Mattress Firm Files For Bankruptcy, To Immediately Shutter 200-Plus Stores
America's largest mattress retailer has filed for bankruptcy, with plans to close up to 700 stores in the U.S. to save itself from mounting debt and rent obligations.
Mattress Firm filed for Chapter 11 bankruptcy protection in Delaware Friday morning. It will shutter an initial 200 stores across the country within the next few days. Mattress Firm tapped A&G Realty Partners to handle the store closures.
The move, which has been expected for a few weeks, will allow the retailer to close inefficient store locations while continuing to pay its vendors and employees without interruption, the company stated in a release.
“Leading up to the holiday shopping season, we will exit up to 700 stores in certain markets where we have too many locations in close proximity to each other,” CEO Steve Stagner said in a release. “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.”
Mattress Firm's home state of Texas will see 35 locations shuttered over the next few days, according to A&G Realty, including eight stores in Houston, two each in Austin, Katy and Dallas, and one in Plano. The retailer also plans to shutter 30 locations in Illinois, 20 stores in North Carolina, 10 each in Arizona, Florida and Maryland, and nine in Virginia.
As part of its bankruptcy, Mattress Firm secured $250M in debtor-in-possession financing to support its store operations, fund employee wages and benefits, and honor warranties and customer programs — subject to court approval — as well as commitments for $525M in senior credit facilities when it expects to emerge from bankruptcy within the next 60 days. The $250M financing must be paid off first in the event that Mattress Firm decides to liquidate.
The retailer also is asking the bankruptcy court for the ability to pay suppliers and contractors in full while restructuring.
Mattress Firm was forced to file for bankruptcy in part, it claims, because of bloated store count, an issue it has already sued two former in-house real estate executives and its former retail broker over, alleging the trio conspired to steer the company toward high-priced real estate in exchange for developer kickbacks and other incentives.
The broker, former Colliers International Atlanta executive Alexander Deitch, filed a countersuit earlier this year, claiming that Mattress Firm entered into leases that were above market rates because of its aggressive growth strategy and desire to corner the mattress retail market, including at times outbidding competitors to steal market share.
Efforts by Mattress Firm to dismiss that countersuit were blocked by a judge last month, but the retailer has since filed an appeal on that ruling.
Over the past few years, Mattress Firm has been facing growing competition from bed-in-a-box online suppliers such as Casper, Purple and Tuft & Needle, which is owned by Serta Simmons, Mattress Firm's top supplier.
Complicating the situation, Mattress Firm's parent company, Steinhoff International — which bought Mattress Firm in 2016 for $3.8B — late last year tapped PwC to investigate accounting irregularities that are forcing it to restate earnings as far back as 2015. Markus Jooste resigned as chief executive of Steinhoff soon after the announcement, and the company's shares — traded on the German stock exchange — lost as much as 80% of their value. Buying Mattress Firm, Jooste told the South African Parliament in September, was a mistake, especially since the retailer was already saddled with more than $1B in debt from its rapid expansion.
"In retrospect, the American decision was a bad one," Jooste was reported as saying.
Mattress Firm owes more than $100M in receivables to Serta a year after the mattress maker entered into an exclusive relationship with Mattress Firm, bolstering Serta's position as the dominant mattress manufacturer in the U.S. Mattress Firm dropped its agreement with Tempur Sealy, one of Serta's main competitors, after a contract dispute.
On Thursday, the owner of Serta Simmons, Boston-based Advent International, was considering making a bid for Mattress Firm once it files for Chapter 11 bankruptcy, the New York Post reports.
UPDATE, OCT. 5, 10:40 A.M. ET: The story has been updated to reflect the latest developments.