and believes that these restructuring initiatives will lead to a stronger, more sustainable business model. While the road to recovery may be tough, the hope remains that these measures will improve profitability and cash flows, setting the company back on its track towards growth.
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