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Why Sleep Number Stock Dropped Today

What happened

In an overall red day for the stock markets, bed retailer Sleep Number (NASDAQ: SNBR) dropped significantly more than the overall S&P 500 index. Sleep Number closed the session off about 13% on the day.

So what

Sleep Number wasn't in bed alone today, though. Another specialty mattress maker, Casper Sleep (NYSE: CSPR), also fell more than 9%. And overall markets took down many stocks that have had outsized returns over the past several months. Sleep Number shares are still up about 170% in 12 months and more than 50% just this year.

Sleep Number retail showroom. Image source: Sleep Number.

Now what

Beds and mattresses have been selling well all through the pandemic. And Sleep Number offers a high-tech sleep solution with its adjustable air-chambered mattresses. Consumers focused on home-retail purchases much of the last year, but Sleep Number thinks the momentum will continue.

Its fourth-quarter 2020 net sales grew 29% year over year, and it expects earnings-per-diluted share to increase 30% for the full-year 2021 versus 2020, excluding an extra 53rd week. If the company hits that earnings mark, it will represent a double in earnings per share in the last two years.

Sometimes the market corrects, and sometimes it rotates between sectors. After a strong run in the stock, that looks to be what happened today. Long-term investors should be able to sleep well through that kind of volatility as long as the business continues to perform as expected.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Sleep Number. The Motley Fool has a disclosure policy.


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