Mattress Firm Holding Corp., the country’s largest mattress chain, filed for bankruptcy protection
Friday, as the latest retailer to succumb to mounting online competition.
The Houston-based company, which has 3,400 locations nationwide, plans to close 200 stores in the coming days and as many as 700 by year’s end, according to its Chapter 11 bankruptcy filing. The company said it does not anticipate delayed deliveries and will keep paying its suppliers in full.
“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 of Mattress Firm, said in a statement. He added that the company would use the money it saves from store closings to “improve our product offering, provide greater value to our customers and strategically expand in existing markets where we see the greatest opportunities to serve our customers.”
Mattress Firm is the latest in a string of national retailers, including Brookstone and Nine West, to file for bankruptcy as consumers flock online. The company, which was founded in 1986, has long had a stronghold on the mattress industry. In 2015, it bought rival Sleepy’s for $780 million and announced plans to expand throughout the Northeast and Mid-Atlantic regions.
But analysts say the company had too many locations — and did too little to keep up with the crush of online competitors that are winning over shoppers with convenience and more transparent pricing. Sales fell 11.2 percent last year to $3.29 billion, Mattress Firm said in an investor presentation.
“This is a wake-up call for traditional mattress chains: The 1960s model doesn’t work anymore,” said Bob Phibbs, chief executive of New York-based consultancy the Retail Doctor. “The traditional mattress-buying experience didn’t make people feel like they mattered. It made them feel used.”
In short, he said, buying a mattress often felt like buying a used car: Customers weren’t sure how to compare one model to another, and the barrage of promotions and discounts made them feel insecure about whether they were actually getting a good deal.
“The reality is that mattress companies have been ripe for disruption,” Phibbs said.
Mattress Firm’s bankruptcy filing comes just days after Amazon.com announced it was getting into the online bed-in-a-box business, popularized in recent years by the likes of Casper, Purple and Tuft & Needle, which was acquired by Serta Simmons in August. Walmart launched its own online premium mattress brand, Allswell, earlier this year. The basic premise of each brand is the same: Buy a mattress online and try it at home. If you don’t like it, you’ll get a full refund. (Jeffrey P. Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
Even as Mattress Firm closes hundreds of stores, some of its online competitors are moving into physical spaces. Casper, which opened its first store in New York this year, plans to open 200 locations around the country where shoppers can test out the company’s mattresses, pillow and bedding. (Napping is encouraged.) Online purchases make up about 15 percent of mattress sales, according to data from Wedbush Securities.
“Before we started this company, the idea of sleeping on your mattress before you bought it just didn’t exist,” Philip Krim, Casper’s chief executive, told The Washington Post in February. “This was a stagnant industry.”
Mattress Firm has had other woes, too: Last year it lost an important contract with Tempur Sealy International, and its parent company, Steinhoff International Holdings, has been mired in an accounting scandal. The company also blamed “ineffective brand marketing” and said it had not done enough to sell high-end mattresses that cost $2,500 and more.
“Between declining sales and over-expansion, it’s been a downhill battle for Mattress Firm,” said Stephanie Lieb, a bankruptcy attorney for Tampa-based Trenam Law. “If consumers are going to a brick-and-mortar location, it’s because they want better service. Not just a mattress.”