After weeks of rumors regarding its future, Mattress Firm filed for Chapter 11 bankruptcy protection and will begin to close roughly 200 stores in the next few days. Presently operating approximately 3,500 stores, Mattress Firm will shutter up to 700 stores in certain markets leading up to the holiday season, according to CEO and Executive Chairman Steve Stagner.
Mattress Firm expects to complete a prepackaged restructuring within 45 to 60 days, and intends to use the additional liquidity from these actions to improve its product offering, open new stores in new markets and strategically expand in existing markets, Stagner said.
The bankruptcy filing lists more than $1 billion each in both assets and liabilities, and includes units of well-known brand names such as Sleepy’s and 1800mattress.com.
The mattress retailer has secured approximately $250 million in debtor-in-possession financing to support its operations under bankruptcy. It also has secured $525 million in financing to help its emergence from bankruptcy and to continue operations.
Trouble has been brewing for Mattress Firm for quite some time due to operating an excessive number of stores, many often located within close proximity to each other. The retailer also has seen an array of competitors pop up in the online direct-to-consumer space, including Casper, Leesa, Tuft & Needle and Purple, allof which have provided simpler, more transparent price points than Mattress Firm.
The influx of e-Commerce options, while only accounting for approximately 12% to 14% of current mattress sales, has given consumers less of a reason to enter Mattress Firm stores.
Even Amazon has gotten into the mix, unveiling its own in-house brand of foam mattresses that costs a fraction rivals’ beds. For example, an AmazonBasics queen mattress costs $229, compared to $600 at Tuft and Needle and nearly $1,000 at Casper.
Casper is the first of the digital natives to test the physical market on a large scale. The formerly online-only retailer is set to open 200 stores across North America over the next three years, further pressuring Mattress Firm to make vast improvements within its store experiences.
Tempur Sealy Exit, Accounting Scandal Hit Mattress Firm Hard
Aside from competition and declining sales, Mattress Firm has seen its relationship with a major supplier go sour. Last year, Mattress Firm’s preferred brand, Tempur Sealy International, unexpectedly pulled its products out of the retailer following a pricing dispute. That left the retailer with less product, and employees who now had to promote and sell Serta Simmons mattresses after years of promoting Tempur Sealy.
The retailer also has had to deal with fallout from a massive accounting scandal at its parent company, South Africa-based Steinhoff International Holdings. The scandal led to the resignation of Steinhoff CEO Markus Jooste in December 2017 and cost the company $12 billion. Three months later, Mattress Firm CEO and President Ken Murphy stepped down, leaving Stanger to assume the chief executive responsibilities.
The bankruptcy includes a prepackaged restructuring agreement, meaning it already has the approval of key stakeholders, but it will still need court approval.