US's Largest Mattress Retailer Faces Bankruptcy, with Sales of 2 Major Mattress Giants Plummeting 11% and 20.9%

Mattress Firm, the largest mattress retailer in the US, is considering filing for bankruptcy protection and is working to close some of its more than 3,000 loss-making stores.

On August 7, 2018, Beijing time, Reuters reported that people familiar with the matter said that Mattress Firm, the largest mattress retailer in the United States, is considering applying for bankruptcy protection and has begun to close some of its more than 3,000 loss-making stores in order to get rid of the high rents cost, ease the pressure on the company's operations.

 

 

Founded in 1986, Mattress Firm has more than 3,500 franchise stores in 48 states, mainly in the economically developed areas of the East Coast and the Great Lakes. In 2012, Mattress Firm sales increased by 41.1%, with a total revenue of $1.07 billion. It is the only mattress retailer with a sales volume of over $1 billion, ranking first among the top 25 mattress retailers.

 

Since then, Mattress Firm seems to be firmly in the dominance of the US mattress retail industry. In fact, it has long been mired in internal and external troubles. In just a few years, it has fallen from the altar and suffered a bankruptcy crisis. The empire may turn into an empty eye.

 

M&A strategy has encountered bottlenecks and performance has begun to decline

 

In order to expand assets and upgrade quickly, Mattress Firm continues to acquire other mattress retail giant hair. However, the acquisition is difficult to integrate. After two consecutive mergers and acquisitions, Mattress Firm faced “indigestion” and its performance was avalanche.

 

In 2014, Mattress Firm acquired the Sleep Train, the 4th largest US bedding retailer, with a high-profile price of 13.7x tax depreciation and amortization and 1.3 times net sales, making it a sensational event in the industry.

 

 

 

Due to the high fragmentation of the US mattress retail market, the total sales revenue of the top five mattress retailers accounted for only 27% of the total bedding market sales. Therefore, this acquisition only brings 4% market share to Mattress Firm.

 

In 2016, Mattress Firm acquired US mattress retailer Sleepy’s with a 10.9x tax depreciation and amortization profit and 0.7x net sales.

 

Sleepy’s is the second largest mattress retailer in the US with more than 1,050 retail stores in 17 states. The acquisition further strengthens Mattress Firm's dominant position in the US mattress retail market and accelerates sales growth, but it also has more negative impacts.

 

 

The ensuing huge mergers and acquisitions have increased the financial pressure on Mattress Firm. The brand of nearly $139 million has re-advertised the packaging costs, and Mattress Firm issued a profit warning in June 2016: In fiscal 2016, Mattress Firm expects a full-year loss reaching $1.57 to $1.62 per share. In the same period last year, the company's earnings per share reached 1.82 US dollars.

 

E-commerce shock + high rent, financial recession

 

In recent years, US physical store retailers have repeatedly suffered from the eclipse and challenges of e-commerce platforms such as Amazon. Many large physical stores have been “smashed up” and their performance has plummeted. The Mattress Firm is also difficult to escape. Not only that, but in order to control more channels, Mattress Firm often competes for store resources in a way that increases the amount of rent.

 

 

Whether Matress Firm is bankrupt or not is still unknown, but the US mattress retail industry has quietly changed: Casper, a mattress brand that started with Internet sales, plans to open 200 new stores in North America in the next three years to accelerate the expansion of physical stores.

 

 

（Source: JJgle.com）

Mattress Firm US