Mattress Firm Files for Chapter 11 Bankruptcy

Furniture World News Desk on 10/5/2018

The Wall Street Journal recently reported that Mattress Firm Inc., the largest specialty mattress seller in the U.S., filed for bankruptcy protection Friday, the victim of increasing competition from discount retailers, too many of its own stores and the loss of a key supplier.

The Houston-based retailer, which had gobbled up dozens of rivals over the past decade, sought chapter 11 protection in U.S. Bankruptcy Court in Wilmington, Del. The filing follows a deal struck in July with bondholders of its troubled parent, Steinhoff International Holdings SNH -3.27% NV, which took Mattress Firm private two years ago for $3.8 billion.

The bankruptcy marks a rapid fall for the once high-flying bedding retailer and Steinhoff, the South Africa-based retail conglomerate that has been called “Africa’s IKEA.” Steinhoff, whose purchase of Mattress Firm marked its entry into the U.S. market, has been caught up in an accounting scandal that erupted in December. Its creditors, who hold billions of dollars of the company’s bonds, agreed to suspend all payments on its debt for three years. Steinhoff is expected to launch a debt restructuring for its European business in the U.K. later this month.

Mattress Firm, the market leader in the U.S. with more than 3,200 stores and more than $3 billion in annual revenue, has its own problems. The retailer finds itself with too many stores as its sales have slumped and it struggles to integrate rival chains it bought.

“There are many examples of a Mattress Firm store being located literally across the street from another Mattress Firm store,” Hendré Ackermann, the company’s finance chief, said in an affidavit filed with the court. As part of its business restructuring, the company plans to close 700 stores before the holidays.

Its business was also rocked last year when Tempur Sealy International Inc., a top mattress maker, abandoned the retailer in a dispute over pricing. Mattress Firm’s revenue and earnings took a huge hit, according to a person familiar with the matter. Tempur- and Sealy-branded mattresses accounted for roughly one-third of the company’s annual revenue, said Seth Basham, an equity analyst at Wedbush Securities who follows Tempur Sealy.

The mattress market, like most other retail sectors, has also come under pressure in recent years from online upstarts, such as Casper Sleep Inc. and Leesa. The newcomers mostly sell bed-in-a-box mattresses they ship directly to homes, promising free returns.

Even as Mattress Firm retreats, some of the web-based sellers are starting to set up shop, opening pop-up stores in malls or partnering with furniture retailers like West Elm. Casper recently announced plans to open 200 stores over three years to counter growing competition in online mattress sales.

To read more, visit the artcile on wsj.com.