Steinhoff’s Mattress Firm goes bankrupt, shuts some stores after accounting scandal
Mattress Firm Inc., the troubled bed retailer of scandal-plagued Steinhoff International Holdings NV, filed for bankruptcy with plans to shutter up to 700 stores.
The Chapter 11 petition filed Friday in Wilmington, Delaware, lists more than $1 billion in both debt and assets, and includes units of well-known brand names such as Sleepy’s and 1800mattress.com. Among the largest unsecured creditors are Simmons Manufacturing Co. and Serta Mattress Co.
Mattress Firm expects to keep operating as usual while it completes a restructuring plan that includes paring back its chain of more than 3,000 stores across 49 states, according to a statement. The Houston-based company is asking the court to approve $250 million of financing to keep paying its bills during the reorganization. It also said $525 million in senior secured credit has been committed to fund its turnaround. The process is expected to take 45 to 60 days, Mattress Firm said.
“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,” Steve Stagner, chief executive officer of Mattress Firm, said in the statement. An initial group of 200 stores will be shut in the next few days, the company said.
The bankruptcy includes a prepackaged restructuring agreement, meaning it already has the approval of key stakeholders, but it will still need court approval. The chain said deliveries to customers won’t be affected and it will continue to honor warranties, promotional programs, returns and exchanges.
Mattress Firm’s problems have intensified the troubles of parent Steinhoff, which is restructuring more than 9 billion euros of debt and dealing with an investigation into faulty accounting. The downward spiral began in December, when Steinhoff said it had uncovered irregularities and that Markus Jooste had left the CEO post.
The scandal wiped out billions of dollars of market value, and Steinhoff has been probed by regulators, law enforcement officials and tax officials in its home country of South Africa and abroad.
To stave off collapse, Steinhoff has had to sell some assets and persuade bondholders and banks to agree to new repayment terms. Suffering losses, some investors have launched class-action lawsuits and the company’s former chairman, billionaire Christo Wiese, is suing Steinhoff for 59 billion rand ($4 billion).
Steinhoff bought Mattress Firm for $3.8 billion two years ago, but the chain expanded too aggressively, suffered from ineffective marketing and has been embroiled in a dispute with suppliers, Steinhoff said.
The company has acknowledged it over-saturated some of its markets, a problem made worse in 2016 when Mattress Firm bought Sleepy’s and created the biggest U.S. mattress chain. That left the combined company with some outlets across the street from each other. The chain also parted ways with its largest supplier, Tempur Sealy, which has now sued Mattress Firm for allegedly selling confusingly similar products under the Therapedic brand name.
According to a presentation to lenders, Mattress Firm’s revenue as of September declined to 1.9 billion euros ($2.2 billion) from 2.2 billion euros in September 2017, but the like-for-like sales rose 2.6 percent. The company targets e-commerce improvement and opening stores in Los Angeles and Detroit as part of its turnaround strategy.
The case is Mattress Firm Inc., 18-12241, U.S. Bankruptcy Court, District of Delaware.