Pomerantz Appointed Co-Lead Counsel in Sleep Number Securities Litigation

On May 20, 2022, U.S. Magistrate Judge Becky R. Thorson of the District of Minnesota appointed Pomerantz LLP as Co-Lead Counsel on behalf of Ricardo Dario Schammas, the Co-Lead Plaintiff, and the class, in Steamfitters Local 449 Pension & Retirement Security Funds v. Sleep Number Corporation, 21-cv-2669 (D. Minn.). This securities action alleges that Sleep Number Corporation ("Sleep Number" or the "Company") failed to disclose significant disruptions in its supply chain which resulted in a failure to fulfill orders in a timely manner and to meet surging customer demand.

Sleep Number manufactures beds and bedding accessories, including the Sleep Number 360® smart bed which automatically adjusts mattress firmness and support.

Allegations against Sleep Number include that: (i)  the Company had misrepresented the resilience of its highly touted global supply chain and the strength of its contingency plans and redundancies to minimize supply chain disruptions in the event of emergencies; (ii) due to Winter Storm Uri in February 2021, Sleep Number suffered but did not disclose a significant disruption to its supply of foam for mattresses; (iii) as a result, the Company was not able to manufacture enough mattresses to meet customer demand and fulfill orders in a timely manner; and (iv) as a result of the foregoing, Sleep Number had delayed mattress shipments and pushed recognition of sales into subsequent quarters, negatively impacting its financial results.

On February 17, 2021, three days after Winter Storm Uri caused significant damage in the Gulf Coast of the United States, Sleep Number held an earnings call to discuss its 2020 financial results during which CEO Shelly R. Ibach touted the Company's vertical integration and ability to manage inventory as part of a "customer-focused supply chain.” CFO David R. Callen affirmed that, despite "explosive demand" for its products, the flexibility, resilience, and strength of its relationships with global suppliers, along with its ability to forecast and track inventory, allowed Sleep Number to deliver products to customers within six days.

On March 2, 2021, Sleep Number issued its annual report in which it touted its vertically integrated supply chain as a “competitive advantage” and asserted it had numerous fail-safes in place to prevent supply chain disruptions, including maintaining safety stocks and identifying alternate suppliers. 

The truth began to emerge on April 21, 2021, when Sleep Number announced its 1Q 2021 financial results, in which it revealed that the Company had missed consensus sales estimates as a result of shifting more than $50 million worth of deliveries out of the quarter, representing nearly 9% of 1Q 2021 sales, as a result of significant disruptions in its foam supply chain. On an earnings call the same day, CFO Callen called the supply chain issues a “hiccup” that would be resolved in the next quarter.

On this news, Sleep Number’s share price fell $14.80 per share, or 11.8%, to close at $110.13 per share on April 22, 2021.

Then, on July 20, 2021, Sleep Number announced its second quarter 2021 financial results, in which it revealed that the Company had again missed consensus estimates for the quarter as a result of “near-term supply constraints” and component shortages.

On this news, the Company’s share price fell a further $14.46 per share, or 12.9%, to close at $97.78 per share on July 21, 2021.