Mattress Firm Inc., the nation's biggest specialty mattress retailer with eight stores in the Chattanooga and North Georgia region, filed for bankruptcy reorganization today and said it is in the process of closing 200 stores across the country, including an outlet on North Dug Gap Road in Dalton, Georgia and another store on Kingston Pike in Knoxville.
The Houston-based retailer said it expects to shut down about 700 of its 3,230 company-owned stores by the end of the year.
"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," Mattress Firm CEO Steve Stagner said in an announcement of the bankruptcy filing.
Mattress Firm filed a Chapter 11 petition to reorganize its finances under the protection of the U.S. Bankruptcy Court in Delaware. The prepackaged plan submitted to the court today 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. The company has nearly 10,000 employees and another 125 franchised locations.
"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," Stagner said in a statement today.
Like many bedding retailers, Mattress Firm has been hurt by a surge in online bed-in-a-box retailers. The company also was hurt by debt used to acquire other retail chains and accounting problems at its parent company , Steinhoff International.
Last October, Mattress Firm filed a lawsuit against two former employees, a broker and a group of developers for pushing the company to aggressively expand and open more stores. The lawsuit accuses company executives and brokers of bribes and kickbacks through secret store leases.
Despite the bankrupty, Mattress Firm said today it anticipates that deliveries for customer orders will be made as scheduled, and the company intends that warranties, guarantees and other customer programs will be honored as usual.
"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," Stagner said.
The company 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.
Founded in 1986, Mattress Firm grew to be America's largest specialty mattress retailer, with neighborhood stores in 49 states. In 2016, Mattress Firm was acquired by Steinhoff International Holdings, N.V.
The retailer ballooned in size through its purchases of Mattress Giant in 2012, Sleep Train in 2014 and Sleepy's in 2016.
In its court filing, the company acknowledged "several well-intentioned, but ill-advised, marketing and sales promotions" over the past two years. Mattress Firm expects to lose $150 million in its 2018 fiscal year after making a profit before earnings, taxes, interest and depreciation of $251 million in 2017