Mattress Firm, the largest mattress retailer in the U.S., has come out of bankruptcy. Over the course of the Chapter 11 process, which began on October 5, the company’s parent Steinhoff International Holdings stated it closed approximately 660 stores.
Steinhoff management also said the Mattress Firm deal included $525 million in “exit financing” to fund the turnaround. The transaction included the termination of a $125 million line of credit that Steinhoff said would be “withdrawn at closing”. Mattress Firm said the plan included “the optimized store footprint of approximately 2,600 stores across the country”. Steinhoff commented that this meant “exited approximately 660 underperforming stores.”
Danie van der Merwe, the acting CEO of Steinhoff, explained, “We are pleased that Mattress Firm has emerged from the Chapter 11 process within the 45 to 60-day timeframe initially targeted. This short process has enabled Mattress Firm to strengthen its balance sheet and optimize its store footprint, and it emerges as a stronger and more competitive company.
Steve Stagner, Executive Chairman, President, and CEO of Mattress Firm added, “We knew that our unprecedented growth had led to duplicative store locations in many of our markets. Now, having completed our operational and financial restructuring, we have the right store locations to not only better serve our customers, but also to fuel future growth”
Chapter 11 was filed in U.S. Bankruptcy Court in Delaware. It was a “prepacked” deal, which means Mattress Firm anticipated that it would receive the money it needed to operate. Steinhoff call this its “Chapter 11 plan”
There were several things which forced Mattress Firm into bankruptcy. One is that the company took over about 1,000 Sleepy’s locations. Mattress Firm bought Sleepy’s in 2015 and paid $780 million to close the transaction. Sleepy’s was another large brick and mortar mattress retailer. With the takeover, Mattress Firm simply had too many locations based on the potential number of customers. One of the problem’s Mattress Firm had was the cost of hundreds of store leases. Another was that Mattress Frim was too slow to move only.
Another reason was that Mattress Frim was too slow to move online. This meant it had a new kind of competition, which included mattress company Casper. When Mattress firm went bankrupt Casper founder Philip Krim wrote in an email to CNN, “Traditional mattress retailers have been alienating customers for decades and are now buckling under pressure. Casper has turned a tired industry on its head with innovative products and a superior shopping experience.” Casper customers buy online, get free shipping, and a guarantee that buyers can return mattresses after 100 days, presumably because they do not like them. Several other e-commerce sites sell mattresses. As is true in almost every category, this includes Amazon
Mattress Firm has to prove that it can do more than shut stores. Its old model will need to be revamped if wants to compete with retailers like Casper and Amazon