Clinton Group Discloses 5.07% Stake in Select Comfort (SCSS), Wants Steps Taken

In a 13D filing on Select Comfort (Nasdaq: SCSS) today, Clinton Group disclosed a 5.07% stake (2,262,950 shares) in the Company. At the quarter ended December 31, 2007, Clinton did not show a stake in Select Comfort.

The firm also sent a letter dated March6, 2008 to the Board, outlining certain initiatives that the they believe the Board and management should take in order to improve the strategic direction and operational performance of the Issuer.

A Copy of the Letter:

Dear Board Members:

Mr. William McLaughlin has not yet responded to my request to meet, and time is passing. As one of Select Comfort Corporation's (the "Company" or "Select Comfort") largest shareholders, we are writing to express our concern over missteps we believe the Company has taken that have resulted in a deterioration of the Company's performance and that has obscured its strong growth prospects. We believe Select Comfort has the superior product in the growing non-innerspring mattress category.

Over the last 52 weeks, Select Comfort has lost approximately 79% of its market value. Year to date in 2008, the Company's stock price has declined approximately 4%. The dramatic declines cannot be blamed on a difficult macroeconomic environment alone, as the declines in the broader consumer discretionary indices and overall market declines have not been nearly as severe. Further, the company's peers have outperformed the Company during the same period.(1)

We believe the Board of Directors and management should immediately implement the initiatives outlined below to rectify the strategic direction and operational performance of Select Comfort in order to protect shareholder value:

1. Revise marketing strategy to refocus on direct marketing.

2. Disband the "Quality of Life Advisory Board" as a wasteful use of company resources.

3. Review its store portfolio to eliminate underperforming stores.

4. Immediately cease all new store openings and spending on unnecessary capital expenditures until sales results improve.

5. Eliminate stores in regions where the Company does not have the critical mass to justify its advertising and the overhead for that region, and then eliminate the excess regional and corporate overhead.

6. Freeze spending on the SAP system installation until it is evaluated by an independent consultant.

7. Consider subleasing or disposing of the costly new corporate headquarters and conduct a study on the future needs of the Company in light of its anticipated growth.

8. Revise new Chief Executive Officer performance metrics to earn 2008 base salary to align with shareholders interests.

9. Consider outsourcing its call center operations.

The Company's fourth quarter 2007 results represent the fifth consecutive quarter of disappointing sales. Beginning in the fourth quarter of 2006, in each fiscal quarter, the Company has experienced negative same store sales declines of -9%, -11%, -14%, -6%, -13%, respectively. Rather than focus on improving declining sales in existing locations, however, the Company mistakenly chose to increase its net store count by 12% throughout this period(2) and expand its wholesale business, which has lower margins and cannibalizes the Company's store sales. Moreover, the Company's operating margins have declined from 10.4% in beginning in the fourth quarter of 2006 to 1.6% in the fourth quarter of 2007.

Even in a difficult market, we believe that the Company should be able to capture market share if it effectively communicates the value of its mattress products with respect to comfort, sleep quality, and price. After all, specialty sleep (i.e. non-innerspring mattresses) is increasingly gaining consumer acceptance and market share. The International Sleep Products Association reported that in 2007, innerspring units were up 1% while non-innerspring units increased 11.9% compared to 2006. On a dollar basis, innerspring dollars grew2.5%, lagging non-innerspring sales, which increased 17.2% over the same period.(3) Favorable demographics and the enhanced sleep quality and comfort of non-innerspring product are driving increased purchases of specialty bedding,even as the overall mattress industry faces some near-term uncertainty.(4)Within the non-inner spring category, we believe Select Comfort has the superior product.

We believe that the Company's change in marketing and sales strategy over the past several years away from direct marketing has had a significant negative effect on the Company's sales performance. We believe that this change is a mistake. The Company should adopt a renewed focus on direct marketing through long and short form infomercials and the internet to educate consumers on the quality and value of Select Comfort's sleep offering. Infomercials and videos provide an ideal way to deliver the unusually complex Select Comfort story to consumers. We do not believe that the qualities and performance of the Company's products can be effectively communicated through traditional advertising alone.Further, we believe that infomercial rates will drop over the next several years, thus making infomercials even more attractive. In addition, while the Company has taken limited steps to reduce its wholesale business, the steps taken are not significant enough, and the Company should quickly evaluate whether additional partner store programs should be discontinued. We do not believe Select Comfort generally fares well in a competitive selling environment at the Company's retail partners as sales personnel tend to go for the "easy sell" of less complex products. Also, the Company's latest marketing inspiration--- "The Quality of Life Advisory Board"-- appears misguided. Hiring a panel of five "internationally known experts", a description we question, to provide such valuable insights as:

o "Being well rested and recovered will keep you fully "on your game"";

o "A good nights sleep helps people enjoy life";

o "Sleep (is) the world's best-kept beauty secret";

o "Disruptions in sleep can have ripple effects on our relationships and negatively impact how we feel about ourselves'; and

o "There's nothing more conducive to a good night's sleep than a beautiful bedroom"

is a waste of the Company's time and money. This is an example of how off-track the Company's marketing strategy is. Select Comfort needs product-focused marketing that explains the benefits of the Company's superior products.

Moreover, given the weak 1.6% operating margin the Company achieved in the fourth quarter of 2007, the Company should evaluate its expense structure beyond those steps the Company has recently announced. While we believe the Company is moving in the right direction by freezing headcount and eliminating unnecessary managerial overhead, we recommend a number of other initiatives. We believe that spending on the SAP system installation should be deferred until an expeditious detailed review of information technology needs is undertaken and completed by an independent consultant, particularly in light of the departure of the Company's Chief Information Officer. It appears that the SAP implementation is behind schedule and is significantly over running its original cost estimates.There are several alternate SAP implementation approaches and given the smaller than anticipated current size of the Company, the approach to SAP software originally adopted may be outsized for the Company's needs. It appears to us,after reviewing the Company's recently filed 10-K, that in 2007 the Company spent $12 million on the SAP implementation and anticipates spending another $8million in 2008, assuming no additional costs. It is difficult for us to envision, given the size of the Company, that the Company could ever achieve costs savings to justify such a large expense. Further, the Chief Executive Officer's agreement to forgo his base salary until same store sales increase by at least 1% for four consecutive weeks, while good for public relations, is inconsistent with shareholder interests, since improvement of the Company's financial performance requires a greater length of same store sales improvement than four weeks. Further, this limited, short test allows for alteration of marketing spending in order for the Chief Executive Officer to achieve his limited performance goals, which may have nothing to do with appropriate marketing spending for the Company and inconsistent with the Company improving its annual financial performance.Finally, we believe that the Company should close stores, eliminate store openings, reduce headquarters expense and outsource call center operations as outlined in points 3-5 and 7-8 above.

We urge you to execute the initiatives we have outlined, and would like to meet with you to discuss management's progress towards that end. Please feel free to contact me at your convenience at (212) 377-4204 to discuss scheduling. We look forward to hearing from you.

Sincerely,

Jerry W. Levin

Vice Chairman