Check your mattress for mold

August 14, 2004

Select Comfort Shares Drop on Mold Woes

08.13.2004, 05:57 PM

Mattress retailer Select Comfort Corp. saw its shares sink to a new 52-week low

on heavy volume Friday after a brokerage firm downgraded the

ml#> on worries that fallout from complaints about mold growing in the company's

mattresses could be greater than expected. <snip>

BB & T Capital Markets lowered the company's rating to " underweight " from " buy "

Friday morning, expecting its quarterly earnings to be crushed by higher costs

and a drop in sales after a Minneapolis television station two weeks ago aired a

story over complaints from about two dozen customers who said they found mold

inside their Select Comfort mattresses.

Though Select Comfort last week backed its projected third-quarter sales, the

company said in its quarterly report filed Thursday with the

39.html#> and Exchange Commission that its warranty costs have increased $60,000

from calls in response to the mold situation.

Select Comfort said mold-related warranty claims typically affect less than 1

percent of its customers at a cost of less than $200,000 each year.

Harkness Inc. analyst Mark Rupe estimates the total cost of the situation at

$100,000, and said while incidents have been limited mainly to the Minneapolis

region, the problem could become more widespread.

" The mold issue they're dealing with is isolated, but it has potential to be

larger, " Rupe said, who also downgraded Select Comfort earlier in the week to

" market perform " from " buy. " " Just the perception of it could slow traffic in

stores - that's their concern. "

Select Comfort shares plunged about 22 percent on Aug. 2, the day the

Minneapolis mold situation was reported. It shares recovered slightly later in

the week, climbing about 10 percent to $17.58, but slipped in trading this week

despite the company's reassurance that its warranty reserve will cover mattress

replacements.

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