Mattress Firm filed for bankruptcy protection on Friday in a move to restructure a business that has been hit by overexpansion and competition from bed-in-a-box retailers.
The nation’s largest mattress retailer, which had $3.2 billion in sales last year, plans to close 200 stores in the coming days and as many as 700 by year’s end as part of the restructuring plan it submitted with its Chapter 11 petition.
Mattress Firm said it had secured $250 million from lenders to support ongoing operations during the bankruptcy process. In a court filing, CFO Hendré Ackermann said the company “would likely run out of cash later this month” without additional funding.
The restructuring plan “provides the company access to new financing to support the business, establishes an efficient and orderly process for closing certain economically inefficient store locations, and provides for all trade creditors to continue being paid in full for goods and services provided,” CEO Steve Stagner said in a news release.
As The Washington Post reports, Mattress Firm “has long had a stranglehold on the mattress industry.” It has more than 3,230 stores across 49 states but, like many retailers, has struggled with overexpansion, including its purchase of Sleepy’s in 2016 and Mattress Giant in 2012.
“While these acquisitions have allowed Mattress Firm to enter major markets in which it previously did not have a significant presence, and to significantly expand its share of the retail market, they also left Mattress Firm with too many newly-rebranded stores in close proximity to existing Mattress Firm stores,” Ackermann said.
“There are many examples of a Mattress Firm store being located literally across the street from another Mattress Firm store,” he added.
Additionally, the Mattress Firm business model has come under attack from bed-in-a-box players such as Casper and Leesa that allow consumers to compare mattresses online and try them out in their own homes.
Mattress Firm’s bankruptcy “is a wake-up call for traditional mattress chains: The 1960s model doesn’t work anymore,” said Bob Phibbs, chief executive of New York-based consultancy the Retail Doctor.