The mattress manufacturing and retail industry is having its share of nightmares over upheaval from online-based retail disruptors, and scandal within an industry giant.
Mattress Firm, which has been grappling with declining sales amid an overexpansion and a scandal at its parent company, filed for Chapter 11 bankruptcy protection Friday.
The Houston-based retailer has been ailing amid a surge of bed-in-a-box online retailers, too many physical stores and an accounting mess at its parent company, Steinhoff International.
Mattress Firm plans to close as many as 700 of its 3,230 stores. Those stores are located “in certain markets where we have too many locations in close proximity to each other,” Mattress Firm CEO Steve Stagner said in a statement.
About 200 will close within days.
“We intend to use the additional liquidity from these actions to improve our product offering, provide greater value to our customers, open new stores in new markets, and strategically expand in existing markets where we see the greatest opportunities to serve our customers,” he said.
Mattress Firms said in a court filing that it will not conduct typical going-out-of-business sales, where customers might score a deal.
Instead, it will transfer mattresses to other stores, warehouses or distribution centers, or could “decide to abandon” showroom products, according to a court filing.
In Chapter 11 bankruptcy, retailers typically try to get out of expensive leases and slash debt to have a better chance of surviving profitably.
The retailer ballooned in size in recent years through a series of acquisitions – Mattress Giant in 2012, Sleep Train in 2014 and Sleepy’s in 2016.
It was too much, too fast.
The company has since closed hundreds of locations, seeking stability amid upheaval in the mattress market.
Overexpansion is at the heart of the industry’s troubles. There are now more places to buy a mattress in the U.S. than places to buy a Big Mac.
Representatives for Mattress Firm and Steinhoff International did not immediately respond to requests seeking comment beyond a press release.
The chain filed for bankruptcy in a federal court in Delaware. The company said it had secured enough support from secured lenders to stay in business, but a federal judge must approve with the company’s restructuring plan, which is not guaranteed.
The case could have significant collateral damage:
• Landlords that bet big on Mattress Firm’s expansion will be left with empty stores.
• Mattress makers could face huge losses. Mattress Firm owes Serta Simmons alone more than $90 million, according to a court filing.
• Competitors could face a flood of cheap mattresses. If the company can’t survive bankruptcy, enormous disruption would ensue.
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On the other hand, online retailers could capitalize in the long run. Bed-in-a-box sellers like Casper and Leesa have surged in recent years, offering free trial periods, free delivery and easy ordering.
But online mattress makers are facing their own problems, including steep discounting, intense marketing and the threat of Amazon out-muscling them.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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