Sleep Number (NASDAQ:SNBR) saw its fourth-quarter losses widen substantially, as the specialized mattress maker struggled with a combination of sluggish consumer demand and a heavy non-cash accounting charge.
The Minneapolis-based company reported net sales of $347 million for the period ended Jan. 3, 2026, an 8% decline compared to the previous year.
Management attributed the drop to ongoing pressure across the mattress industry and a noticeable dip in showroom traffic.
The bottom line was hit particularly hard by a $47.9 million deferred tax valuation adjustment, leading to a total net loss of $59 million for the quarter, compared to a $5 million loss in the prior-year period.
Profitability was also squeezed by a transition in the company's product catalog.
Gross profit margin fell to 55.6% from 59.9%, largely due to a $9.6 million inventory obsolescence charge tied to the launch of a new product line.
On an adjusted basis, excluding the one-time inventory hit, gross margins remained relatively resilient at 58.4%.
To counter the top-line contraction, Sleep Number aggressively reduced its cost structure.
Adjusted operating expenses fell 9% to $197 million, driven by significant cuts in marketing, research and development, and general administrative costs.
These efforts helped the company maintain a positive adjusted EBITDA of $19 million, though this figure represented a 26% decline from the previous year.
The company also recognized $14 million in restructuring and non-recurring costs, which included contract termination fees related to store closures.