Key Summary: On August 25, 2023, Stadium Capital Management (8.5%) expressed concerns over the company’s long-term underperformance and advocated for shareholder representation on the Board to improve governance, capital allocation, and operations. On September 13, 2023, Stadium Capital (9%) requested a meeting with independent directors, criticizing the Board for poor returns, capital allocation, and governance, and for rejecting collaboration on director refreshment. They noted that if Sleep Number's R&D spending matched Tempur Sealy's proportionally, its 2023 EPS could double. On November 7, 2023, Stadium Capital entered into a cooperation agreement with the company, resulting in the addition of Stephen Macadam and Hilary Schneider to the Board. On Nov 4, 2024, Stadium Capital Voices Concerns Over the company's long-term performance following governance changes
Market Cap: $293 million| Sleep Number Corporation, together with its subsidiaries, offers sleep solutions and services in the United States.
On August 25, 2023, Stadium Capital Management (8.5%) stated that it is concerned with the company’s long-term underperformance and believe shareholder representation on the Board is needed to drive improvements to the governance, capital allocation and operations. Stadium Capital stated that it is engaging in discussions with the Board and management regarding the composition of the Board and opportunities to enhance shareholder value. Source
On September 13, 2023, Stadium Capital Management (9%) issued a letter and press release to the Board requesting a meeting with the independent directors to discuss the urgent need for shareholder-driven Board change. In the letter, Stadium Capital asserted that the Board has presided over abysmal shareholder returns, egregious capital allocation, poor corporate governance practices and questionable compensation decisions. Stadium Capital also expressed its views that the Board’s ineffective oversight has enabled management to let costs run out-of-control in pursuit of its wellness technology strategy. It has also expressed disappointment with the Board’s rejection of a good faith offer to collaborate on director refreshment, including adding its representative to the board.
Valuation insight
"Sleep Number spends 2x on R&D relative to Tempur Sealy even though Tempur Sealy generates, by our estimates, roughly 4x the retail sales of Sleep Number. Yet, based on our research, if Sleep Number spent proportionally the same amount on R&D as Tempur Sealy does, Sleep Number’s 2023 expected EPS would double."
On November 7, 2023, Stadium Capital Management entered into a cooperating agreement with the company and pursuant to it, the company agreed to add Stephen Macadam and Hilary Schneider (the “New Directors”) to its Board. Source
On October 30, 2024, the company announced Board and corporate governance changes.
On November 4, 2024, Stadium Capital Management (11%) expressed concerns about the company's long-term performance despite recent leadership and governance changes. The firm intends to engage with the company and other stakeholders to evaluate the need for further changes. Source
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