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Business and Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 27, 2025
Accounting Policies [Abstract]  
Business & Basis of Presentation Business & Basis of Presentation
The Company prepared the condensed consolidated financial statements as of and for the three and nine months ended
September 27, 2025 of Sleep Number Corporation and its 100%-owned subsidiaries (Sleep Number or the Company),
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and they reflect, in
the opinion of management, all normal recurring adjustments, including the elimination of all significant intra-entity
balances and transactions, necessary to present fairly its financial position as of September 27, 2025 and December 28,
2024, and the consolidated results of operations and cash flows for the periods presented. The historical and quarterly
consolidated results of operations may not be indicative of the results that may be achieved for the full year or any future
period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
Generally Accepted Accounting Principles (GAAP) have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in conjunction with the most recent
audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 28, 2024 and other recent filings with the SEC.
Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to
make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the
reported amounts of sales, expenses and income taxes during the reporting period. Predicting future events is inherently
an imprecise activity and, as such, requires the use of judgment. As future events and their effects cannot be determined
with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in
the consolidated financial statements in future periods and could be material.
The Company’s critical accounting policies consist of stock-based compensation, warranty liabilities and revenue
recognition.
Accounting Pronouncements Issued But Not Yet Effective Accounting Pronouncements Issued But Not Yet Effective
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2023-09, "Income Taxes (Topic 740): Improvements in Income Tax Disclosures" to enhance the transparency and
decision usefulness of income tax disclosures. This amendment requires public companies to disclose specific categories
in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.
Additionally, under the amendment, entities are required to disclose the amount of income taxes paid disaggregated by
federal, state and foreign taxes, as well as disaggregated by material individual jurisdictions. Finally, the amendment
requires entities to disclose income from continuing operations before income tax expense disaggregated between
domestic and foreign and income tax expense from continuing operations disaggregated by federal, state and foreign. The
new rules are effective for annual periods beginning after December 15, 2024. The adoption of this standard is not
expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40)", which requires public business entities to disclose in the notes to the
financial statements more detailed information about the types of expenses included in certain expense captions in the
consolidated financial statements, including purchases of inventory, employee compensation, and depreciation and
amortization. The amendments are effective for the Company beginning with the 2027 annual period and in interim
periods beginning in 2028. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. The
Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related
disclosures.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses for Accounts Receivable and Contract Assets”, which provides a practical expedient related to the estimation of
expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for
under Topic 606, including those assets acquired in a business combination. The practical expedient permits an entity to
assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts
receivable and current contract assets. This guidance is effective for the Company for its fiscal year and all interim periods
beginning January 4, 2026 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the
impact of the adoption of this guidance on its condensed consolidated financial statements.
Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements,
if adopted in their current form, would have a material impact on the Company’s consolidated financial statements.
Leases The Company leases its retail, office and manufacturing space 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. While the Company’s local market development approach generally results in long-term participation in given
markets, the retail store leases generally provide for an initial lease term of five to ten years. The Company’s office and
manufacturing leases provide for an initial lease term of up to fifteen years. In addition, the Company’s mall-based retail
store leases may require payment of variable rent based on net sales in excess of certain thresholds. Certain leases may
contain options to extend the term of the original lease. The exercise of lease renewal options is at the Company’s sole
discretion. Lease options are included in the lease term only if exercise is reasonably certain at lease commencement.
The Company’s lease agreements do not contain any material residual value guarantees. The Company also leases
vehicles and certain equipment under operating leases with an initial lease term of three to six years.
The Company’s operating lease costs include facility, vehicle and equipment lease costs, but exclude variable lease costs.
Operating lease costs are recognized on a straight-line basis over the lease term, after consideration of rent escalations
and rent holidays. The lease term for purposes of the calculation begins on the earlier of the lease commencement date or
the date the Company takes possession of the property. During lease renewal negotiations that extend beyond the original
lease term, the Company estimates straight-line rent expense based on current market conditions. Variable lease costs
are recorded when it is probable the cost has been incurred and the amount can be reasonably estimated. Future
payments for real estate taxes and certain building operating expenses for which the Company is obligated are not
included in operating lease costs.