The largest U.S. mattress retailer, Mattress Firm, said Friday it has filed for Chapter 11 bankruptcy protection, as its corporate parent battles an accounting scandal and the retailer grapples with an onerous store footprint.
The retailer has 3,500 stores across the U.S., reflecting a time when the economics of mattress retailers was such that more was better. The stores are relatively cheap to run and faced little price competition. With new entrants like online retailer Casper now selling mattresses with little to no markup, that pricing umbrella has begun to collapse.
Bankruptcy is often a tool that retailers use to get out of unwanted leases. Mattress Firm CEO Steve Stagner said in a statement Friday the company will "exit up to 700 stores in certain markets where [it has] too many locations in close proximity to each other."
The retailer will begin to close roughly 200 stores in the next few days.
The company has also had to deal with its own corporate challenges. Last year, Mattress Firm's preferred brand, Tempur Sealy International, unexpectedly pulled its products out of the retailer following a pricing dispute. That left the retailer with less product and employees who now had to promote and sell Serta Simmons mattresses after years of promoting Tempur Sealy.
Shares of Tempur Sealy gained about 1.5 percent on the news of Mattress Firm's bankruptcy. The stock is down more than 18 percent this year.
Serta Simmons is merging with direct-to-consumer mattress company Tuft & Needle, CNBC first reported, to transform its business as the industry changes.
The Houston-based retailer was acquired by South African retailer Steinhoff International Holdings for $3.8 billion in 2016. The conglomerate, which owns more than 40 retail brands including Conforama in France and Poundland in the U.K., has been embroiled in an accounting scandal that has crushed its stock price and created liquidity concerns. Its shares are down nearly 54 percent since January.
Mattress Firm said it expects to complete a prepackaged restructuring within 45 to 60 days.
It has secured about $250 million in so-called debtor-in-possession financing to support its operations under bankruptcy. It has also secured $525 million in financing to help its emergence from bankruptcy and to continue operations.
Mattress Firm says it has filed motions to support the continued payment of employee wages and health and welfare benefits, as well as honor its customer policies and programs.
It said it is seeking court authorization to pay suppliers and contractors in full for all services provided before and after its bankruptcy filing.
More than two dozen retailers have filed for bankruptcy since the beginning of 2017. Some, like Toys R Us, have been unable to reorganize forcing them to liquidate.
Read the full press release below:
Mattress Firm to Strengthen Balance Sheet and Optimize Store Footprint through Court-Supervised Prepackaged Financial Restructuring
Customers Will Continue to Find the Mattresses and Bedding Accessories They Need in Stores and on Website as Normal Company Will Take Steps to Ensure Deliveries Will Be Made as Scheduled and Without Interruption; Warranties and Guarantees Will Be Honored as Usual Suppliers and Contractors to be Paid in Full for All Goods and Services Provided Company Secures Commitments for $250 Million in DIP Financing to Support Operations Company Expects to Complete Restructuring Within Next 45 to 60 Days with Commitments for $525 Million of Senior Secured Credit Facilities to Fund Emergence
HOUSTON – October 5, 2018 – Mattress Firm, Inc. ("Mattress Firm" or "the Company"), the nation's leading specialty mattress retailer, today announced that it is taking action to strengthen its balance sheet and optimize its store footprint. To achieve these objectives, the Company and its subsidiaries today filed voluntary Chapter 11 restructuring cases in the U.S. Bankruptcy Court in Delaware to implement a prepackaged plan of reorganization that, among other things, 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.
Mattress Firm will continue to be the largest specialty mattress retailer in the nation with thousands of stores across the country and remains committed to offering a large selection of quality, brand name mattresses and bedding products at competitive prices. The Company is continuing to serve customers as usual at stores across the nation and online. Mattress Firm anticipates that deliveries will be made as scheduled, and the Company intends that warranties, guarantees and other customer programs will be honored as usual.
Steve Stagner, Executive Chairman, President and CEO of Mattress Firm, said, "The process we have initiated today will allow us to strengthen our balance sheet and accelerate the optimization of our store portfolio. 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. 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 is the nation's leading specialty mattress retailer, and we will continue to provide unmatched value to our customers by offering the best quality beds at prices that fit any budget today, tomorrow and into the future," Mr. Stagner continued. "We thank our suppliers and partners for their continued support, as well as the contractors we partner with to make deliveries across our markets, all of whom will continue to be paid in full in the normal course for products and services provided. We also thank our team members for their continued commitment and dedication to serving our customers."
In conjunction with its prepackaged restructuring plan, Mattress Firm received commitments for approximately $250 million in debtor-in-possession financing, which, subject to Court approval, will be available to support its ongoing operations during the Chapter 11 proceedings. The Company also obtained commitments for $525 million of senior secured credit facilities enabling it to emerge from Chapter 11 and support operations thereafter. Mattress Firm expects to complete the prepackaged restructuring process within the next 45 to 60 days.
Mattress Firm has filed a number of customary motions with the court seeking authorization to support its operations during the restructuring process. These include authority to continue payment of employee wages and health and welfare benefits, and to continue to honor its customer policies and programs, including warranties, returns/exchanges and promotions. The Company's prepackaged plan of reorganization provides for all suppliers and contractors to be unimpaired by this process. Accordingly, the Company has filed a motion seeking court authorization to pay suppliers and contractors in full under normal terms for all goods and services provided prior to and after the filing date.
To facilitate the store optimization plan, the Company has filed motions with the court seeking authority to reject up to 700 leases. An initial group of approximately 200 stores are expected to be closed in the next few days. Decisions about additional store closings will be made in the next few weeks.
Additional information can be accessed by visiting the Company's restructuring website at www.mattressfirm.com/restructuring. Court filings and other documents related to the court-supervised process in the U.S. are available on a separate website administered by the Company's claims agent, Epiq, at http://dm.epiq11.com/MattressFirm. Information is also available by calling 877-214-3592 (toll-free in the U.S.) or 503-520-4465 (for parties outside the U.S.).
A&G Realty Partners is assisting the Company with its store closing and lease restructuring program. Mattress Firm landlords are encouraged to contact A&G Realty Partners through its website, www.agrealtypartners.com. Sidley Austin LLP is serving as the Company's legal counsel, AlixPartners LLP is serving as its financial advisor, and Guggenheim Securities, LLC is serving as its restructuring advisor. About Mattress Firm Founded in 1986, Mattress Firm strives to help customers find the beds they want at the price that fits their budget. Today, Mattress Firm has grown to be America's largest specialty mattress retailer, with neighborhood stores in 49 states across the country and a passion for helping people find the right bed. Mattress Firm helps customers' budget stretch further with a broad selection of mattresses and bedding accessories from leading manufacturers and brand names, including Serta, Simmons, tulo, Sleepy's, Chattam & Wells and Purple. In 2016, Mattress Firm was acquired by Steinhoff International Holdings, N.V. Committed to serving its communities, the Mattress Firm Foster Kids initiative, a program of the Ticket to Dream Foundation, hosts six collection drives a year in communities nationwide to ensure that foster children have the resources needed to succeed.