Mattress Firm files for Chapter 11 bankruptcy protection, will close up to 700 stores

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

The Houston-based retailer has been ailing amid a surge of bed-in-a-box online retailers, too many physical stores and an accounting mess at its parent company, Steinhoff International.

Mattress Firm, which had more than 3,300 stores as of March 31, plans to close as many as 700 stores.

Those stores are “in certain markets where we have too many locations in close proximity to each other,” Mattress Firm CEO Steve Stagner said in a statement.

About 200 locations will close within days.

“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,” he said.

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.

   More: There’s a fierce battle over your bed: Industry goes to the mattresses

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.

Representatives for Mattress Firm and Steinhoff International did not immediately respond to requests seeking comment beyond a press release.

The chain 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 with the company’s restructuring plan, which is not guaranteed.

The case could have significant collateral damage:

Landlords that bet big on Mattress Firm’s expansion will be left with empty stores.

Mattress makers could face huge losses. Mattress Firm owes Serta Simmons alone more than $90 million, according to a court filing.

Competitors could face a flood of cheap mattresses. If the company can’t survive bankruptcy, enormous disruption would ensue.

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