snbr-20260103

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 3, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 000-25121

SLEEP NUMBER CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota		41-1597886
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


1001 Third Avenue South
Minneapolis	,	Minnesota	55404
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (763) 551-7000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SNBR	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging

growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of

the Exchange Act.


Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company		☐
		Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised

financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit

report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect

the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any

of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 28, 2025, was $131,813,000 (based on the last reported sale

price of the registrant’s common stock on that date as reported by Nasdaq).

As of January 31, 2026, there were 22,864,000 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement to be furnished to shareholders in connection with its 2026 Annual Meeting of Shareholders are incorporated by

reference in Part III, Items 10-14 of this Annual Report on Form 10-K.


2 \| 2025 FORM 10-K	FORWARD-LOOKING STATEMENTS

SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Sleep Number®, SleepIQ®, Sleep Number 360®, 360®, the Double Arrow logo, Select Comfort®, AirFit®, Climate360®,

ClimateCool®, Comfortaire®, DualTemp®, the DualTemp logo, the DualAir Technology Inside logo, FlexFit®, FlexTop®,

HealthIQ®, IndividualFit®, Know Better Sleep®, Pillow[ology]®, PillowFit®, RespiratoryIQ®, Responsive Air®, Sleep Is

Training®, Sleep Number Inner Circle®, Sleep30®, This Is Not A Bed®, We Make Beds Smart®, WhisperFlo®, Auto

Snore™, BreatheIQ™, BreatheIQ+™, the BreatheIQ logo, the BreatheIQ+ logo, ComfortMode™, EnviroIQ™, HeartIQ™,

Individualized Sleep Experiences™, Tri-Brid™, Smart SleeperSM, WellnessIQ™, ActiveComfort™, Clima-Temp™,

ClimateSeries™, Comfort Service™, ComfortFit™, CoolFit™, Coolgenex™, Create Your Perfect Comforter™, Create

Your Perfect Pillow™, Does Your Bedding Do that?™, Does Your Pillow Do That?™, DownComfort™, DualAir™,

ExactFit™, Firmness Control™, FlexTop™, In Balance™, Knows You. Senses You. Adjusts to You™, Logic™ Label,

LuxWarmth™, NaturalFit™, No Shift™, Partner Snore™, PlushComfort™, Relaxation™, ResponseFit™, Rest&Read™,

Sleep Better Together™, Sleep Number Does That™, Smart™ Skirt, Smart Button™, SmartFit™, Smart Temp™, Smart

Sleeper™, The Best Bed for Couples™, ThermaLux™, True Temp™, VariaCool™, Winter Soft™, its bed model names,

and the Company’s other marks and stylized logos are trademarks and/or service marks of Sleep Number. This Form

10‑K may also contain trademarks, trade names and service marks that are owned by other persons or entities.

The Company’s fiscal year ends on the Saturday closest to December 31, and, unless the context otherwise requires, all

references to years in this Form 10-K refer to its fiscal years. The Company’s fiscal year is based on a 52- or 53-week

year. All years presented in this Form 10-K are 52 weeks, except for the 2025 fiscal year ended January 3, 2026, which is

a 53-week year.

Forward-looking Statements

This Annual Report on Form 10-K contains or incorporates by reference certain forward-looking statements within the

meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in or

incorporated by reference into this Annual Report on Form 10-K that are not statements of historical fact may be deemed

to be forward-looking statements, including but not limited to projections of revenues, results of operations, financial

condition or other financial items; management’s conclusion regarding its substantial doubt about the Company’s ability to

continue as a going concern, and related mitigation plans; any statements of plans, strategies and objectives of

management for future operations; any statements regarding proposed new products, services or developments, including

potential features of Sleep Number’s products that may be developed in the future; any statements regarding future

economic conditions, prospects or performance; any statements regarding proposed financing, capital solutions, strategic

alternatives; statements of belief and any statement or assumptions underlying any of the foregoing. In addition, the

Company or others on its behalf may make forward-looking statements from time to time in oral presentations, including

telephone conferences and/or Webcasts open to the public, in press releases or reports, on the Company’s website or

otherwise. The Company tries to identify forward-looking statements in this report and elsewhere by using words such as

“may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “predict,” “intend,” “potential,”

“continue” or the negative of these or similar terms.

The forward-looking statements speak only as of the date made and by their nature involve substantial risks and

uncertainties. The Company’s actual results may differ materially depending on a variety of factors, including the items

discussed in greater detail below under the caption “Risk Factors.” These risks and uncertainties are not exclusive and

further information concerning the Company and its business, including factors that potentially could materially affect its

financial results or condition, may emerge from time to time, including factors that it may consider immaterial or do not

anticipate at this time.

The Company wishes to caution readers not to place undue reliance on any forward-looking statement and to recognize

that forward-looking statements are predictions of future results, which may not occur as anticipated. Sleep Number

assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions

affecting such forward-looking statements. The Company advises you, however, to review and consider any further

disclosures it makes on related subjects in its quarterly reports on Form 10-Q and current reports on Form 8‑K that it files

with or furnishes to the Securities and Exchange Commission.


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PART I

ITEM 1. BUSINESS

Overview

Sleep Number is the leader in personalized sleep wellness. Its mattresses are designed to evolve with each sleeper to

help them feel and perform their best. With adjustable firmness, pressure-relieving support and temperature balancing

comfort built into every mattress, Sleep Number beds adapt to customers’ changing needs, night after night, year after

year. Backed by over 40 years of innovation, over 1,000 patents and patents pending, and billions of hours of sleep data,

Sleep Number has helped more than 16 million people achieve their best sleep. The fully integrated model ensures quality,

durability, and care at every step—from design and craftsmanship to delivery and long-term support. 

Sleep Number products are awarded the industry's top recognitions, including ranked #1 in customer satisfaction for

mattresses purchased in-store and online, and #1 in comfort, by J.D. Power. In addition, the company is the Official Sleep +

Wellness Partner of the NFL, marking a relationship that leverages players, team partnerships, and league-wide initiatives

to amplify brand awareness and drive consumer engagement. 

Sleep Number’s life-changing, differentiated smart mattresses combine physical and digital innovations, integrating

unparalleled physical comfort with a highly advanced sleep wellness platform. The smart beds offer the Company’s

signature firmness adjustability, enabling each sleeper adjustable comfort. Embedded digital sensors learn the sleep

needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart mattress to

keep the sleeper comfortable throughout the night. Temperature balancing technology supports the ideal climate for each

sleeper and solves a prevalent sleep challenge. Additionally, smart mattresses are an exceptional value, with personalized

sleep insights delivered daily, new features regularly added to all smart mattresses through over-the-air updates and

prices to meet most budgets. Sleep Number’s mattresses provide unmatched features, benefits and comfort that can lead

to improved sleep health and wellness for both sleepers.

The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized, digital

sleep wellness platform, a network of millions of highly engaged Smart Sleepers who are loyal brand advocates, a

vertically integrated operating model and a team member culture of individuality.

The Company’s 3,100 mission-driven team members are focused on driving value creation, including our exclusive direct-

to-consumer selling in 600 stores and online, which meets customers whenever and wherever they choose to provide an

exceptional experience and a lifelong relationship. Additionally, the Company partners with world-leading institutions to

bring the power of over 38 billion hours of longitudinal sleep data to sleep science and research.

Turnaround Strategy

2025 was a transformational year for Sleep Number. Under the leadership of its new CEO, Linda Findley, who joined the

Company in April 2025, the business has undergone change at every level. The Company:

•Created a more streamlined operation designed to enable faster decision‑making by consolidating roles across

key functions and strengthening accountability;

•Reduced operating costs across the business by $136 million as compared to 2024, excluding restructuring and

other non-recurring costs;

•Added financial flexibility by extending the Credit Agreement through the end of 2027; and

•Executed the Twelfth Amendment to the Amended and Restated Credit and Security Agreement, dated as of

February 14, 2018 (as amended, supplemented or otherwise modified from time to time), among U.S. Bank

National Association, as Administrative Agent, Swing Line Lender and Issuing Lender, and certain other financial

institutions party thereto (the “Credit Agreement”) to amend financial covenants.


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With a stronger foundation, in November 2025, the Company introduced its turnaround strategy “Sleep Number Shifts,” a

focused, company-wide effort to reposition the brand, expand reach to new customer groups, and reignite growth. The

aim is to drive value for shareholders, customers and team members with efforts rooted in the consumer through all

dimensions of the business. It is centered on three key areas:

•Product: The Company is simplifying its offering with the goal of growing its customer base while building on the

demand from repeat customers

•Marketing: The Company is modernizing its efforts by expanding channels and reach with new creative to better

connect with today’s consumer and drive engagement with a focus on better ROI

•Distribution: The Company is focused on optimizing store footprint as well as exploring opportunities to expand

distribution into new channels, both physical and digital.

“Sleep Number Shifts” is being implemented as the Company continues to execute cost savings and operating

efficiencies, including real estate optimization and right-sizing the fixed cost base. While the Company is focused on

implementing the “Sleep Number Shifts” and executing cost savings and operating efficiencies, it faces liquidity

challenges. See “Risk Factors—Risks Related to Indebtedness and Liquidity.”

Financial Highlights

Ongoing industry demand decline and the impact of lower store traffic contributed to a 16% net sales decline in 2025 for

the Company. Against this recessionary backdrop, the Company continued to focus on improving gross margins and

streamlining its cost structure to optimize Adjusted EBITDA and cash flow generation. For 2025, the Company had a

0.6 percentage point decrease in gross margin rate, including an inventory write-down charge offset by the benefit of

product cost reductions through value engineering and ongoing supplier negotiations and ongoing efficiencies in our home

delivery and logistics operations. The Company also executed an additional $136 million of operating cost reduction

actions for 2025, prior to restructuring and other non-recurring costs, bringing the cumulative operating cost reduction over

the last three years to $308 million. The Company’s net loss for 2025 was $132 million and delivered full-year Adjusted

EBITDA of $78 million, with an Adjusted EBITDA margin of 5.5%, down 1.6 percentage points versus the prior year,

largely a result of the year-over-year net sales decline. Our 2025 fiscal year included an extra week which we estimate

benefited net sales by $25 million.

See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results from Operations - Non-

GAAP Data Reconciliations for additional information on Adjusted EBITDA and other non-GAAP reconciliations.

Integrated Sleep Solutions

Smart Beds and Mattresses

With a relentless focus on the consumer, Sleep Number has continued to advance its award-winning Sleep Number®

smart beds and mattresses. Enhancing its trademark comfort, adjustability and highly accurate detection of sleep and

biosignal data, the smart bed has evolved into a progressive and adaptive sleep wellness technology platform.

The combination of physical and digital innovation enables the Sleep Number smart bed’s proprietary “sense and do”

technology, which digitally responds to each sleeper’s movements, effortlessly adjusting firmness, comfort and support to

relieve pressure points. Through the analysis of sleeper-generated sleep and biosignal data, the smart bed can deliver

both real-time interventions – including automatic comfort adjustments during the night, with no action required by the

sleeper – and personalized sleep insights through its accompanying app. By combining artificial intelligence (AI) and

machine learning (ML) technology, which "learn” from each sleeper over time, the Sleep Number smart bed allows

sleepers to understand metrics related to health and wellbeing during sleep. This data may ultimately enable the

Company’s Smart Sleepers to take preventative and proactive wellness actions. Additionally, the longitudinal data

generated from Sleep Number’s wellness technology platform can be shared with sleepers’ physicians through a monthly

HealthIQ® report, leading to insights that may guide health-provider diagnostics.

Sleep Number’s product innovation roadmap is driven by proprietary data from its millions of Smart Sleepers and sleep

science. This allows the Company to address some of the most pressing sleep health needs and differentiate itself among

mattress brands as one that consumers perceive to improve their health and wellbeing.


5 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

As the Company heads into 2026, and as part of its turnaround, Sleep Number announced it is simplifying its offering with

a significant product transition and the goal of growing the new customer base while building on the demand from repeat

customers.

Smart Adjustable Bases

Sleep Number’s smart bed ecosystem includes a full line of exclusive FlexFit® smart adjustable bases that seamlessly

integrate with Sleep Number smart beds for an individualized sleep experience that is proven to deliver more restful sleep

per night. The Company’s industry-leading smart bases offer endless adjustability by raising the head and feet for ultimate

relaxation. Additional features include Partner Snore™ technology, which allows a sleeping partner to temporarily relieve

mild snoring by raising the companion’s head at the touch of a button; Foot Warming, which is designed to help an

individual fall asleep faster; and under-bed lighting, for nighttime visibility.

Sleep Number Bedding and Furniture

The exclusive Sleep Number® bedding collection and upholstered furniture line are designed to improve sleep comfort

and quality, including pillows designed to fit each individual’s sleeping position. The Sleep Number® Lifestyle Collection

furniture enhances the sleep environment and supports the health and wellness benefits of the Sleep Number smart bed

and FlexFit smart adjustable bases. The Lifestyle Collection also provides an integrated sleep experience with

accessories for aging and recovery, providing comfort, aiding in mobility and helping maintain independence at home.

Sleep Number Proprietary Ecosystem

Sleep Number builds lifelong relationships with its customers. The proprietary ecosystem of over 3 million Smart Sleepers

with an average monthly engagement rate of approximately 80 percent is best-in-class for digital products. This high

engagement with the Company’s sleep wellness platform increases customer lifetime value and drives efficient customer

acquisition through advocacy and referrals. The Company measures its repeat and referral customers, which account for

over 50% of sales. The Company’s innovation roadmap supports ongoing engagement initiatives within this ecosystem for

future growth.

An important part of the smart bed ecosystem, the Sleep Number app, puts the “brand in the hand” of the Company’s loyal

Smart Sleepers every day. It enables control of the smart bed and smart adjustable base from one’s mobile device. It also

provides a nightly score – a SleepIQ® score – that indicates how sleepers slept against their personal best metrics and

goals. Paired with personalized insights and details about each sleeper’s heart rate, breath rate, heart rate variability,

circadian rhythm and more, the Sleep Number app is an invaluable tool in helping Smart Sleepers better understand how

to improve their sleep health and wellbeing. A monthly summary report – the HealthIQ® report – comes to the inbox of

each sleeper for a monthly assessment of how they slept; this report can be downloaded to be shared with health

professionals and caregivers.

Sales and Marketing

Brand Communications

Sleep Number continues to invest in its brand and demand drivers for near- and long-term performance. The mattress

industry is a highly commoditized, competitive low-interest category. The Sleep Number brand strategy focuses on brand

amplification to drive awareness and consumer benefits to drive consideration. The Company has several highly visible

strategic partnerships; it engages consumers seamlessly across multiple touchpoints, with an emphasis on digital; and it

creates lifelong customer relationships and brand advocacy by delivering an unparalleled sleep experience. Together,

these actions result in strong brand health, increased brand interest, heightened consumer consideration, customer

engagement and authentic advocacy for Sleep Number’s brand, innovations and services.

The Company leverages a sophisticated media mix to drive its performance marketing and advertising, with emphasis on

digital and aligned with consumer consumption, contributing to improved media return on investment. High-profile video,

including television and online streaming, is its most efficient media, followed by digital and social platforms. Sleep

Number’s in-house digital capabilities, content marketing, online user experience and data-driven tools give it the flexibility

to pivot quickly and optimize media investment, messages and audience by platform in real-time. The Company’s


6 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

promotional strategy focuses on simplicity and relevance, driving consumers to the brand at the time when they are

seeking a sleep solution.

The Company’s brand marketing strategies are designed to deliver Sleep Number value messaging to a broader set of

consumers. In 2025, Sleep Number reset its marketing strategy, building on top of a strong brand relevance to attract

consumers from a larger addressable market. The Company is leveraging the correlation between marketing and

consumer demand to deliver improvements in marketing effectiveness and return on investment at greater scale. In

parallel, Sleep Number is evolving all aspects of marketing and creative work, including deploying a brand refresh focused

on target segments.

The Sleep Number® Rewards loyalty program drives significant brand engagement. Since the launch of the program, the

Company welcomed over 1.9 million members who participated in over 3 million engagements per year on its digital

platform. The Company’s most dedicated Smart Sleepers regularly interact with branded content – including video, web,

email and blog content – which educates them about Sleep Number® products and sleep expertise, adding value to their

investment. They actively write product reviews and post on social media, further activating the marketing flywheel and

advancing the Company’s purpose.

Exclusive Direct-to-Consumer Distribution

Sleep Number’s exclusive, direct-to-consumer distribution model supports lifelong relationships with its customers. Across

its customer touchpoints, defined as Total Retail (Stores, Online, Phone and Chat), it delivers a value-added retail

experience that seamlessly integrates Sleep Number’s digital and physical experiences to meet customer needs. The

Company offers an engaging and dynamic online experience to educate consumers and advance their purchase path,

driving highly-qualified traffic to all of its retail touchpoints. Sleep Number’s mission-driven sleep experts use digital

technology and a best-in-class, relationship-based selling process, which is continually tested and refined to meet the

changing consumer priorities. Processes are designed to match the right sleep solutions and right price point for its

customers – wherever and whenever they want to shop. This “sell-from-anywhere” model supports customers’ shopping

preferences and results in new customer acquisition, sustained repeat and referral, high conversion and strong revenue

per smart bed unit – all of which drive future sales and profitable growth.

As the exclusive distributor of Sleep Number® products, the Company has a nationwide portfolio of retail stores. The

Company targets high-quality, convenient and visible store locations based on several factors, including each market’s

overall sales and profit potential, store geography, demographics and proximity to other brand experiences. Since 2010,

the Company has invested to reposition a large percentage of its mall stores to stronger, optimally-sized, non-mall

locations, adding stores in both existing and new markets. As of January 3, 2026, the Company operated 600 Sleep

Number® stores, with locations in all 50 states.

The Company’s Stores accounted for 88% of net sales in 2025. Average annual net sales per store in 2025, based on

Total Retail, was $1.9 million. In 2025, 32% of Stores open for a full year generated net sales of greater than $2 million,

and 8% of Stores open for a full year generated more than $3 million in net sales. In 2025, Online, Phone, Chat and Other

sales accounted for 12% of net sales.

Operations

Integrated Sourcing and Logistics

All of Sleep Number’s smart beds and mattresses are pre-assembled in its assembly distribution centers prior to delivery.

Sleep Number's network delivers improved visibility, efficiency and waste reduction. Bedding fulfillment is centralized to

leverage improved logistics costs and to serve the entire United States from Ohio. Sleep Number continues to advance its

outbound logistics network by evolving its mix of truckload carriers and dedicated cross docks to reduce product handling,

hand-offs, damage and costs while in transit to customers’ homes. This network design enables scale and provides a

superior and reliable experience for customers.

In addition to a network of global suppliers, Sleep Number operates a dedicated cut and sew facility for cover production

in Irmo, SC and an advanced engineering and prototyping facility in Salt Lake City, UT. Each of these facilities are

combined with an assembly distribution center. There are three additional assembly distribution centers (Minneapolis, MN;


7 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

Cincinnati, OH; and Dallas, TX). The assembly distribution centers fulfill customer orders that are made-to-order daily and

assemble final mattress and order kitting with bases and accessories for shipment.

The Company sources the raw materials and components used in its products from third parties. A significant percentage

of the Company’s products are assembled after it receives orders from customers utilizing manufacturing processes with

minimal levels of raw materials, work-in-process and finished goods inventories. The Company has taken, and continues

to take, various measures to mitigate the potential impact of supply disruptions, including strengthening relationships with

primary suppliers, identifying new alternate suppliers, redesigning products, exploring alternative components and

maintaining safety stocks. Sleep Number is leveraging the flexibility, visibility and resilience of its operating model to

respond nimbly as conditions change.

Home Delivery Service

Sleep Number’s home delivery teams are another direct touchpoint with its customers. Sleep Number smart beds and

mattresses are delivered and installed by Sleep Number delivery technicians or by trained third-party service providers.

This blended model enables the Company to efficiently deliver a strong customer experience.

Customer Service

Sleep Number provides comprehensive post-purchase support that improves Smart Sleepers’ experience and supports its

business. Through ongoing interactions with customers via phone, email, chat and social media, the customer service

team also provides a unique opportunity to benefit from insights that help the Company continuously improve its products

and strengthen its service quality and innovation. This integration enables operational synergies and organizational

efficiencies. Sleep Number has outsourced a portion of its customer service operations for greater efficiency.

Innovation

Sleep Number’s global research and development (R&D) team is comprised of onshore teams in Minneapolis, MN and

San Jose, CA and offshore teams in Europe and Asia. Together, these teams are the driving force of the entire smart bed

ecosystem including all smart beds, adjustable base designs and bedding solutions, and are comprised of experts in

mechanical engineering, comfort, adjustability, temperature, anthropometrics and test systems. The Company’s research

and development expenses were $34 million in 2025 compared to $45 million in 2024.

With over 1,000 patents and patent applications pending worldwide, Sleep Number’s innovation pipeline is robust. The

combination of trademark individualized comfort and adjustability features – with AI, biometric analysis and other digital

tools – creates the sleep wellness platform, which is the foundation of a long-term value proposition. Paired with millions

of connected sleepers with approximately 80% monthly average smart bed user engagement and high customer lifetime

value, the Company believes in the potential for expanded market relevance beyond the traditional mattress space into

wellness technology and data, where there are many untapped consumer opportunities to solve persistent sleep issues.

Sleep Number is redefining the standards for monitoring sleep for research and health, and its smart bed ecosystem

offers a non-invasive, real-world and accurate method to conduct sleep research. The Company’s sleep wellness platform

generates longitudinal sleep and biosignal data through a research-grade, multi-sensor ecosystem including

ballistocardiography and AI/ML algorithms. This platform leverages high-resolution, full-body, continuous sensor

recordings, as well as utilizing signal processing and machine-learning methods. Cloud infrastructure enables scale for

one-to-many security and data sharing capabilities. Cloud intelligence and edge intelligence engines deliver advanced AI

and analytics to generate a physical and digital immersive, adaptive and effortless sleep experience for each sleeper.

Sleep Number’s sleep wellness platform automatically collects and analyzes billions of data points from millions of Smart

Sleepers, conducting one of the largest sample sizes of sleep studies every night. To date, the Company has leveraged

and learned from more than 38 billion hours of sleep data gathered from over 4.8 billion real-world sleep sessions,

generating comprehensive longitudinal and ecologically-valid data to improve sleep quality. More than 558,000 individuals

in its Smart SleeperSM Community — and counting — have opted in to participate in ongoing sleep research and advance

the science of sleep and health. This participation has led to rapid enrollment in Institutional Review Board (IRB)-approved

studies, which combine the power of Sleep Number’s broad sleep database with subjective understanding of sleeper

behaviors to understand real-world outcomes. The smart bed ecosystem is helping to advance the linkage of quality sleep

to health, bringing significant benefits to real-world sleepers.


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Sleep Number is pairing data and innovations with meaningful collaborations with world-leading partners in sleep,

leveraging the potential of the Company’s research and technology to advance sleep science and to develop new

products, services and synergistic interactions.

Partnerships and Collaborations

Strategic partnerships amplify the effectiveness, impact and scale of Sleep Number’s brand and marketing efforts.

National Football League (NFL)

As the Official Sleep and Wellness Partner of the NFL since 2018, the partnership broadens Sleep Number’s brand reach,

deepens its brand relevance and amplifies the benefits of its proprietary innovations. The partnership has led to

unparalleled product adoption: 83% of NFL players have a Sleep Number smart bed*. Through 2028, Sleep Number

expects to continue to actively support players and team personnel with their performance and recovery programs through

sleep assessments, new innovations and more.

Sleep Number’s NFL partnership also includes partnerships with the NFL Players Association (NFLPA) and the

Professional Football Athletic Trainers Society (PFATS), which helps drive greater engagement on and off the field.

Through Sleep Number content, seminars and team sleep education meetings, the trainers and football medical personnel

qualify for continuing education credits.

In 2025, Sleep Number had partnerships with three clubs — Super Bowl LVI Champion Los Angeles Rams, the Dallas

Cowboys, and the Minnesota Vikings — which add to its national media and community-activation efforts. These

partnerships allow for focused communications in some of Sleep Number’s most important markets.

Additionally, the Company leverages the NFL audience to further support American Cancer Society (ACS), being

recognized as “an Official Partner of Crucial Catch” and a presenting sponsor of the Defender, an online tool developed by

ACS and the NFL to provide cancer prevention, screening and support. The Company included ACS in its brand

communications to Smart Sleepers, in its work with the NFL, across its social media and more.

In 2022, Sleep Number formed a partnership with the ACS to study the connection between cancer and sleep quality, with

the goal of developing the first-ever sleep strategies and guidance for cancer patients and survivors. With contributions

from Sleep Number’s proprietary sleep data, ACS will conduct research over six years, which may lead to improved sleep

outcomes for cancer patients and survivors. Additionally, Sleep Number supports cancer patients and caregivers through

donations of sleep solutions to ACS’s Hope Lodges across the country. And, as part of the Crucial Catch partnership,

Sleep Number inspired tens of thousands of NFL fans to learn more about cancer risks and prevention by driving

activation of The Defender.

Health & Research Institutions

Through partnerships with world-leading health and wellness institutions, Sleep Number has advanced sleep science with

its highly accurate, longitudinal sleep data. This data serves as the foundation for groundbreaking research on various

health-related issues.

By enabling a longitudinal view of sleep habits for organizations that otherwise may not have access, Sleep Number

believes partnerships and collaborations with physicians, researchers and institutions can deliver meaningful health

solutions.

Sleep Number has partnered with the Mayo Clinic, ACS, Northwestern University, and the University of Pittsburgh in

several research studies, with the aim of providing insights into how sleep affects health.

*Based on the number of active roster players eligible for the NFL player Sleep Number® bed program who purchased a bed between 7/23/18 and

12/13/24.


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In 2020, Sleep Number announced a collaboration with Mayo Clinic, resulting in multiple research projects including:

•Research to explore the relationship between disrupted sleep and markers of aging (telomeres,

senescence, chronological EKG based on AI);

•Research to explore excessive daytime sleepiness (EDS) and its cardiovascular implications; and

•Research to investigate the prevalence of disordered sleep (sleep apnea, insomnia, and short sleep) in patients with

Somali heritage and the implications for cardiovascular risk.

Intellectual Property

As a result of the Company’s R&D and strategic efforts, Sleep Number has continued to strengthen its patent portfolio,

with a particular focus on smart features that improve sleep quality and thermal solutions to solve temperature disruptions

to sleep. The Company holds various U.S. and foreign patents and patent applications regarding certain elements of the

design and function of Sleep Number products, including air control systems, remote control systems, air chamber

features, mattress construction, foundation systems, sensing systems, automated adjustments, in-bed temperature

control, as well as other technology. Sleep Number has numerous U.S. patents expiring at various dates between January

2027 and May 2044, and numerous U.S. patent applications pending. The Company also has numerous foreign patents

expiring at various dates between September 2026 and June 2047, and foreign patent applications pending.

Notwithstanding these patents and patent applications, the Company cannot ensure that these patent rights will provide

substantial protection or that others will not be able to develop products that are similar to, or competitive with, Sleep

Number products.

Sleep Number has a number of trademarks and service marks registered with the U.S. Patent and Trademark Office,

including Sleep Number®, SleepIQ®, Sleep Number 360®, 360®, the Double Arrow logo, Select Comfort®, AirFit®,

Climate360®, ClimateCool®, Comfortaire®, Dreamaire® , DualTemp®, the DualTemp logo, the DualAir Technology Inside

logo, FlexFit®, FlexTop®, HealthIQ®, IndividualFit®, Know Better Sleep®, Pillow[ology]®, PillowFit®, RespiratoryIQ®,

Responsive Air®, Sleep Is Training®, Sleep Number Inner Circle®, Sleep30®, Smart SleeperSM, This Is Not A Bed®, We

Make Beds Smart®, and WhisperFlo®. The Company has several trademarks that are the subject of pending applications,

including Auto Snore™, BreatheIQ™, BreatheIQ+™, the BreatheIQ logo, the BreatheIQ+ logo, ComfortMode™,

EnviroIQ™, HeartIQ™, Individualized Sleep Experiences™, Tri-Brid™, and WellnessIQ™. Each registered mark is

renewable indefinitely as long as the mark remains in use and/or is not deemed to be invalid or canceled. The Company

also has a number of common law trademarks, including Clima-Temp™, ClimateSeries™, Comfort Service™,

ComfortFit™, CoolFit™, Coolgenex™, Create Your Perfect Comforter™, Create Your Perfect Pillow™, Does Your Bedding

Do that?™, Does Your Pillow Do That?™, DownComfort™, DualAir™, ExactFit™, Firmness Control™, FlexTop™, In

Balance™, Knows You. Senses You. Adjusts to You™, Logic™ Label, LuxWarmth™, NaturalFit™, No Shift™, Partner

Snore™, PlushComfort™, Relaxation™, ResponseFit™, Rest&Read™, Sleep Better Together™, Sleep Number Does

That™, Smart™ Skirt, Smart Button™, SmartFit™, Smart Temp™, Smart Sleeper™, The Best Bed for Couples™,

ThermaLux™, True Temp™, VariaCool™, Winter Soft™, and the Company’s bed model names.

Several of the Company’s trademarks have been registered, or are the subject of pending applications for registration, in

various foreign countries. Sleep Number also has other intellectual property rights related to its products, processes and

technologies, including trade secrets, trade dress and copyrights. The Company protects and enforces its intellectual

property rights, including through litigation, as necessary.

Industry and Competition

The Company competes in the bedding industry that is comprised of mattresses and foundations, pillows and

accessories. The mattress category includes both traditional innerspring models and a wide range of non‑innerspring

options, such as viscoelastic and foam mattresses, hybrids, airbeds, and latex mattresses. The foundation category

includes static and adjustable foundations. The bedding industry is commoditized and highly competitive. Sleep Number

competes against regional and local specialty bedding retailers, bedding manufacturers, home furnishing stores, mass

merchants, national discount stores and online marketers.


10 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

Manufacturers in the bedding industry mostly compete through national and regional retail partners, regional

manufacturing verticals and online direct-to-consumer. Price, quality, brand name recognition, product availability and

product performance are the primary ways manufacturers differentiate themselves. There is a high degree of

concentration among manufacturers who produce innerspring, memory foam and hybrid beds under nationally recognized

brand names, including Tempur-Pedic, Sealy, Stearns & Foster, Serta and Beautyrest. National manufacturers still

dominate the bedding industry. There has recently been market consolidation, with Somnigroup owning the Tempur-Pedic,

Sealy and Stearns & Foster brands, and also owning the Mattress Firm brand and stores. Brands including Saatva,

Purple, Casper and Nectar, which started online have now moved into traditional retail channels for growth.

Seasonality

The Company’s business is modestly impacted by seasonal influences inherent in the U.S. bedding industry and general

retail shopping patterns. The U.S. bedding industry generally experiences lower sales demand in the second quarter of

the calendar year and increased sales demand during selected holiday or promotional periods.

Working Capital

The Company is able to operate with minimal working capital requirements because it sells directly to customers, utilizes

both “make-to-order” and “make-to-stock” production processes and operates retail stores that serve mainly as

showrooms. Sleep Number has historically generated sufficient cash flows to self-fund operations through an accelerated

cash-conversion cycle. The Company’s Credit Agreement provides a revolving credit facility for general corporate

purposes with net aggregate availability of $655 million. The Credit Agreement matures in December 2027.

Qualified customers are offered revolving credit to finance purchases through a private-label consumer credit facility

provided by Synchrony Bank. Approximately 40% of net sales in 2025 were financed by Synchrony Bank. The Company’s

current agreement with Synchrony Bank expires December 31, 2028, subject to earlier termination upon certain events.

The Company pays Synchrony Bank a fee for extended credit promotional financing offers. Under the terms of the

agreement, Synchrony Bank sets the minimum acceptable credit ratings, interest rates, fees and all other terms and

conditions of the customers’ accounts, including collection policies and procedures. As the receivables are owned by

Synchrony Bank, at no time are the receivables purchased or acquired from the Company. Sleep Number is not liable to

Synchrony Bank for its customers’ credit defaults. In connection with all purchases financed under these arrangements,

Synchrony Bank pays the Company an amount equal to the total amount of such purchases, net of promotional related

discounts, upon delivery to the customer.

Governmental Regulation and Compliance

As a vertically integrated manufacturer and retailer, the Company is subject to extensive federal, state and local laws and

regulations affecting all aspects of its business. As a manufacturer, Sleep Number is committed to product quality and

safety, including adherence to all applicable laws and regulations affecting the Company’s products and services.

Compliance with health, safety and environmental laws and regulations, including the federal fire retardant standards

developed by the U.S. Consumer Product Safety Commission, which requires rigorous and costly testing, has increased

the cost and complexity of manufacturing the Company’s products and may adversely impact the speed and cost of

product development efforts. Further, the Company’s manufacturing, distribution, delivery and other business operations

and facilities are subject to additional federal, state or local laws or regulations including supply chain transparency,

conflict minerals sourcing and disclosure, end-of-life disposal, recycling and packaging requirements, transportation and

other laws or regulations relating to environmental protection and health and safety requirements.

As a retailer, the Company is subject to additional laws and regulations that apply to retailers generally and govern the

marketing and sale of the Company’s products and the operation of both Sleep Number retail stores and e-commerce

activities. Many of the statutory and regulatory requirements that impact the Company’s retail and e-commerce operations

are consumer-focused and pertain to activities such as the Company’s promotions, advertising claims, marketing

practices, pricing, consumer credit offerings, truth-in-advertising, consumer privacy, “do not call/mail” requirements, text

messaging requirements, warranty disclosure, delivery timing requirements, accessibility and similar requirements.

The Company’s operations are subject to federal, state and local labor laws including, but not limited to, those relating to

occupational health and safety, employee privacy, wage and hour, overtime pay, pay transparency, harassment and

discrimination, equal opportunity and employee leaves and benefits. The Company is also subject to existing and


11 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

emerging federal and state laws relating to insider trading, data security, privacy, cybersecurity disclosure, clawback policy

disclosures and greenhouse gas measurement and climate impact disclosure.

It is Sleep Number’s policy and practice to comply with all legal and regulatory requirements. The Company’s procedures

and internal controls are designed to promote such compliance.

Human Capital

Guided by its purpose to improve lives by personalizing sleep, Sleep Number fosters a culture where team members are

highly engaged and contribute meaningfully to the company and its communities. With sleep at the center, Sleep Number

supports the wellbeing of its team members across the pillars of physical, emotional, financial, career and community

wellbeing. The company values every individual’s unique talents, perspectives and experiences, and strives to create an

inclusive environment where team members can do their best work, which supports collaboration, innovation, and long-

term success.

At January 3, 2026, Sleep Number employed a total of 3,133 team members, of which 53 were classified as part-time and

3 were employed on a temporary basis. The breakdown of team members by area was as follows: 1,863 in retail sales

and support, 305 in field services, 160 in customer service, 294 in manufacturing and logistics, and 511 in technology,

corporate, management and administrative positions. Team members include racially diverse members of 40% of team

and women of 38%.

Attracting, motivating and retaining the right talent is critical to Sleep Number’s success, which is why it is unyielding in its

commitment to its team members’ wellbeing, connection to one another and sense of belonging. The Company strives to

create and sustain a culture in which all team members feel welcomed and valued and can bring their authentic and whole

selves to work every day and it reinforces this commitment through investment in programs and initiatives including:

•Career Wellbeing: The Company’s Learning and Development programs enhance team member capabilities, driving

personal growth, mentoring opportunities and organizational performance;

•Financial, Emotional and Physical Wellbeing: Sleep Number’s compensation practices and comprehensive benefits

highlight its commitment to improving its team’s economic opportunity and promoting their physical and emotional

stability. The Company annually benchmarks its total rewards programs to ensure market competitiveness and offers

all team members a form of variable compensation tied to performance in addition to their base pay. To support

emotional wellbeing, Sleep Number offers all team members mental health resources in addition to flexible time off

benefits;

•Health and Safety Policies: Sleep Number establishes clear expectations for all team members to ensure a physically

and psychologically safe environment. As part of the Company’s effort to improve safety, it collects and analyzes

workplace injury and accident information across all locations and takes steps to reduce incident rates. The Company

actively evolves its health and safety policies during the year to ensure the safety of its team members and

customers; and

•Community Engagement: Sleep Number fosters a strong sense of belonging, connection and service through Team

Member Resource Groups, Team Member Support Fund and Team Member Volunteer opportunities. Sleep Number

actively supports eight Team Member Resource Groups.

Commitment to Sustainability

Sleep Number is committed to sustainability through initiatives that support the resilience of its business. The Company’s

efforts focus on aligning and integrating environmental stewardship and social progress with its pursuit of long-term

shareholder value creation.

Sleep Number takes seriously its responsibility to its stakeholders, including team members, consumers, community,

suppliers and shareholders. To continue to earn their trust, the Company proactively advances and discloses practices,

priorities and metrics that demonstrate its accountability and commitment to sustainability.


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•Sleep Number is strengthening systems and processes that reinforce sound governance, high integrity decision-

making and transparent, consistent reporting practices.

•To attract and retain highly engaged team members, the Company continues to prioritize programs that promote well-

being, provide opportunities for professional development and reward strong performance.

•Through volunteerism, financial and in-kind support, and meaningful contributions to sleep science, research and

sleep innovations, Sleep Number is improving millions of lives – delivering significant value to consumers and their

communities.

•Recognizing the benefit of collaboration in achieving the Company’s goals, Sleep Number is strengthening its

relationships with suppliers and engaging with them to increase its operating model durability and sustainability.

•And the Company is monitoring – and taking responsible actions to control – its greenhouse gas emissions, waste

and other environmental outputs, including through improved network design, transportation optimization and

innovations that extend the useful life of product components.

Additional information is available in the Company’s Corporate Sustainability Report, posted within the Investor Relations

section of the Sleep Number website at http://ir.sleepnumber.com. Select the “ESG” link and then “Sustainability Reports.”

The information contained on the Company’s website or connected to its website is not incorporated by reference into this

Form 10-K and should not be considered part of this report.


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Information about the Company’s Executive Officers

LINDA FINDLEY, 52

Board Member, President and Chief Executive Officer (Joined the Company in April 2025)

Linda Findley, Sleep Number® setting 30, serves as the President and Chief Executive Officer for Sleep Number. From

April 2019 to May 2024, Ms. Findley served as the President, Chief Executive Officer and Director of Blue Apron Holdings,

Inc. (formerly Nasdaq: APRN), an ingredient and recipe meal kit company. From May 2016 to December 2018, she was

the Chief Operating Officer at Etsy, Inc. (NYSE: ETSY), a global e-commerce marketplace for unique and creative goods,

where she oversaw product, design, marketing, and customer engagement and acquisition. Prior to Etsy, Ms. Findley held

a variety of senior executive roles at Evernote Corp. from October 2012 to December 2015, including most recently as

Chief Operating Officer, and led global marketing, business development, and customer service for Alibaba.com Ltd. from

June 2009 to October 2012, based out of Hong Kong. Ms. Findley has served on the board of directors of Ralph Lauren

(NYSE: RL) since August 2018 and HeliosX since February 2025.

AMY O’KEEFE, 55

Executive Vice President and Chief Financial Officer (Joined the Company in December 2025)

Amy O’Keefe, Sleep Number® setting 65, serves as Executive Vice President and Chief Financial Officer for Sleep

Number and brings over 30 years of experience leading operational, strategic, and financial transformations across public

and private companies in the consumer products, technology, and wellness sectors. From June 2023 to May 2025, Ms.

O’Keefe served as Chief Financial and Administrative Officer of Avaya LLC, a global communications software company,

where she played a key leadership role in its operational, strategic, and financial transformation, driving significantly

improved free cash flow. Prior to Avaya, O’Keefe spent nearly half of her career at The Black & Decker Corporation

(NYSE: SWK) and subsequently served as Chief Financial Officer for multiple public and private companies, including

Weight Watchers International (Nasdaq: WW), a global wellness company providing subscription-based commercial

weight management programs with both in-person and digital-only offerings, from October 2020 to December 2022, Drive

DeVilbiss Healthcare, Savant Systems, and D&M Holdings. Ms. O’Keefe has served on the board of directors of

TruBridge, Inc. (Nasdaq: TBRG) since October 2024.

MELISSA BARRA, 54

Executive Vice President and Chief Product and Enterprise Strategy Officer (Joined the Company in 2013 and was

promoted to current role in April 2025)

Melissa Barra, Sleep Number® setting 30, serves as Executive Vice President and Chief Product and Enterprise Strategy

Officer. Ms. Barra oversees the Company's product portfolio, from development through distribution and is responsible for

streamlining research and development efforts and ensuring that products, partnerships and distribution continue to

evolve in ways that meet the needs of today's customers. From June 2019 to April 2025, Barra served as Executive Vice

President, Chief Sales and Services Officer, where she led the company’s customer-focused strategy and the

organization’s sales, real estate, field services, customer relationships, and corporate technology teams. Barra joined

Sleep Number in 2013 as Vice President, Consumer Insights and Strategy. Prior to joining Sleep Number in February

2013, Ms. Barra held leadership positions in the U.S. and internationally in process reengineering, finance, strategic

alliances and corporate development for Best Buy, Grupo Futuro S.A., Citibank and GE Capital. Ms. Barra has served on

the board of directors of Pentair PLC (NYSE: PNR) since December 2021.

SAMUEL R. HELLFELD, 47

Executive Vice President and Chief Legal and Risk Officer and Secretary (Joined the Company in 2013 and was

promoted to current role in March 2022)

Samuel R. Hellfeld, Sleep Number® setting 35, serves as Executive Vice President and Chief Legal and Risk Officer and

Secretary and leads legal, internal audit, corporate security and asset protection. From September 2018 to March 2022,

Mr. Hellfeld served as Senior Vice President and Chief Legal and Risk Officer. From October 2015 to September 2018,

Mr. Hellfeld served as Vice President, Associate General Counsel. Mr. Hellfeld joined Sleep Number in March 2013 as

Corporate Counsel. Prior to joining Sleep Number, Mr. Hellfeld was a Partner in the law firm of Fox Rothschild LLP (fka

Oppenheimer Wolff & Donnelly LLP), practicing in the areas of litigation and intellectual property. Prior to 2010, Mr.

Hellfeld was an Associate at several national law firms and also served as Law Clerk in the United States Court of Appeals

for the Ninth Circuit and the United States District Court, Southern District of California.


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CHRISTOPHER D. KRUSMARK, 46

Executive Vice President and Chief Retail and People Officer (Joined the Company in 2005 and was promoted to Chief

Retail and People Officer in April 2025)

Christopher D. Krusmark, Sleep Number® setting 55, serves as Executive Vice President and Chief Retail and People

Officer, where he leads the retail selling experience and real estate footprint, ensuring both customers and team members

are supported through connected enterprise processes. From July 2020 to April 2025, Mr. Krusmark served as Sleep

Number as Executive Vice President and Chief Human Resources Officer. From January 2023 through August 2023, Mr.

Krusmark also served as Interim CFO. Prior to being promoted to his Chief Human Resources Officer role in July 2020,

Mr. Krusmark served as Sleep Number’s Vice President of Sales Operations, Field Services and Training where he led

retail and home delivery operations and wholesale business development. From June 2005 to October 2015, Mr.

Krusmark held a variety of leadership roles in finance at Sleep Number supporting sales, real estate, marketing and

product. Prior to joining Sleep Number, Mr. Krusmark worked on the financial audit staff of EY and Arthur Andersen.

AMBER L. MINSON, 56

Executive Vice President and Chief Marketing Officer (Joined the Company in May 2025)

Amber L. Minson, Sleep Number® setting 55, serves as the Executive Vice President and Chief Marketing Officer for

Sleep Number. She leads the company’s integrated marketing strategy, driving sustained demand generation, enhancing

brand visibility and delivering media efficiency. She is an accomplished leader with more than two decades of marketing

and brand strategy experience. Most recently, from July 2024 to April 2025, Ms. Minson served as Chief Marketing Officer

of Casper Sleep Inc., a consumer sleep products company that designs, manufactures, and sells mattresses and related

sleep accessories, under a contract agreement. From January 2023 to May 2024, she served as Chief Revenue Officer,

as well as from October 2022 to January 2023, as Chief Marketing Officer at Blue Apron Holdings, Inc. (formerly Nasdaq:

APRN), an ingredient and recipe meal kit company. where she was responsible for all revenue generating and customer-

facing functions, including growth through strategic pricing and promotional initiatives. From 2020 to 2022, Ms. Minson

served at Chief Marketing Officer for Foreground LLC, a company that helps photographers and photo consumers create

memories that last a lifetime. Ms. Minson also built and scaled high performance marketing organizations for companies

including Intuit, Alibaba, Home Shopping Network (HSN) and Comcast NBCUniversal.

TANYA SKOGERBOE, 50

Senior Vice President and Chief Supply Chain and Transformation Officer (Joined the Company in February 2007 and

was promoted to Chief Supply Chain and Transformation Officer in February 2025)

Ms. Skogerboe, Sleep Number® setting 35, serves as the Senior Vice President and Chief Supply Chain and

Transformation Officer for Sleep Number. In her role, she is responsible for leading all aspects of the company’s supply

chain operations – from manufacturing to fulfillment – to ensure quality, consistency and efficiency at every step of the

customer journey. Ms. Skogerboe also oversees the rigorous transformation efforts of the company to get closer to the

customer and optimize operations. Over her almost 20 year career at Sleep Number, she has held senior leadership

positions in services and strategy, customer experience and commercial channel operations. Prior to joining Sleep

Number, Ms. Skogerboe served as manager of global sales for Northwest Airlines.


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Available Information

Sleep Number is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange

Act) and its rules and regulations. The Exchange Act requires the Company to file reports, proxy statements and other

information with the Securities and Exchange Commission (SEC).

Sleep Number’s corporate website is www.sleepnumber.com. Through a link to a third-party content provider, the

corporate website provides free access to its annual reports on Form 10-K, quarterly reports on Form 10-Q, current

reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the

Securities Exchange Act of 1934 as soon as reasonably practicable after the Company electronically files such material

with, or furnishes it to, the SEC. These documents are posted on the corporate website at www.sleepnumber.com: select

the “Investors” link, the “Financials” link, and then the “SEC Filings” link. The information contained on the Company’s

website or connected to its website is not incorporated by reference into this Form 10-K and should not be considered part

of this report.

The Company also makes available, free of charge on its website, the charters of the Audit Committee, Management

Development and Compensation Committee and Corporate Governance and Nominating Committee, as well as its Code

of Business Conduct and Ethics (including any amendment to, or waiver from, a provision of its Code of Business Conduct

and Ethics) adopted by the Company’s Board of Directors (Board). These documents are posted on the Company’s

website: select the “Investors” link, the “Governance” link and then the “Governance Documents” link. The information

contained on the Company’s website or connected to its website is not incorporated by reference into this Form 10-K and

should not be considered part of this report.

Copies of any of the above-referenced information will also be made available, free of charge, upon written request to:

Sleep Number Corporation

Investor Relations Department

1001 Third Avenue South

Minneapolis, MN 55404

ITEM 1A. RISK FACTORS

An investment in Sleep Number’s common stock involves a high degree of risk. Stakeholders should carefully consider

the specific risks set forth below and other matters described in this Annual Report on Form 10-K before making an

investment decision. The risks and uncertainties described below are not the only ones facing the Company. Additional

risks and uncertainties, including risks and uncertainties that impact the business environment generally, those not

presently known to the Company, or those that it currently sees as immaterial, may also harm its business. If any of these

risks occur, the Company’s business, results of operations, cash flows and financial condition could be materially and

adversely affected.

Risks Related to our Business and Industry

Adverse changes in general economic conditions and consumer sentiment have reduced, and could continue to

reduce discretionary consumer spending and, as a result, have adversely affected and could continue to

adversely affect the Company’s sales, profitability, cash flows, availability of credit, and financial condition.

The Company’s success depends significantly upon discretionary consumer spending, which is influenced by a number of

general economic factors, including without limitation economic growth, consumer confidence and sentiment, consumer

disposable income, the housing market, employment, fuel prices, income and debt levels, interest rates, inflation, taxation,

consumer shopping trends and the level of customer traffic, political conditions, inclement weather, natural disasters,

recession and fears of recession, civil unrest and disturbances, terrorist activities, war and fears of war, as well as

perceptions of personal wellbeing and security, health epidemics or pandemics. Adverse trends in these general economic

factors and reduced consumer spending have and may continue to adversely affect the Company’s sales, profitability,

cash flows, financial condition, availability of credit, including with respect to the Company’s current credit facility, its ability

to service and pay down debt, and any potential new or replacement sources of credit, or cause the Company to breach

covenants or other terms contained in its Credit Agreement, which could materially adversely affect the Company’s

business, results of operations, cash flows and financial condition. In the first quarter of 2026, to date, our net sales have


16 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

been adversely affected by negative consumer sentiment, inclement weather, and we have experienced a year-over-year

decrease in net sales.

Although previously high inflation subsided somewhat in 2024 and 2025, it may again increase due to various economic

factors, such as the imposition of increased tariffs or other inflationary economic policies, and adversely affect the

Company’s business operations and financial results by increasing the costs of fuel, shipping, raw materials, labor,

commodity, and other costs. While the Company has historically been able to pass along some cost increases to its

customers, it has not and may not be able to offset such higher costs through price increases or other means, and its

margins, profitability, cash flows, availability of credit, and financial condition have been and could continue to be

adversely impacted.

The federal funds rates have fluctuated over the past three years and remain relatively high compared to the 10-year

average, adversely affecting customer purchasing behavior. It is uncertain whether the Federal Reserve will hold, reduce,

or increase the rate going forward and such uncertainty, as well as any Federal Reserve action or non-action with respect

to the rate, has and may continue to negatively affect customer purchasing behavior, which has and may continue to

adversely affect the Company’s sales, profitability, cash flows, credit availability and financial condition.

The United States (U.S.) debt ceiling and budget deficit concerns have increased the possibility of credit-rating

downgrades, economic slowdowns, or a recession in the U.S. The federal government has shutdown in 2026 and risks of

additional government shutdowns or sovereign defaults remain if the spending bills necessary to fund the government

through 2026 are not passed by Congress. Whether or not these concerns materialize, growing uncertainty may reduce

consumer confidence and increase levels of unemployment, all of which may reduce demand for the Company’s products,

causing harm to its sales, profitability, cash flows, availability of credit, and financial condition.

Additionally, instability or disruptions to credit markets or the financial services industry, including banks that fail or

otherwise become distressed, could adversely affect the Company’s, sales, operations, profitability, cash flows, availability

of credit, and financial condition.

Interest rates remain elevated, and may further increase, and impact the cost of servicing the Company’s

indebtedness and have an adverse effect on its results of operations, cash flows and stock price.

The Company’s Credit Agreement currently bears interest at a variable rate. The Company bears the risk that the rates

charged by the Company’s lenders will outpace expectations and the earnings and cash flow of its business. This has

reduced the Company’s profitability and has potential to continue to reduce profitability in addition to the potential to

adversely affect the Company’s ability to service its debt, or cause the Company to breach covenants or other terms

contained in its Credit Agreement, which could materially adversely affect the Company’s business, results of operations,

cash flows and financial condition.

A reduction in the availability of, or increase in the cost of, credit to consumers generally or under the

Company’s existing consumer credit programs has negatively impacted, and could continue to negatively

impact, the Company’s sales, profitability, cash flows and financial condition.

A significant percentage of the Company’s sales are made under consumer credit programs through third parties. The

amount and cost of credit available to consumers may be adversely impacted by macroeconomic factors, including

general economic conditions, consumer confidence and sentiment, consumer disposable income, the housing market,

employment, fuel prices, income and debt levels, interest rates, inflation, taxation, political conditions and uncertainty with

respect to the presidential administration, inclement weather, natural disasters, recession and fears of recession, civil

unrest and disturbances, terrorist activities, war and fears of war, including the war between Russia and Ukraine and the

conflicts in the Middle East, as well as consumer perceptions of personal wellbeing and security, health epidemics or

pandemics, which could cause suppliers of credit to adjust their lending criteria and costs. These macroeconomic factors

have, and may continue to, adversely impact the cost of credit which, in turn, has and may continue to negatively impact

the Company’s sales, profitability, cash flows and financial condition.

Synchrony Bank provides credit to the Company’s customers through a private label credit card agreement that is

currently scheduled to expire on December 31, 2028, subject to earlier termination upon certain events. Adverse trends in

general economic factors and reduced consumer spending have and may continue to adversely affect the Company’s

sales, profitability, cash flows, financial condition, availability of credit, including with respect to the Company’s agreement


17 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

with Synchrony Bank, or cause the Company to breach covenants or other terms contained in its agreement with

Synchrony Bank, which could materially adversely affect the Company’s business, results of operations, cash flows and

financial condition. Synchrony Bank has discretion to control the content of financing offers to the Company’s customers

and to set minimum credit standards under which credit is extended to customers.

Reduction of credit availability due to changing economic conditions, including rising inflation, increased interest rates,

changes in credit standards under the Company’s private label credit card program or changes in regulatory requirements,

or the termination of its agreement with Synchrony Bank, could harm the Company’s sales, profitability, cash flows and

financial condition.

The Company may not be successful in achieving the expected improvements, growth, cost savings, and other

benefits related to its turnaround strategy and such actions could have adverse effects on the Company.

The Company’s turnaround strategy is centered on product, marketing and distribution, as well as ongoing cost savings

and operating efficiencies, to reignite growth and increase financial resilience. The Company’s turnaround strategy and its

execution thereof may not be successful, which could adversely impact the Company’s business, results, profitability, cash

flows, availability of credit, and financial condition. Current or future demand may not support the costs of the Company’s

turnaround strategy, infrastructure at an acceptable margin, or vertically integrated business model. A failure or delay in

implementing or realizing the anticipated improvements, growth, cost savings, and other benefits of the turnaround

strategy could materially and adversely impact the Company’s business, results, profitability, cash flows, availability of

credit, and financial condition. Investments, costs and charges necessary or incurred in connection with implementing the

turnaround strategy may be significant and have been and may continue to be higher than expected. In addition,

implementing the cost savings and operating efficiency plans has and could continue to negatively impact the Company’s

workforce, partnerships, initiatives, innovation, brand, customer experience, and development plans or otherwise interfere

with the Company’s ability to grow and compete effectively, each of which could adversely impact the Company’s

business, results, profitability, cash flows, availability of credit, and financial condition.

Risks Related to Indebtedness and Liquidity

There is substantial doubt about the Company’s ability to continue as a going concern, and this may adversely

affect our stock price, our ability to raise capital or enter into strategic transactions, and our relationships with

key stakeholders.

In accordance with ASC Topic 205-40, Going Concern, the Company’s management evaluates whether there are certain

conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue

as a going concern. This evaluation includes considerations related to the Company’s forecasted liquidity and cash

consumption requirements for one year from the date of issuance of our consolidated financial statements included in this

Annual Report on Form 10-K.

As discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Liquidity and Capital Resources, the Company has, throughout 2025, announced certain fixed cost reductions, pursued

alternative financing, and continues to pursue its turnaround strategy, however the timing, costs and realization of these

cannot be guaranteed to ensure sufficient cash flow is generated to provide liquidity to meet the Company’s obligations.

While these actions demonstrate a series of material steps taken to improve the Company’s financial condition, the

Company has a history of net losses over the past three years and expects to continue to incur additional losses in the

near future. In addition, the Company anticipates that it will not remain in compliance with the financial covenants of its

Credit Agreement for the next twelve months. Inability to remain in compliance with such covenants will result in an event

of default under the Credit Agreement, allowing the lenders thereunder to declare all indebtedness thereunder due and

payable and terminate remaining commitments. As a result of these considerations, the Company’s liquidity may be

insufficient to meet its obligations for at least one year from the date of issuance of these financial statements, which

raises substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans to address the substantial doubt about the Company’s ability to continue as a going concern, as

described above, include the following actions:

•execute the Company’s turnaround strategy centered on product, marketing and distribution with ongoing cost

savings and operating efficiencies to reignite growth and increase financial resilience;


18 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

•engage in negotiations with the lenders in its Credit Agreement with the goal of amending or waiving financial

covenants and certain other provisions of its credit facility; and

•engaged financial advisors to assist in negotiating with the lenders and identifying and securing additional capital

options, alternative financing arrangements, strategic alternatives, or other comprehensive solutions to address

the Company’s capital structure and leverage needs to return to growth and create long-term value.

There can be no assurance of the Company’s ability to realize these plans, and the Company’s ability to realize these

plans depends, in part, on factors beyond the Company’s control. As a result, the Company has concluded that

management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern for at

least one year from the date of issuance of these financial statements.

There may be adverse impacts to the Company’s stock price, the Company’s ability to obtain supplies and services on

credit and the Company’s ability to raise capital, obtain waivers of the covenants under, or refinance the indebtedness

under, its Credit Agreement or enter into strategic transactions, or the Company’s relationship with its key stakeholders

and other counterparties as a result of the uncertainty regarding its ability to continue as a going concern or successfully

execute its plan to address the substantial doubt related thereto. If the Company is unable to successfully execute its

mitigation plan or obtain sufficient financial resources, its business, results of operations, financial condition, and cash

flows could be materially and adversely affected and it could be forced to terminate, significantly curtail or cease our

operations, pursue strategic alternatives or commence a case under the U.S. Bankruptcy Code.

The Company will require additional capital and its access to such capital or alternative financing options may

depend on factors beyond the Company’s control or may require the Company to accept unfavorable terms.

Absent a material improvement in the Company’s performance, the Company will need to obtain additional capital to

enable the Company to fund its operations, execute its business and turnaround strategies, service and repay its

indebtedness or to fund other liquidity needs. If the Company is unable to obtain additional capital to fund its operations

and strategies or satisfy its debt obligations, it will have to undertake alternative financing options, such as refinancing or

restructuring its indebtedness, selling assets, reducing or delaying capital investments, raising additional capital or

pursuing strategic alternatives, including commencement of a case under the U.S. Bankruptcy Code. The Company’s

ability to execute on these actions will depend on numerous factors including the Company’s financial condition at such

time and the condition of the capital markets and other factors beyond the Company’s control. Any new capital or

refinancing of the Company’s indebtedness could be at higher interest rates and could require the Company to comply

with more onerous covenants or other unfavorable terms, which could further restrict its business operations. The

Company cannot assure that any new capital raise, refinancing or debt restructuring would be possible, or if possible,

would be completed on favorable or acceptable terms. If sufficient cash from operations, refinancing, or external funding is

not available, the Company may be unable to adequately fund its business plan and operations and the Company’s

business, results of operations, cash flows and financial condition would be materially and adversely affected.

The Company’s credit facility contains financial covenants and other restrictions that may limit the Company’s

financial and operational flexibility or otherwise adversely affect our results of operations.

The terms of the Company’s credit facility, as set out in the Credit Agreement, includes a number of covenants, restrictions

and payment requirements that limit the Company’s ability to, among other things, incur additional indebtedness, grant

liens, sell or otherwise dispose of our assets, pay dividends, make redemptions and repurchases of stock, make

investments, loans and acquisitions or change the nature of our business. These may restrict the Company’s current and

future operations and could adversely affect its ability to finance its future operations or capital needs. In addition,

complying with the covenants and restrictions may make it more difficult for the Company to successfully execute its

business and turnaround strategies. In addition, the Credit Agreement includes financial covenants that, among other

things, require the Company to maintain a minimum liquidity amount and to satisfy certain leverage ratios, interest

coverage ratios and EBITDA targets. Absent a material improvement in the Company’s financial performance, it will be

unable to satisfy these ratios during 2026. A failure to comply with the covenants, restrictions or payment requirements set

out in the Credit Agreement could result in an event of default, which, if not cured or waived, would give the lenders the

right to terminate their commitments to provide additional loans, declare all borrowings outstanding, together with accrued

and unpaid interest and fees, to be immediately due and payable, increase the interest rates applicable to such debt, and

exercise rights and remedies, including by way of initiating foreclosure proceedings against any assets constituting

collateral for the obligations under the credit facilities. If our debt were to be accelerated, the Company may not have

sufficient liquidity or the ability to refinance the debt or sell sufficient assets to repay the debt, which could immediately


19 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

adversely affect the Company’s business, results of operations, financial condition, and cash flows. Even if the Company

were able to obtain new financing, such financing may not be on favorable or acceptable terms.

Risks Related to the Company’s Marketing Strategy and Execution of Total Retail Distribution Strategy

The Company’s future growth and profitability depend upon the effectiveness and efficiency of its marketing

programs and promotions.

The Company is highly dependent on the effectiveness of its marketing messages, the efficiency of its advertising

expenditures in generating consumer awareness, consideration and conversation leading to sales of its products, and the

ability to competitively price its products. Sleep Number continues to evolve its marketing strategies, adjust its messages

and promotional discounts, differentiate its products, and review the amount it spends on advertising, the timing of its

spend, and where it is spent. The Company may not always be successful in developing effective messages or

addressing consumer perception regarding the price of its products, as the consumer and competition change, or in

achieving efficiency in its advertising expenditures. The Company has been and may continue to be constrained in its

ability to invest in advertising at a rate sufficient to drive demand.

The Company relies in part upon third parties, such as social media influencers and athletes, to market its brand, and is

unable to fully control their efforts. Influencers and athletes with whom the Company maintains a relationship could

engage in behavior or use their platforms to communicate directly with Sleep Number’s customers in a manner that

reflects poorly on its brand, and these communications may be attributed to the Company or otherwise adversely affect

the Company. It is not possible to prevent such behavior, and the precautions the Company takes to prevent or detect this

activity may not be effective.

Consumers expect seamless digital experiences and interactions as a part of their shopping experience. As a result, the

Company’s future growth and profitability will depend in part on (i) the effectiveness and efficiency of the Company’s

online experience, including without limitation advertising and search marketing and optimization programs and how our

brand shows up in artificial intelligence overviews and summaries, in generating consumer awareness and sales of its

products; (ii) the Company’s ability to prevent confusion among consumers that can result from search engines that allow

competitors to use its trademarks to direct consumers to competitors’ websites through confusing or misleading

advertisements; (iii) its ability to prevent Internet publication of false or misleading information regarding its products or the

Company’s competitors’ products; (iv) reviews of Sleep Number’s products; (v) the nature and tone of consumer

sentiment, including those published online or elsewhere; and (vi) the stability and effectiveness of the Company’s

website. Competitor spending on digital marketing programs has and may continue to increase, including without limitation

from a number of direct-to-consumer, digital and omnichannel retailers, which, in turn, has and may continue to increase

the cost of the Company’s digital marketing programs and online search terms.

If the Company’s marketing messages are ineffective or its advertising expenditures and other marketing programs,

including digital programs, are inefficient in creating awareness and consideration of its products and brand name, and in

driving consumer traffic to the Company’s website, call centers, or stores, the Company’s sales, profitability, cash flows,

availability of credit, and financial condition may be adversely impacted. In addition, if the Company is not effective in

preventing the publication of confusing, false or misleading information regarding its brand or its products, or if there is

publication online or elsewhere of significant negative consumer sentiment regarding the Company, brand or products,

sales, profitability, cash flows, availability of credit, and financial condition may be adversely impacted.

The Company’s future growth and profitability depend on its ability to execute its Total Retail distribution

strategy.

The vast majority of the Company’s sales occur through Total Retail, including its retail stores and website. The

Company’s retail stores carry significant fixed costs, and it has made significant capital expenditures in that store footprint.

The Company is highly dependent on its ability to maintain and increase sales per store to cover these fixed expenses,

provide a return on its capital investments and improve the Company’s operating margins. As a part of the Company’s

cost savings and operational efficiencies, select stores have been closed and additional stores are expected to be closed,

and store remodels have been delayed. These closures and older retail store designs have resulted and may continue to

result in higher than expected costs, charges, continued rent liability, lost sales, lower brand awareness, weakened

customer experience, deteriorated reputation, or otherwise negatively impact the Company’s sales, profitability, cash

flows, availability of credit, and financial condition.


20 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

Some of the Company’s stores are mall-based, which stores depend on the continued popularity of malls as shopping

destinations and the ability of mall anchor tenants and other attractions to generate customer traffic. Any decrease in mall

traffic, including due to increased online shopping, could adversely affect the Company’s sales, profitability, cash flows,

availability of credit, and financial condition.

The Company’s Total Retail distribution strategy results in relatively few points of distribution, including 600 retail stores in

50 U.S. states as of the end of 2025, Online, Phone and Chat. Several of the mattress manufacturers and retailers with

which the Company competes have significantly more brick-and-mortar points of distribution than it does, which makes

the Company highly dependent on its ability to drive consumers to its points of distribution to maintain and gain market

share.

When the Company is better positioned to extend existing leases or open new stores in the future, it may encounter

higher than anticipated rents, be unable to find or obtain suitable new locations or renew existing locations, and may need

to navigate a deteriorated reputation among potential landlords.

Risks Related to the Company’s Ability to Compete Effectively

Significant competition has affected and is likely to continue to adversely affect the Company’s business.

As a vertically integrated business, the Company’s products and distribution face significant competition from both

manufacturers of different types of mattresses and a variety of retailers.

The mattress industry is becoming more concentrated among the largest manufacturers of innerspring mattresses and

foam mattresses and one dominant national mattress manufacturer and retailer. The dominant national mattress

manufacturer and retailer may further consolidate through an announced potential acquisition of a national foam and

adjustable base supplier. In recent years, numerous direct-to-consumer companies and low-cost importers have entered

the market, offering “bed-in-a-box” or similar products primarily through online distribution directly to consumers though

many now also partner with traditional mattress retailers. A variety of sleep tracking and monitoring products that compete

with the Company’s SleepIQ technology have been introduced by various manufacturers and retailers, both within and

outside of the traditional mattress industry. A variety of mattress and base manufacturers have also come to market with

copycat smart beds, some featuring a version of what they market as “adjustable firmness.” This competition has and may

continue to increase the costs of search terms and digital advertising and otherwise adversely affect the Company’s

business.

Some of the Company’s competitors have substantially greater financial, marketing and manufacturing resources, greater

investment in customer experience, and greater brand name recognition than the Company does and sell products

through broader and more established distribution touchpoints, which has and may continue to negatively impact traffic to

the Company’s distribution points. Consolidation in the mattress industry has and may continue to amplify this disparity.

The Company’s national, exclusive distribution competes with other retailers who generally provide a wider selection of

mattress and brand alternatives at varying price points than the Company offers.

These manufacturing and retailing competitors, or a combination of these competitors, or new entrants into the market,

may compete aggressively and maintain and gain market share with existing or new products, and may pursue or expand

their presence in the adjustable firmness air bed segment of the market as well as in the market for sleep tracking and

monitoring products. The Company has limited ability to anticipate the timing and scale of new product introductions,

advertising campaigns or new pricing strategies by its competitors, which could inhibit its ability to maintain or increase

market share, or to maintain the Company’s profit margins.

If the Company is unable to effectively compete with other manufacturers and retailers of mattress and sleep tracking and

monitoring products, the Company’s sales, profitability, cash flows and financial condition may be adversely impacted.

Failure to achieve and maintain high levels of product and service quality could negatively impact the Company’s

sales, profitability, cash flows and financial condition.

The Company’s products and services are highly differentiated from traditional innerspring mattresses and from

viscoelastic and other foam mattresses, which have little or no technology and do not rely on electronics and air control

systems. As a result, the Company’s beds may be susceptible to failures that do not exist with traditional or foam


21 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

mattresses. Also, the Company has launched and is launching new products on a faster timeline than the Company’s prior

product launches, which truncated timeline could result in unforeseen issues like potential technical or quality issues.

Failure to achieve and maintain acceptable quality standards could impact consumer acceptance of its products and

services or result in negative media and Internet reports or owner dissatisfaction that could negatively impact the

Company’s brand image and sales levels. In addition, a decline in product or service quality could result in an increase in

return rates and a corresponding decrease in sales, or an increase in product warranty claims in excess of the Company’s

warranty reserves. An unexpected increase in return rates or warranty claims could harm the Company’s sales,

profitability, cash flows and financial condition.

The Company faces an inherent risk of exposure to product liability claims or regulatory actions if the use of its products is

alleged to have resulted in personal injury or property damage. If any of the Company’s products proves to be defective or

non-compliant with applicable regulations such as the federal Consumer Product Safety Commission flammability

standards, the Company may be required to recall or redesign such products. The Company has at times experienced

product liability claims and regulatory actions and may experience such actions in the future. The Company maintains

insurance against some forms of product liability claims, but such coverage may not be applicable to, or adequate for,

liabilities actually incurred. A successful claim brought against the Company outside of, or in excess of, available

insurance coverage, or any claim or product recall that results in significant adverse publicity about the Company, may

have a material adverse effect on the Company’s sales, profitability, cash flows and financial condition.

The Company’s future growth and profitability depend in part on its ability to continue to improve and expand its

product line, anticipate and respond to changing consumer trends, and to successfully execute new product

introductions.

The Company’s ability to compete effectively in the highly competitive sleep and wellness field and to profitably maintain

or grow its market share depend in part on its ability to continue to improve and expand the Company’s product line of

adjustable firmness air beds, adjustable bases, SleepIQ technology, and related accessory products. The Company incurs

significant research and development and other expenditures in the pursuit of improvements and additions to its product

line and is re-prioritizing research and development resources in this highly constrained environment. As part of the

Company’s turnaround strategy, it is repositioning the brand and reducing its core lineup from twelve mattresses to seven

mattresses, including five new mattresses, and doing so on a faster timeline than the Company’s prior product launches. If

these efforts do not result in meaningful product improvements, if the Company is not able to timely anticipate and

respond to changing consumer trends and to gain widespread consumer acceptance of product improvements or new

product introductions, or there are delays or production limitations with respect to its product improvements or new

product introductions, the resulting impacts on our product mix and distribution strategy could adversely affect the

Company’s sales, profitability (including margin), cash flows and financial condition. The Company’s comprehensive new

product launch as part of its turnaround strategy has and may continue to result in inventory management issues including

increased obsolescence and write-offs, as well as, inventory shortages and longer fulfillment times, which would adversely

affect the Company’s sales, profitability (including margin), cash flows and financial condition.

In addition, if any significant product improvements or new product introductions are not successful, delayed, or

constrained the Company’s reputation and brand image may be adversely affected.

The Company’s intellectual property rights may not prevent others from using its technology or trademarks in

connection with the sale of competitive products. The Company is from time to time subject to claims that its

products, processes or trademarks infringe intellectual property rights of others.

The Company owns various U.S. and foreign patents and patent applications related to certain elements of the design and

function of the Company’s beds, biosignal monitoring and related products. The Company owns numerous registered and

unregistered trademarks and trademark applications, including in particular the Sleep Number, Climate360 and SleepIQ

trademarks, as well as other intellectual property rights, including trade secrets, trade dress and copyrights, which it

believes has significant value and is important to the development, function, and marketing of its products. These

intellectual property rights may not provide adequate protection against infringement or piracy, may not prevent

competitors from developing and marketing products that are similar to or competitive with Sleep Number beds, biosignal

monitoring or other products, and may be costly and time-consuming to protect and enforce. The Company’s patents are

also subject to varying expiration dates. In addition, the laws of some foreign countries may not protect its intellectual

property rights and confidential information to the same extent as the laws of the U.S. If the Company is unable to protect

and enforce its intellectual property, the Company may be unable to prevent other companies from using the Company’s


22 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

technology or trademarks in connection with competitive products, which could adversely affect the Company’s sales,

profitability, cash flows and financial condition.

The Company is from time to time subject to claims that its products, processes, advertising, or trademarks infringe the

intellectual property rights of others. The defense of these claims, even if ultimately successful, may result in costly

litigation, and if the Company is not successful in its defense, it could be subject to injunctions and liability for damages or

royalty obligations, and the Company’s sales, profitability, cash flows and financial condition could be adversely affected.

Risks Related to the Company’s Reliance on Third Parties and Reliance on a Global Supply Chain

The Company relies upon several key suppliers and third parties that are, in some instances, the only source of

supply or services currently used by the Company for particular materials, components, products, systems,

services, or consumer financing. A disruption in the supply or substantial increase in cost of any of these

products or services has, and could continue to, harm the Company’s sales, profitability, cash flows, availability

of credit, and financial condition.

Sleep Number currently obtains all the materials and components used to produce its smart beds from outside sources

including some that are located outside the U.S. In several cases, including its air chambers, integrated non-adjustable

foundations, adjustable foundations, various components for its Firmness Control and Smart Control systems, certain

electronic componentry, certain foam formulations, as well as its fabrics and zippers, the Company obtains these

materials, components and products from suppliers who serve as the only source of supply, or who supply the vast

majority of the Company’s needs of the particular material, component or product. While the Company believes that some

of these materials, components and products, or suitable replacements, could be obtained from other sources in the event

of a disruption or loss of supply, it has not been able to, and in the future may not be able to, find alternative sources of

supply or alternative sources of supply on comparable terms, quantities and timelines. If the Company’s relationship with

these suppliers or the suppliers’ services are disrupted, terminated or otherwise negatively impacted, including by

consolidations in the industry or by government actions, such as the imposition of tariffs or other trade restrictions, the

Company could have difficulty in replacing these sources since there are relatively few other suppliers presently capable

of manufacturing these components and products or that offer similar services. Constraints on the ability of certain of its

suppliers to timely meet commitments, including in an environment of increased demand for consumer products and

services and labor challenges, has, and may continue to, adversely impact the Company’s ability to meet its products and

services demand, result in additional costs, or otherwise adversely impact the Company’s business, operations and

financial results.

The Company also relies on limited critical suppliers for its information technology systems and services and e-commerce

as well as Synchrony Financial for the majority of its consumer financing services. If the Company’s relationship with

these suppliers or the suppliers’ services are disrupted, terminated or otherwise negatively impacted, the Company could

have difficulty in replacing these systems, services and e-commerce in a timely and cost-effective manner, adversely

impacting the Company’s sales, profitability, cash flows, availability of credit, and financial condition.

In addition, third parties on which the Company relies, for various reasons have demanded or required or may demand or

require changes to their payment terms and frequency, credit limits and exposures, or other contractual terms with the

Company. As a part of its turnaround strategy and cost savings and operational efficiencies, the Company has and will

continue to carefully manage its cash, including extending payment terms and delaying payments. If the Company is

unable to accommodate or otherwise resolve third-party demands, changes to contractual terms or perceived

deterioration of its credit worthiness, the Company’s supply of goods, products and services from these third parties could

be disrupted, terminated or otherwise negatively impacted and the Company may not be able to or could have difficulty in

replacing the supply of such goods, products and services in a timely and cost-effective manner, adversely impacting the

Company’s sales, profitability, cash flows, availability of credit, and financial condition.

Fluctuations in commodity prices or availability, or third-party delivery or logistics costs, have resulted, and

could continue to result, in an increase in component costs and/or delivery costs.

The Company’s business is subject to significant increases or volatility in the prices or availability of certain commodities,

including but not limited to electronic componentry, fuel, oil, natural gas, rubber, cotton, plastic resin, corrugate, steel and

chemical ingredients used to produce foam, as well as third-party logistic costs. Tariffs on these commodities, increases in

prices of these commodities or logistics costs, supply shortages or other inflationary pressures have resulted, and may


23 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

continue to result, in significant cost increases for the Company’s raw materials and product components, as well as

increases in the cost of delivering its products to customers. The Company has been, and may continue to be, unable to

offset any such increased costs through value engineering and similar initiatives, or through price increases or availability,

and, as a result, the Company’s profitability, cash flows and financial condition have been, and may continue to be

adversely impacted. Price increases to offset the increased costs, have, and may continue to, adversely impact the

Company’s sales volumes.

The Company relies on third parties to deliver some of its products to its facilities and customers on a timely and cost-

effective basis. These third-party providers could be vulnerable to labor challenges, liquidity concerns, the impacts of

global health conditions, or other factors that may result in disruption, delays in deliveries or increased costs of deliveries.

Any significant delay in deliveries to its customers could lead to increased cancellations or returns and cause the

Company to lose sales or incur increased costs. Delays in deliveries and increases in freight charges or other costs of

deliveries has and could continue to harm the Company’s sales, profitability, cash flows and financial condition.

The Company’s business is subject to risks inherent in global sourcing activities.

Sleep Number’s air chambers, certain electronic components, and some of its other components are manufactured

outside the U.S., and therefore are subject to risks associated with foreign sourcing of materials, including but not limited

to:

•Existing or potential duties, tariffs or quotas on certain types of goods that may be imported into the U.S., including

recent and proposed unilateral tariffs, tariffs on certain goods from China and Mexico, tariffs on goods subject to the

United States-Mexico-Canada Agreement (USMCA), and recent and proposed tariffs on materials such as steel;

•Foreign regulations that may impact availability or cost of supply;

•Political instability, unrest, geopolitical turmoil, acts of terrorism, global conflicts, including geopolitically challenging

situations in regions such as Russia, the Middle East and China, outbreaks of pandemics or contagious diseases,

shipping delays, foreign or domestic strikes, customs inspections, changes in immigration rates, laws, and

enforcement, or other factors resulting in disruption in supply, transportation, trade, labor, or the availability of global

contractors utilized in the Company’s business operations;

•Foreign currency fluctuations;

•Economic uncertainties, including inflation and policies that may have an inflationary effect, such as tariffs; and

•Adverse weather conditions, climate change or other natural or man-made disasters.

The Company cannot predict whether the countries in which some of its components are manufactured, or may be

manufactured in the future, or where the Company contracts for labor will be subject to new or additional trade restrictions

imposed by the U.S. or other foreign governments, including the likelihood, type, or effect of any such restrictions. The

U.S. government has implemented certain trade policies, including imposing and proposing tariffs on most of our foreign

suppliers. A significant portion of the Company’s imports are subject to the USMCA, so any changes increasing tariffs

under the USMCA would have negative consequences. Similarly, some of the Company’s third-party suppliers have

disclosed that they may source, directly or indirectly, a portion of their supply chain requirements of 3TGs or fabrics from

China, which materials have generally been under scrutiny for potential ties to Uyghur forced labor camps. These factors

have, and could continue to, increase the costs of doing business with foreign suppliers, lead to inadequate inventory

levels or delays in shipping products to customers, or the need to find new sources for certain materials on short notice,

which could harm the Company’s sales, customer satisfaction, profitability, cash flows and financial condition.

The locations where Sleep Number and its suppliers and global contractors operate have experienced, and may

experience in the future, adverse regional events such as extreme weather conditions, climate change and other natural

and man-made disasters, which could have a significant adverse effect on the Company, its ability to source necessary

materials, components and products, and its ability to develop, launch, sell and deliver its products to customers. Climate

change may increase the frequency and severity of adverse weather conditions and other natural disasters. All regions of

the U.S. and warmer climates globally may be particularly impacted by extreme weather, such as hurricanes, natural

disasters, droughts, wildfires and rising sea levels. These events have disrupted, and may continue to, disrupt the

Company’s operations and ability to source components and products.


24 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

The Company has been, and could continue to be, vulnerable to shortages in supply of components necessary to

manufacture its products due to its manufacturing processes which operate with minimal levels of inventory or

due to global shortages of supply of electronic componentry or other materials, unexpected increased consumer

demand or inadequate demand forecasting, which, in turn, has and may continue to harm its ability to satisfy

consumer demand and adversely impact the Company’s sales and profitability.

A significant percentage of the Company’s products are assembled after it receives orders from customers utilizing

manufacturing processes with minimal levels of raw materials, work-in-process and finished goods inventories. Lead times

for ordered components may vary significantly, and some components used to manufacture its products are provided on a

sole source basis. The Company’s ongoing efforts to mitigate supply chain weaknesses may not be successful or may

have unfavorable effects such as increased storage costs or excess supply. Shortage of materials caused by disruptions

and unavailability of supply, an increase in the demand for some or all of its products or inability to adequately forecast

supply needs, has harmed and could continue to harm the Company’s ability to satisfy customer demand, delay deliveries

of its products to customers, lead to customer cancellations and returns, delay the development and launch of new

products, and increase its costs. These risks have been and will continue to be exacerbated by developments in the

semiconductor and technology supply chain, including increased global demand for more sophisticated, high‑performance

computing and artificial intelligence‑related chips, which has and will continue to strain and divert manufacturing capacity

and supplier resources from the production of lower‑capacity or legacy chips that remain critical to many of the Company’s

products. In addition, the Company may carry some excess inventory of certain components for various products from

time to time especially when the Company has faced component shortages or when the Company introduces new

products that use different components, and if the Company is unable to use that excess inventory fully or timely, the

Company may run the risk of obsolescence, which could result in write-downs of inventory and an adverse effect on gross

margins. As the Company executes its turnaround strategy, and has launched and is launching new products, for a

product transition that repositions the brand and reduces its core lineup from twelve mattresses to seven mattresses,

including five new mattresses, on a faster timeline than any prior product launches, it has incurred and may continue to

incur inventory obsolescence related to this significant product transition. Any such impacts or delays have and may

continue to adversely affect the Company’s sales, customer satisfaction, profitability, cash flows and financial condition.

Risks Related to the Company’s Vertically Integrated Business Model

Disruption to the Company’s facilities and operations could increase its costs of doing business or harm the

Company’s ability to satisfy customer demand, develop, test and launch new products, and service its products

and customers.

As a vertically integrated business, the Company has various facilities and operations including manufacturing, assembly,

distribution, logistics, field services, home delivery, headquarter, product development, retail and customer service. Sleep

Number operates a dedicated cut and sew facility for cover production in Irmo, SC and an advanced engineering and

prototyping facility in Salt Lake City, UT. Each of these facilities are combined with an assembly distribution center (ADC).

There are three additional ADCs (Minneapolis, MN; Cincinnati, OH; and Dallas, TX). The five ADCs leverage component

inventory to pre-assemble 100% of its mattresses to order rather than stocking finished goods. The Company has field

service and home delivery operations and contractors that deliver and service its products across the country as well as a

bedding fulfillment center that ships bedding products to consumers via third-party services. The product development and

testing operations primarily occur in the Company’s corporate headquarters in Minneapolis, Minnesota and Sleep Number

Labs facility in San Jose, California. Sleep Number’s customer service operations are largely remote positions with team

members located across the country and international third-party contractors, and the Company has retail stores across

the country. Disruption to any of the Company’s operations, facilities, workforce, third-party contractors, or the Company’s

nationwide logistics network, could harm or delay its ability to satisfy customer demand, develop, test and launch new

products, service its products and customers, and increase its costs. While the Company’s metrics related to customer’s

experience indicate that the customer experience has improved over prior year, the Company’s customer service

operations remain reliant on third-party contractors. Such impacts and delays could adversely affect the Company’s sales,

customer satisfaction, profitability, cash flows, availability of credit, and financial condition.


25 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

Any future acquisitions, business combinations or divestitures the Company completes involve a number of

risks, the occurrence of which could adversely affect the Company’s business, reputation, operating results and

financial condition.

The Company’s ability to complete future acquisitions, business combinations or divestitures will depend, in part, on the

availability of suitable candidates at acceptable prices, terms, and conditions; the Company’s ability to compete effectively

for transaction candidates; and the availability of capital and personnel to complete such transactions and run the resulting

operations effectively. The benefits of the transaction may take more time than expected to develop, integrate into or

divest from the Company’s operations, and the Company cannot guarantee that future transactions will, in fact, produce

any benefits. Such transactions may involve a number of risks, the occurrence of which could adversely affect the

Company’s business, reputation, operating results and financial condition, including: (i) diversion of management’s

attention; (ii) disruption to the Company’s existing operations and plans or the inability to effectively manage the

Company’s expanded operations; (iii) reallocation of amounts of capital from other operating initiatives and/or an increase

in the Company’s leverage and debt service requirements to fund any such transactions, which could in turn restrict the

Company’s ability to access additional capital when needed or pursue other important elements of its business strategy;

(iv) infringement by acquired businesses of intellectual property rights of others; (v) violation of confidentiality, intellectual

property and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate

formal intellectual property protection mechanisms in place at an acquired business; (vi) inaccurate assessment of

additional post-transaction investments, undisclosed, contingent, tax or other liabilities or problems, unanticipated costs

associated with an acquisition, and an inability to recover or manage such liabilities and costs; (vii) incorrect estimates

made in the accounting for transactions and incurrence of non-recurring charges, including restructuring charges in

connection with any future effort to reduce costs and streamline operations; and (viii) additional risks that may arise as a

result of the transaction with international entities, including managing international laws and regulations applicable to the

business, operations and personnel.

Risks Related to Workforce

The Company’s operating performance, profitability, and future growth depend upon its ability to attract, retain

and motivate qualified and effective personnel.

As a vertically integrated manufacturer and retailer, the Company’s future growth and profitability will depend upon its

ability to attract, retain and motivate qualified personnel in a wide variety of areas to execute its growth strategy, including

qualified management and executive personnel, retail sales professionals and managers, and manufacturing, home

delivery and technical personnel. In addition, the Company’s success will depend upon the effectiveness of its

organizational leadership and managers as well as the capabilities of its team members; some of these risks may be

heightened while the Company executes its turnaround strategy and ongoing cost savings and operational efficiencies.

Labor challenges or other economic factors may prevent the Company, and its suppliers and vendors, from successfully

hiring and retaining qualified personnel especially for critical business functions. The failure to attract, retain and motivate

qualified personnel or the lack of effective organizational leadership, management or appropriate team capabilities or

resources may hinder the Company’s ability to execute its turnaround strategy, growth initiatives, business operations,

and may adversely impact the Company’s sales, profitability, cash flows and financial condition.

Certain portions of the Company’s workforce, in particular its home delivery, logistics, manufacturing, warehouse, and

retail, may seek to unionize or engage in unionization activities. Such activities may cause distraction from the Company’s

core business, reduce the Company’s ability to manufacture, sell, or deliver its products, increase the Company’s costs,

reduce efficiency, and adversely impact the Company’s sales, profitability, cash flows and financial condition.

Risks Related to Legal Compliance and Legal Proceedings

The Company’s business is subject to a wide variety of government laws and regulations. These laws and

regulations, as well as any new or changed laws or regulations, could disrupt the Company’s operations or

increase its compliance costs. Failure to comply with such laws and regulations could have further adverse

impacts on the Company’s operations.

The Company is subject to a variety of laws and regulations. Laws and regulations at the international, federal, state and

local levels frequently change and the Company cannot always reasonably predict the impact from, or the ultimate cost of

compliance with, future regulatory or administrative changes. Changes in law, the imposition of new or additional


26 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

regulations or the enactment of any new or more stringent legislation that impacts employment and labor, trade,

advertising claims, marketing practices, pricing, consumer credit offerings, “do not call/mail” requirements, text messaging

requirements, product testing and safety, health and wellness product requirements, use of artificial intelligence,

transportation and logistics, health care, tax, accounting, privacy and data security, health and safety or environmental

issues, warranty disclosures, delivery timing requirements, accessibility requirements, among others, could require the

Company to change the way it does business and could have a material adverse impact on the Company’s sales,

profitability, cash flows and financial condition. New or different laws or regulations could increase direct compliance costs

for the Company or may cause its vendors to raise the prices they charge the Company because of increased compliance

costs. Further, the adoption of a multi-layered regulatory approach to any one of the state or federal laws or regulations to

which the Company is currently subject, particularly where the layers are in conflict, could require alteration of its

manufacturing processes or operational parameters which may adversely impact the Company’s business.

Legislative or regulatory changes that impact the Company’s relationship with its workforce, such as minimum wage

requirements or health insurance or other employee benefits mandates, could increase the Company’s expenses and

adversely affect its operations. While it is Sleep Number’s policy and practice to comply with legal and regulatory

requirements and its procedures and internal controls are designed to promote such compliance, the Company cannot

assure that all of its operations will comply with all such legal and regulatory requirements. Further, laws and regulations

change over time and the Company may be required to incur significant expenses, modify its operations, or delay new

product introductions in order to ensure compliance. This could harm the Company’s profitability, cash flows and financial

condition. If Sleep Number is found to be in violation of any laws or regulations, it could become subject to fines, penalties,

damages or other sanctions as well as potential adverse publicity or litigation exposure. This could adversely impact the

Company’s business, reputation, sales, profitability, cash flows and financial condition.

Risks Related to the Company’s Information Systems and Cybersecurity

Information systems that contain confidential Company data, consumers’ personal information, and team

members’ personal information may be subject to attacks by hackers or other cyber threats that could

compromise the confidentiality, integrity, and availability of the data, which could substantially disrupt the

Company’s business and could result in a breach of the data.

The Company’s information systems and information systems of third-party vendors it uses to assist in the storage and

management of information, including on-premise and cloud-based systems, contain personal, financial, and SleepIQ®

data and information related to its customers and team members collected and maintained in the ordinary course of its

business. These information systems also contain confidential Company data regarding its business and innovations. The

Company’s use and dependence on its information systems requires data storage in cloud-based systems. While the

Company maintains, and requires the Company’s third-party vendors to maintain, security measures to protect this

information, a breach of these security measures, such as through third-party action and attacks, team member error,

access to its data and systems, malfeasance or otherwise, could compromise the security of the Company’s data and

customers’ and team members’ personal information. Like many other businesses, Sleep Number has and will likely

continue to experience cyber-based attacks and incidents from time to time. As the techniques used to breach security

measures change frequently and may not be recognized until launched against a target, the Company may be unable to

anticipate these techniques or to implement adequate preventive measures. In addition, the Company or its third-party

vendors may not be successful in timely identification or containment of cyber-based attacks and incidents. Any failure of

the Company’s systems and processes or its third-party vendors’ systems and processes to adequately protect its data or

customer or team member personal information from exposure, theft or loss could adversely impact the Company’s

business, reputation, sales, profitability, cash flows and financial condition.

Advancements in and adoption of, or the failure to effectively adopt, artificial intelligence and related

technologies may increase cost and risks associated with competition, regulatory requirements, and

cybersecurity threats.

Rapidly evolving technological and regulatory developments related to artificial intelligence and related technologies may

increase competitive, legal, and security risks facing the Company. To effectively compete, the Company needs identify

and evolve with emerging technological and broader industry trends, including technologies such as artificial intelligence

and related technologies as well as to develop appropriate protections, safeguards, and policies for handling the

processing of data. In addition, the regulatory and legal landscape regarding artificial intelligence is rapidly evolving and

the Company may be challenged to timely comply in a cost-effective manner. Any actual or perceived failure to effectively


27 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

adopt artificial intelligence or related technologies, comply with evolving regulatory frameworks regarding, or if adoption

introduces bias or other issues, the development and use of artificial intelligence could adversely affect the Company’s

business operations, reputation, customer satisfaction, profitability, cash flows and financial condition. In addition, new

artificial intelligence technologies may increase the risk of internal or external data loss, misappropriation of intellectual

property, and enable cyber-attackers to create increasingly effective and powerful methods of cyber-attack, including, for

example, the development of malicious code, denial-of-service attacks, use of quantum computing, sophisticated phishing

attempts, and other attacks. The Company may not be able to sufficiently identify, withstand, and contain such attacks,

which may cause disruption to business operations and harm the Company’s sales, customer satisfaction, profitability,

cash flows and financial condition.

Any maintenance, improvements or upgrades to information systems and services that may be required to meet

the ongoing and evolving needs of the Company’s business and cybersecurity needs as well as existing and

emerging regulatory requirements may be costly to implement, may take longer or require greater resources than

anticipated and may result in disruptions to its systems or business.

The Company depends on its information systems and services for many aspects of its business including those provided

by suppliers and third parties. Sleep Number has and may continue to have disruptions or outages to these information

systems and services that negatively impact its business and systems. If the Company’s information systems and services

or if any suppliers or other third-parties’ information systems and services upon which the Company relies are disrupted in

any material way, or maintenance, improvements or upgrades are required to meet the ongoing or evolving needs of its

business, cybersecurity needs, and existing and emerging regulatory requirements, then the Company may be required to

incur significant capital expenditures in the pursuit of continuity, improvements or upgrades to its information systems and

services. These efforts may take longer and may require greater financial and other resources than anticipated, may

cause distraction of key personnel, and may cause short-term disruptions, fines, security vulnerabilities to, or otherwise

negatively impact the Company’s existing systems and business. Any of these outcomes could impair the Company’s

ability to achieve critical strategic initiatives and could adversely impact the Company’s sales, profitability, cash flows and

financial condition.

Risks Related to the Company’s Stock

The Company’s stock price has and may continue to fluctuate and the Company’s financial results, removal from

various stock indices and other factors have and may continue to adversely affect the Company’s stock price.

The Company’s stock price has and may continue to fluctuate significantly in response to numerous factors such as: the

overall performance of the equity markets and the economy as a whole; the Company’s’ financial and operating

performance, which may fluctuate due to the risk factors set forth herein; changes in the financial projections the

Company or third parties may provide to the public or the Company’s failure to meet these projections; actual or

anticipated changes in its growth rate relative to that of its competitors; inclusion or removal from various stock indices;

significant stock trades by large shareholders; failure of securities analysts to maintain coverage of the Company;

changes in financial estimates by securities analysts who follow the Company or its failure to meet these estimates or the

expectations of investors; sales of shares of the Company’s common stock by Sleep Number or its shareholders

particularly sales by its directors, executive officers and significant shareholders or the perception that these sales could

occur. Although the Company’s common shares are listed on the Nasdaq Stock Market, the volume of trades on any given

day may be limited and, as a result, shareholders might not be able to sell or purchase its common shares at the volume,

price or time desired.

A substantial amount of the Company’s stock is held by a small number of large investors and significant sales

of its common stock by one or more of these holders could adversely affect the Company’s stock price.

As of January 2, 2026, the Company’s 25 largest holders of common stock were investors who held approximately 79% of

the outstanding shares of common stock in the aggregate. These investors have sold and may sell some or all of their

shares at any time for a variety of reasons, and such sales could depress the market price of the Company’s common

stock, which could adversely affect the Company’s stock price. In addition, any such sales of the Company’s common

stock by these entities could also impair its ability to raise capital through the sale of additional equity securities.


28 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

The Company’s business could be negatively affected as a result of shareholder activism.

While the Company welcomes shareholders’ constructive input, the Company could be negatively affected as a result of

shareholder activism, which could cause the Company to incur significant expense, disrupt the execution of its business

strategy, and impact the performance of its stock price. The Company has been, and may continue to be, the subject of

shareholder activism, and it is subject to the risks associated therewith. Responding to shareholder activism, including

proxy contests, requires significant time and attention from management and the Board, potentially interfering with the

Company’s ability to execute its strategic plan. The Company may be required to incur significant legal fees and other

expenses, and the attention of management may be diverted by such activism. Any of these impacts could materially and

adversely affect the Company’s business and operating results, and the Company’s stock price has experienced, and may

continue to experience, fluctuation or otherwise be adversely affected by shareholder activism.

If securities analysts do not publish, or cease publishing, research or reports about the Company, the Company’s

business, or if they change their recommendations regarding the Company’s stock adversely, the price of the

Company’s common stock and trading volume could decline.

The trading market for the Company’s common stock could be influenced by any research and reports that securities or

industry analysts publish about the Company, the Company’s business or the Company’s market. If one or more of the

analysts who covers the Company downgrades the Company’s common stock or publishes inaccurate or unfavorable

research about the Company, the Company’s business or the Company’s market, the price of the Company’s common

stock would likely decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on

the Company regularly, demand for the Company’s common stock could decrease, which could cause the price of the

Company’s common stock and trading volume to decline.

Risks Related to Tax Treatment

Unfavorable tax treatment may adversely affect the Company’s financial condition.

The Company's effective tax rate could be adversely affected by changes in the valuation allowance of deferred tax assets

or changes in tax laws. The Company has significant deferred tax assets and must generate sufficient earnings of the

appropriate character in order to utilize its deferred tax assets. If the Company’s earnings remain flat or decline over an

extended period of time, it may not be able to utilize its deferred tax assets and it has and may in the future need to record

a valuation allowance against them that could adversely affect its results of operations, cash flows and financial condition

in the period in which the valuation allowance is recorded. As of January 3, 2026, a valuation allowance of $55.3 million

has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

Risks Related to Environmental, Social and Governance Matters

The Company’s priorities and progress with respect to sustainability, or Environmental, Social and Governance

(ESG), matters, and scrutiny and evolving expectations from the public, investors, regulators, vendors, and other

stakeholders may expose the Company to numerous risks, including risks to its reputation and stock price,

additional costs, and compliance risks.

Different stakeholder groups have divergent views on ESG matters such environment, climate change, health and safety,

supply chain management, diversity, equity and inclusion, labor conditions and human rights in the Company’s operations

and supply chain, which increases the risk that any action or lack thereof with respect to ESG matters may be perceived

negatively by at least some stakeholders and adversely impact the Company’s reputation and business. Sleep Number’s

current ESG priorities reflect the Company’s strategic plans and aspirations and are not guarantees that it will be able to

achieve them. The Company’s ability to achieve any ESG-related objectives is subject to numerous risks, many of which

are outside of its control, including: the availability and cost of relevant technologies and materials and evolving regulatory

requirements affecting relevant standards or disclosures. While some stakeholders may not be satisfied with the

Company’s ESG practices or initiatives or the speed with which the Company is implementing such initiatives, other

stakeholders may be opposed to the implementation of such initiatives at all, which could result in customer backlash or

other adverse effects. The ESG performance of the Company’s competitors, some of which are subject to more rigorous

international ESG-related disclosure regulations, may be better perceived than the Company’s, which may result in

potential or current customers, suppliers or investors electing to do business with its competitors rather than the Company,

and may detract from the Company’s ability to attract or retain employees. Furthermore, the Company’s efforts to


29 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

accurately report its ESG status under evolving and competing standards has resulted and may continue to result in a lack

of consistent or meaningful comparative data from period to period and which has and could result in revisions to the

Company’s ESG priorities and reported progress. The Company’s failure, or perceived failure, to pursue or fulfill its ESG

priorities or to satisfy various reporting standards may present numerous operational, reputational, competitive, financial,

legal, government enforcement action and other risks, any of which could have a material adverse impact, including on

the Company’s reputation, stock price, and results of operations, cash flows and financial condition.

The SEC adopted climate disclosure rules, which would have required new climate-related disclosures in SEC filings,

including certain climate-related metrics and greenhouse gas emissions data, information about climate-related targets

and goals, transition plans, if any, and extensive attestation requirements. However, these climate-related disclosure rules

remain stayed pending litigation in the Eighth Circuit Court of Appeals. The SEC has withdrawn its defense of the rules,

creating uncertainty regarding their future applicability. At the state level, California has enacted legislation that would

require the Company to make broad-based climate-related disclosures, and other states are considering similar

measures. In addition to requiring companies to quantify and disclose direct emissions data, the California rules seek

disclosure of climate impact arising from companies’ operations, their business partners and the end-users of their

products. The Company is refining its measurements and readiness to report under the California rules. Sleep Number

has and will continue to incur costs relating to the collection, review and assurance for required disclosures of climate-

related information and may experience increased costs, litigation, regulatory, business, reputation, or other risks.

Climate change and legal or regulatory responses may adversely affect the Company’s business, operations and

financial condition.

Climate change presents various near- and long-term risks that may adversely impact the Company’s business. The

enactment of certain laws and regulations to address or limit the effects of climate change, or changes to existing laws

and regulations, could mandate more restrictive standards or require such changes on a more accelerated time frame.

The consequences of climate change and the ensuing governmental regulations could disrupt the Company’s operations

or harm its ability to source necessary materials and components and manufacture its products, which may adversely

affect the Company’s financial condition. If public perception of Sleep Number’s compliance with laws and regulations

related to climate change is negative, it could adversely affect the Company’s business, reputation and shareholder

perception. Adverse publicity or climate-related litigation that impacts the Company could also have a negative impact on

its business.

Extreme weather, natural disasters, power outages, or other unexpected climate-related events could result in physical

damage to and complete or partial closure of one or more of the Company’s manufacturing, distribution centers or other

facilities or those of its suppliers, temporary or long-term disruption in its supply chain or logistics, disruption of or harm to

the Company’s workforce and/or disruption of its ability to deliver products to customers. Current or future insurance

arrangements may not provide protection for costs that may arise from such events, particularly if such events are

catastrophic in nature or if multiple such events occur. Climate change may also subject the Company’s business to

significant increases or volatility in the prices of certain commodities, including but not limited to electronic componentry,

fuel, oil, natural gas, rubber, cotton, plastic resin, corrugate, plywood, steel and chemical ingredients used to produce

foam, as well as third-party logistic costs. Further, the long-term effects of climate change on general economic conditions

and the Company’s industry in particular are unclear, and changes in the supply, demand, or available sources of energy

and the regulatory and other costs associated with energy production and delivery may affect the availability or cost of

goods and services, including natural resources, necessary to run its business. Any long-term disruption in the Company’s

ability to service its customers from one or more manufacturing, distribution centers or other facilities could have an

adverse effect on the Company’s results of operations, cash flows and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Sleep Number uses a “defense in depth” approach for its cybersecurity risk management program leveraging the National

Institute of Standards and Technology (NIST) framework, which organizes cybersecurity risks into five categories: identify,

protect, detect, respond and recover. The Company regularly assesses the threat landscape for cybersecurity risks, with a

strategy based on prevention, detection and mitigation. The Company’s information technology (IT) security team–led by

the Chief Product and Enterprise Strategy Officer (CPESO)–reviews cybersecurity risks on an ongoing basis. IT security


30 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

team members who support the Company’s information security program have relevant educational and industry

experience. The CPESO, and their team, provide regular reports to senior management, the Audit Committee, and other

relevant teams on various cybersecurity threats, assessments and findings. The IT security team has established policies,

standards, processes, and practices for assessing, identifying, and managing material risks from cybersecurity threats

(including Generative AI associated risks). These threats are also identified and assessed through the Company’s overall

risk management program, including quarterly assessments of IT systems, cybersecurity, and related risks. The Company

engages in an ongoing review of all cybersecurity events and threats to assess the materiality of each event, if any.

The Company maintains controls and procedures that are designed to ensure prompt escalation of certain cybersecurity

incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and

the Audit Committee in a timely manner.

The Company assesses cybersecurity risks on an ongoing basis, including assessing and deploying technical safeguards

designed to protect its information systems from cybersecurity threats. The Company has established comprehensive

incident response and recovery plans, regularly tests and evaluates the effectiveness of those plans, and maintains

cybersecurity risk insurance.

The Company implements processes to identify, prioritize, assess, mitigate and remediate risks associated with third-party

service providers. It conducts security assessments of critical third-party providers before engagement and maintains

ongoing monitoring to ensure compliance with the Company’s cybersecurity standards. The monitoring includes ongoing

assessments by the IT security team. This approach is designed to mitigate risks related to data breaches or other

security incidents originating from third parties. The Company also contractually requires third parties it engages to have

security programs commensurate with their risk, while retaining certain audit rights for higher risk third parties.

The Company regularly reminds its team members and contractors of the importance of handling and protecting customer

and employee data. The Company provides all its team members with dedicated cybersecurity awareness training

annually and conducts monthly phishing simulation testing and other cybersecurity awareness campaigns (e.g., intranet

articles, cybersecurity awareness month). Further, the Company sponsors a year-long "Cybersecurity Champions

Academy" where team members from all across the Company are engaged in a cybersecurity-focused community which

more deeply embeds cybersecurity awareness through monthly meetings, topical projects, and cyber-skill sharing.

The Company engages with a range of external experts, including cybersecurity assessors, auditors, and legal counsel, in

evaluating and testing its cybersecurity risk management systems. This enables the Company to leverage specialized

knowledge, experience and insights, to help ensure its cybersecurity strategies and processes remain current.

•The Company has cybersecurity operations and security engineering capabilities that provide comprehensive

monitoring to detect and respond to cyber threats and alerts and execute cyber incident response playbooks. This

includes a vulnerability management program which identifies and drives remediation of risks. The Company employs

a wide array of industry-leading security platforms and tools.

•The Company has retained data security and data privacy legal counsel whose practices focus on data breach

response, information security compliance, and compliance with the data privacy laws in the various jurisdictions in

which the Company operates.

•In addition, the Company engages specialized consultants and third-party managed service providers on a project-

specific basis to assist it with projects that will improve the Company’s IT infrastructure, strengthen its security posture

and cyber incident investigations, and improve its cyber readiness.

Management’s Role

The CPESO has primary operational responsibility for the Company’s cybersecurity function. The CPESO has served in

various leadership positions for over 20 years, with 3 years specifically leading information technology. The CPESO, and

the Chief Legal and Risk Officer have primary responsibility for assessing and managing material cybersecurity risks. This

group, and their supporting teams, meets quarterly to review security performance metrics, identify security risks, and

assess the status of approved security enhancements. This group also considers and makes recommendations on

security policies and procedures, security service requirements, and risk mitigation strategies.


32 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

ITEM 2. PROPERTIES

Retail Locations

Sleep Number currently leases all of its existing retail store locations and expects that its policy of leasing stores, rather

than owning stores, will continue. The Company leases its retail stores under operating leases which, in addition to the

minimum lease payments, may require payment of a proportionate share of the real estate taxes and certain building

operating expenses. The Company retail store leases generally provide for an initial lease term of five to 10 years. In

addition, the mall-based retail store leases may require payment of contingent rent based on net sales in excess of certain

thresholds. Certain retail store leases may contain options to extend the term of the original lease.

The following table summarizes the geographic locations of Sleep Number’s 600 retail stores as of January 3, 2026:


	Retail Stores		Retail Stores		Retail Stores
Alabama	9	Louisiana	10	Ohio	20
Alaska	1	Maine	3	Oklahoma	5
Arizona	14	Maryland	14	Oregon	8
Arkansas	7	Massachusetts	9	Pennsylvania	24
California	62	Michigan	19	Rhode Island	1
Colorado	15	Minnesota	14	South Carolina	10
Connecticut	6	Mississippi	5	South Dakota	2
Delaware	2	Missouri	12	Tennessee	14
Florida	44	Montana	4	Texas	54
Georgia	20	Nebraska	4	Utah	6
Hawaii	2	Nevada	6	Vermont	1
Idaho	3	New Hampshire	4	Virginia	18
Illinois	23	New Jersey	14	Washington	17
Indiana	14	New Mexico	4	West Virginia	3
Iowa	6	New York	19	Wisconsin	11
Kansas	5	North Carolina	20	Wyoming	2
Kentucky	8	North Dakota	2
				Total	600

Manufacturing, Distribution and Headquarters

The Company leases its 238,000 square-foot corporate headquarters in Minneapolis, MN. The lease term commenced in

November 2017 and runs through October 2032. The lease includes three five-year renewal options.

The Company has five assembly distribution centers (Irmo, SC; Salt Lake City, UT; Minneapolis, MN; Cincinnati, OH; and

Dallas, TX) with a combined total square footage of approximately 745,000 square feet. The Irmo, SC facility’s lease term

ends June 2026. The other four facilities have lease terms ending between December 2029 through July 2032. The

leases include one or two, five-year option renewals. The Company also operates a cut and sew manufacturing facility at

the same location as it’s Irmo, SC assembly distribution center and a bedding fulfillment center at the same location as its

Cincinnati, OH assembly distribution center. The Company subleases two former assembly distribution centers with lease

terms ending May 2028 and April 2030.


34 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER

PURCHASES OF EQUITY SECURITIES

Sleep Number’s common stock trades on The Nasdaq Stock Market LLC (Nasdaq Global Select Market) under the

symbol “SNBR.” As of January 31, 2026, there were approximately 174 holders of record of Sleep Number common stock.

Under the Company’s Credit Agreement, the Company is restricted from paying cash dividends, subject to narrow

exceptions. However, Sleep Number has not historically paid, and has no current plans to pay, cash dividends on the

Company’s common stock.

Information concerning share repurchases completed during the fourth quarter of fiscal 2025 is set forth below:


Period	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(3)
September 28, 2025 through October 25, 2025	523	$6.94	—	$348,071,000
October 26, 2025 through November 29, 2025	34,617	$5.27	—	348,071,000
November 30, 2025 through January 3, 2026	1,560	$8.32	—	348,071,000
Total	36,700	$5.43	—	$348,071,000

____________________

(1)Sleep Number did not repurchase any shares during the three months ended January 3, 2026 under its Board-approved $600 million share

repurchase program (effective April 4, 2021).

(2)In connection with the vesting of employee restricted stock grants, the Company repurchased 36,700 shares of its common stock at a cost of

$199,000 during the three months ended January 3, 2026.

(3)There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase

program. Any repurchased shares are constructively retired and returned to an unissued status.


35 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

Comparative Stock Performance

The graph below compares the total cumulative shareholder return on Sleep Number’s common stock over the last five

years to the total cumulative return on the Standard and Poor’s (S&P) 400 Specialty Stores Index and The Nasdaq Stock

Market (U.S.) Index assuming a $100 investment made on December 28, 2019. Each of the three measures of cumulative

total return assumes reinvestment of dividends. The stock performance shown on the graph below is not necessarily

indicative of future price performance. The information contained in this “Comparative Stock Performance” section shall

not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to

the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company

specifically requests that it be treated as soliciting material or incorporate it by reference into a document filed under the

Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.


	12/28/19	01/01/22	12/31/22	12/30/23	12/28/24	01/03/26
Sleep Number Corporation	$100	$94	$32	$18	$19	$10
S&P 400 Specialty Stores Index	$100	$146	$136	$167	$164	$159
The Nasdaq Stock Market (U.S.) Index	$100	$122	$82	$117	$154	$181

ITEM 6. RESERVED


36 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Forward-Looking Statements

The discussion in this Annual Report contains certain forward-looking statements that relate to future plans,

events, financial results or performance. You can identify forward-looking statements by those that are not

historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “could,” “expect,”

“anticipate,” “believe,” “estimate,” “plan,” “project,” “predict,” “intend,” “potential,” “continue” or the negative

of these or similar terms. These statements are subject to certain risks and uncertainties that could cause actual

results to differ materially from the Company’s historical experience and present expectations or projections.

These risks and uncertainties include, among others:

•Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending;

•Interest rates remain elevated, and may further increase and impact the cost of servicing the Company’s

indebtedness;

•Availability of attractive and cost-effective consumer credit options;

•Ability to achieve the improvements, growth, cost savings, efficiencies and other benefits related to its turnaround

strategy to avoid adverse effects and the costs to implement its turnaround strategy;

•Ability to continue as a going concern;

•Access to additional capital and its access to such capital or alternative financing options may depend on factors

beyond the Company’s control or require the Company to accept unfavorable terms;

•Ability to manage our credit agreement, which contains financial covenants and other restrictions on our actions;

•Effectiveness and efficiency of the Company’s marketing strategy and promotions;

•Ability to execute Sleep Number’s Total Retail distribution strategy;

•Ability to compete effectively;

•Ability to achieve and maintain high levels of product and service quality;

•Ability to improve and expand the product line, anticipate and respond to changing consumer trends, and execute new

product introductions;

•Ability to protect the Company’s technology, trademarks and brand, and the adequacy of its intellectual property

rights;

•Dependence on, and ability to maintain working relationships with key suppliers and third parties, including some that

are the only source of supply or services currently used by the Company;

•Fluctuations in commodity prices or third-party delivery or logistics costs and other inflationary pressures;

•Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics,

labor challenges, foreign currency fluctuations, inflation, climate or other disasters and resulting supply shortages, and

production and delivery delays and disruptions;

•Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages;

•Risks of disruption in the operation of any of the Company’s facilities and operations, including manufacturing,

assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer

service operations;

•Ability to effectively complete potential future acquisitions, business combinations or divestitures;

•Sleep Number’s ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and

effective personnel;

•Ability to comply with existing and changing government regulations and laws;

•Ability to identify and withstand cyber threats that could compromise the security of the Company’s systems or those

of third parties upon which it relies and could result in a data breach or business disruption;

•Risks associated with advancements in, adoption of, or the failure to effectively adopt, artificial intelligence and related

technologies;

•Adequacy of the Company’s and third-party information systems, and costs and disruptions related to upgrading or

maintaining these systems;


37 \| 2025 FORM 10-K	SLEEP NUMBER CORPORATION

•Volatility of Sleep Number stock, its removal from various stock indices and the potential negative effects of

shareholder activism or of changes in coverage by securities analysts;

•Unfavorable tax treatment;

•Environmental, social and governance risks, including increasing scrutiny and evolving regulatory and stakeholder

expectations; and

•Ability to adapt to climate change and readiness for legal or regulatory responses thereto.

Additional information concerning these and other risks and uncertainties is contained under the caption “Item

1A. Risk Factors” in this Annual Report on Form 10-K.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a

reader of the Company’s consolidated financial statements with a narrative from the perspective of management on its

financial condition, results of operations, liquidity and certain other factors that may affect its future results. The

Company’s MD&A is presented in the following sections:

•Business Overview

•Results of Operations

•Liquidity and Capital Resources

•Non-GAAP Data Reconciliations

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

Business Overview

Sleep Number is the leader in personalized sleep wellness. Its mattresses are designed to evolve with each sleeper to

help them feel and perform their best. With adjustable firmness, pressure-relieving support and temperature balancing

comfort built into every mattress, Sleep Number beds adapt to customers’ changing needs, night after night, year after

year.