Mattress Firm is planning to file for bankruptcy as early as this week, Reuters reported, a move that would likely result in store closures and operational restructuring as the company works to boost lagging sales.
The filing would cap off a tumultuous two years for Mattress Firm, which has struggled since its 2016 acquisition by South African retail conglomerate Steinhoff International. The company paid $3.8 billion to to acquire the Houston-based mattress chain, which had quickly grown to become the country’s largest in the years before the deal.
Mattress Firm did not immediately respond to a request for comment.
Steinhoff late last year became embroiled in an accounting scandal that called into question the value of more than $7 billion in assets. The company has been working to restructure its debt and regain investor confidence amid an ongoing investigation into its finances.
Steinhoff said in a presentation last week that Mattress Firm’s performance in 2017 and 2018 “reflects the requirement for a turnaround plan.” It noted that the company has too many stores in certain markets following a series of rapid acquisitions that gave it more than 3,400 locations nationwide.
Former Mattress Firm CEO and president Ken Murphy stepped down earlier this year after two years at the helm. Steve Stagner, who served as the company’s CEO from 2010 to 2016, resumed that role in March.
Steinhoff said that Mattress Firm’s leadership is assessing means of securing funding to needed to carry out a turnaround plan to improve “financial accountability,” advertising and merchandising. It noted the need to boost same-store sales by “optimizing” its store base by closing underperforming locations and perhaps opening new ones in cities such as Los Angeles
Mattress Firm, which now has about 3,300 stores, for years borrowed heavily to buy up dozens of competitors. Its $3.8 billion purchase price included more than $1 billion in debt
The company’s sales had been falling at the time of the Steinhoff acquisition, a trend that continued under new leadership. Steinhoff said in the presentation that quarterly same-store sales in April, May and June turned positive for the first time in months.
Mattress Firm faced an additional challenge shortly after the acquisition, when it severed ties with Tempur Sealy, its largest supplier. It then crafted a five-year partnership with Serta Simmons, the nation’s largest mattress maker.
Tempur Sealy’s stock rose 10 percent in Wednesday morning trading on news of Mattress Firm’s potential bankruptcy filing.