Mat­tress Firm to close up to 700 stores in bank­ruptcy

USA TODAY Weekend Extra - - MONEY - Nathan Bomey

Mat­tress Firm, which has been grap­pling with de­clin­ing sales fol­low­ing an over­ex­pan­sion and a scan­dal at its par­ent com­pany, filed for Chap­ter 11 bank­ruptcy pro­tec­tion Fri­day.

The na­tion’s largest mat­tress re­tailer has been ail­ing amid a surge of be­din-a-box on­line re­tail­ers, too many phys­i­cal stores and an ac­count­ing mess at its par­ent com­pany, Stein­hoff In­ter­na­tional.

Hous­ton-based Mat­tress Firm plans to close as many as 700 of its 3,230 com­pany-owned stores. Those stores are lo­cated “in cer­tain mar­kets where we have too many lo­ca­tions in close prox­im­ity to each other,” CEO Steve Stag­ner said in a state­ment.

About 200 stores will close within days. The com­pany has nearly 10,000 em­ploy­ees and an­other 125 fran­chised lo­ca­tions.

“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,” Stag­ner said.

Mat­tress Firm said in a court fil­ing that it will not con­duct typ­i­cal liq­ui­da­tion sales, where cus­tomers might oth­er­wise score a go­ing-out-of-busi­ness deal. In­stead, it will trans­fer mat­tresses to other stores, ware­houses or dis­tri­bu­tion cen­ters, or it 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.

Re­brand­ing the ac­quired stores as Mat­tress Firm lo­ca­tions wors­ened the re­tailer’s trou­bles. In a court fil­ing, the com­pany also ac­knowl­edged “sev­eral well-in­ten­tioned, but ill-ad­vised, mar­ket­ing and sales pro­mo­tions” in 2017 and 2018. Mat­tress Firm ex­pects to lose $150 mil­lion in its 2018 fis­cal year af­ter mak­ing a profit be­fore earn­ings, taxes, in­ter­est and de­pre­ci­a­tion of $251 mil­lion in 2017.

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.

Mat­tress Firm 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 the com­pany’s re­struc­tur­ing plan, which is not guar­an­teed.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.