Largest US Mattress Retailer Preparing To File For Bankruptcy

It has long been speculated that Mattress Firm, the US mattress retailing giant, was in a solvency crisis, largely as a result of the spectacular collapse of its parent, Steinhoff International Holdings NV following an accounting scandal in late 2017 and has been struggling to restructure the debt of some subsidiaries with its creditors.

Now, according to Reuters, Mattress Firm, the largest U.S. mattress retailer, is planning to file for bankruptcy Reuters reports, as the firm struggles to exit costly store leases and shut some of its 3,000 locations that are losing money.

A bankruptcy filing would make Mattress Firm the latest U.S. retailer struggling due to competition from e-commerce firms such as Amazon.com putting pressure on brick-and-mortar retailers, as well as a decline in demand as the business model transforms. However, a key driver behind any Chapter 11 filing would be the sorry financial state of insolvent Steinhoff,  which acquired Mattress Firm for $3.8 billion in 2016 as part of an aggressive global roll-up which ultimately pushed the company into bankruptcy.

According to Reuters, both the Houston-headquartered Mattress Firm and Steinhoff have been working with distressed turnaround consultancy AlixPartners, which is often hired just ahead of a bankruptcy filing.

A bankruptcy filing, while leading to numerous store closures, would allow Mattress Firm to clean up its real estate portfolio and improve cash flow and profitability, according to Piper Jaffray analysts. In recent Chapter 11 cases, discount footwear retailer Payless ShoeSource closed roughly 700 mall-based stores in bankruptcy last year, while children’s clothing shop Gymboree Corp closed about 300.

That said, some retailers have managed to close huge swaths of their store base outside of bankruptcy, although the inability to renegitate leases - unless the landlord is especially friendly as was the case with Bebe stores - usually requires an in court process.

The loudest warning sign for Mattress Firm came last year when the retailer lost Tempur Sealy, the maker of popular mattress brand Tempur-Pedic, as a supplier last year, limiting its offerings. Mattress Firm secured a $225 million asset-backed revolving loan last year.

As part of its breakneck expansion which prompted many questions in recent years, Mattress Firm acquired HMK Mattress Holdings, the parent company of competitor Sleepy’s, in 2016 for $780 million and then rebranded the shops. Sleepy’s had over 1,050 stores on the U.S. East Coast and Illinois.

Meanwhile, Mattress Firm's parent, Steinhoff, booked a $12 billion write-down earlier this year relating to accounting irregularities. Expect a similar outcome in this case.

Comments

SloMoe Mon, 08/06/2018 - 15:44 Permalink

Is a mattress anything like a futon? I think the futon in my parent's basement is wreaking havoc on my back. Can hardly make to the unemployment office these days.

Stan522 Shitonya Serfs Mon, 08/06/2018 - 15:59 Permalink

Guess that name change did shit for them.....

The way all of these mattress retailers differentiate is by having the mattress manufacturers rename the mattresses for each big retailer, so to make it more difficult to shop and compare. The problem resides in the fact that you can buy great mattresses like Leesa, Casper and others online and have it ship right to your door avoiding the big box stores.....

In reply to by Shitonya Serfs

ZD1 Stan522 Mon, 08/06/2018 - 16:06 Permalink

Can't blame the mess at Mattress Firm on cheap futons or mattresses purchased online.  

Mattress Firm had been thrown together quickly via a string of mattress store acquisitions growing from 500 stores to 3,500 stores between 2012 and 2016.  In the process of growing, Mattress Firm accumulated $1.3 billion of net debt and was also on the hook for $2.7 billion in off-balance sheet lease liabilities related to its sprawling store chain.

Steinhoff International Holdings, a highly leveraged South African company, bought Mattress Firm in 2017 at a whopping 115% premium.

Be wary of companies that try to rapidly consolidate a fragmented industry via a roll-up and be especially wary when one leveraged roll-up buys another one.

In reply to by Stan522

Didymos ZD1 Mon, 08/06/2018 - 16:26 Permalink

Thank you for this.  Toss in that Mattress Firm is as common as Starbuck's now - so much so that people were wondering if the whole damn chain was a money-laundering front for the drug trade.  Seriously, in some areas you find one on either side of an intersection.  This is a shitty strategy.  Mattresses are wildly overpriced to begin with, so having multiple storefronts in the same area makes these places look shady and cheap, but their prices aren't cheap!

In reply to by ZD1

RedBaron616 Stan522 Mon, 08/06/2018 - 16:15 Permalink

"A bankruptcy filing would make Mattress Firm the latest U.S. retailer struggling due to competition from e-commerce firms such as Amazon.com putting pressure on brick-and-mortar retailers. . ."

Idiot writers stick this line in, whether it is true or not. The vast majority of people are NOT buying mattresses online. So stop the idiotic Amazon line. I suspect that if an auto manufacture got into the same trouble, some drone would write that it was because of Amazon. Do writers get bonus dollars for mentioning Amazon?  

In reply to by Stan522

biker_trash RedBaron616 Mon, 08/06/2018 - 18:10 Permalink

Not sure you have the total picture.  The trend to buy online is increasing due to memory foam mattresses which can be compressed and rolled up for delivery. Traditional mattresses are overpriced and don't perform as well as decent memory foam. The last 5 mattresses I purchased where from Amazon and I'll never go back to a retail store again. Traditional mattresses are dead.

In reply to by RedBaron616

spastic_colon SloMoe Mon, 08/06/2018 - 15:49 Permalink

they even could not make money after a commiefornia court years ago won a case to ban dual sided mattresses because some drunk ass person passed out while smoking in bed and caused a huge fire; they claim the cigarette got caught in the mattresses padding crease that was on the bottom at the time.  It was huge win for the mattress biz because now a mattress only lasted 1/2 as long because you could not flip them anymore.

In reply to by SloMoe

wetwipe SloMoe Mon, 08/06/2018 - 15:51 Permalink

I blame the millennials. They're fucking faggots.

I used to have to buy a new mattress every year.

After one years use the thing was so full of puke stains, jizz and shit that it was a fuckin' health hazard. Plus all the springs were fucked from all the shagging. 

These millennials can now make a mattress in their moms basement last a generation... selfish bastards.

-Wetwipe

In reply to by SloMoe

wetwipe WTFUD Mon, 08/06/2018 - 16:24 Permalink

Once said to the bird... I'm going to watch football. She said ok but don't get too pissed and get me a chinese on your way home. Anyway to cut a long story short. I got really, really pissed and on the way home called at the indian and bought two prawn vindaloos and a naan bread. Later I remembered that she asked for chinese so stumbled in to the chinese and picked up some pork ribs, anyway by the time I got home it was 2AM and the missus was already fast asleep. I didn't want the food to go to waste so I ate the two prawn vindaloo's and the pork ribs washed down with another four pints of shitty larger. By this stage I was really fucked so I decide to go to bed. After falling over a few times in the dark I managed to remove all my clothes and got in to bed lying down close next to the missus. Then without any bodily warning I then managed to regurgitate the two vindaloos and chinese all over her face and hair and the bed, then promptly fell fast asleep and could not be woken. Not surprisingly my breakfast in bed the next morning had burnt toast and the boiled eggs were overdone.

 

-Wetwipe

In reply to by WTFUD