Friday, February 08, 2008

Portfolio news

First, has some details on the Oracle/BEA merger and gave First Marblehead a gold star.

In worse news, Select Comfort has again disappointed shareholders, though it seems the market is overreacting a bit. Now that it's clear air beds are not immune from recession the way Tempur-Pedic memory foam beds seem to be, no one should be surprised by slowing sales in the quarters ahead. There is no reason the company can't survive and come back much stronger. At these prices the risk is minimal and I suspect that recent price drops have more to do with institutions dropping losers and "penny stocks" than real analysis of the business.

That said, there are some huge opportunities that the company has missed. Having established their brand and product as legitimate, they should have addressed the question of why buy from them. The competition, in my opinion, is regional mattress stores and traditional mattresses, not other premium mattresses like Tempur-Pedic. Now that Select Comfort has established stores all over the country, the network needs to be leveraged.

Here's my idea for a new ad campaign:

A sleazy looking salesman in a wrinkled suit is standing in front of a mile of mattresses next to a guy in a bear costume.

Salesman: Come on down to Miles of Mattresses! If we can't get you the cheapest bed, I'll wrassle this bear!

The picture jumps and slows down as if it were on a film projector that is starting to die. The scene fades to a clean Select Comfort store with three beds or so and a clean-cut salesman in a polo shirt and slacks. There might be another salesman helping a couple try out the bed in the background, but the store should not look cluttered.

Spokesman: Why buy an outdated spring mattress that needs to be flipped every year? Springs start to sag after a while in cheap mattresses and become uncomfortable. Select Comfort sells only modern Sleep Number beds that support sleepers with their exclusive adjustable air chambers. And unlike foam or water beds that are difficult to move, the a Sleep Number bed can be emptied and packed in a matter of minutes. Why buy from this guy, when you can sleep on a layer of air for a lot less than you might think. Come to one of our X locations in Y.

As the spokesman talks, cut to the standard "pressure point and support" image or, if there are customers in the store, show them adjusting the bed to minimize pressure. When the spokesman says, "this guy", cut to the salesman and bear wrestling or cycling each other. Finally cut to a map of the Y region with X stores clearly marked.

These ads should be short, well produced and run constantly. They need to be shown in the cheaper time-slots at night, during the day, and on weekends so that they get seen by people who are ready to buy a new bed. Hopefully everyone who has a TV will see them at least occasionally. I think retail partners are a mistake unless Select Comfort has no locations in a region, and even then, they should make sure the retailer's ads put Sleep Number beds in a good light.

I don't think the financials are nearly as bad as they appear, especially if you allow for a recession. I also don't think it will be too hard to turn this ship around. In fact, I think they are one good TV spot away from returning to high growth, since they have cultivated a number of advantages over regular beds.

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