Mattress Firm Inc. will initially close one of its 19 Tucson-area stores as part of a plan to close up to 700 stores in a bankruptcy restructuring plan.
The Houston-based company, the nation’s largest mattress retailer with more than 3,000 stores in 49 states, filed for Chapter 11 bankruptcy reorganization on Friday in Delaware.
Mattress Firm, which expanded aggressively in recent years through a string of acquisitions, plans to close its store at 5545 E. Broadway in the next few days, as part of an initial group of 200 closures that also includes nine in the Phoenix area.
The Tucson store, at East Broadway and South Craycroft Road, is across the street from a Mattress Firm clearance center at 5455 E. Broadway and another retail store at 5480 E. Broadway, in The Plaza at Williams Center.
Decisions about additional store closings will be made in the next few weeks, the company said.
That rapid expansion of stores in recent years — with locations often very close to each other — resulted in “cannibalization” of sales, the company said.
In court documents, Mattress Firm said the company’s previous management team made several miscalculations as it rebranded more than 1,300 stores it bought from competitors in the last two years.
“While these acquisitions allowed (Mattress Firm) to achieve ... presence in markets where they previously had little to no presence, they also led to ‘cannibalization’ of sales amongst stores in close proximity to each other,” the company said.
“As a result, many Mattress Firm stores are in direct competition with other Mattress Firm stores, resulting in disappointing sales.”
Mattress Firm says that as the restructuring proceeds, it will update its list of store closures daily at the website of its real estate advisory firm, A & G Realty partners, at www.agrealtypartners.com
Mattress Firm grew rapidly in Tucson by buying out competitors that included Bed Mart, Mattress Pro and Phoenix-based Sleep America in 2015, which had 45 Arizona stores.
By 2016, Mattress Firm had 35 stores in Pima County.
In a statement, CEO and President Steve Stagner said the bankruptcy filing will allow the company to “strengthen our balance sheet” and close stores in certain markets with “too many locations in close proximity to each other.”
Mattress Firm, founded in 1986, has sales of more than $3 billion. But in court documents, the company said in fiscal year 2018, it is projected to lose about $150 million.
In 2016, Mattress Firm was acquired by South Africa-based retailer Steinhoff International Holdings for $3.8 billion.
In its bankruptcy filing, Mattress Firm listed more than $1 billion in liabilities and more than 50,000 creditors.
Under Chapter 11 bankruptcy, debtor companies are protected from legal actions while they work out plans to pay creditors.
Mattress Firm owes its largest unsecured creditor, mattress maker Simmons Manufacturing Co., nearly $65 million.
As part of its prepackaged bankruptcy restructuring plan, the company says it has commitments for about $250 million in financing to support its operations during the Chapter 11 case, as well as commitments for $525 million of senior secured credit facilities enabling it to emerge from Chapter 11.
The company says it expects to complete the restructuring process within the next 45 to 60 days.
Mattress Firm’s parent company has been dealing with its own problems as its stock price has drastically tumbled after it reported accounting irregularities that are being investigated.
“The past few years have been tough for Mattress Firm. It had too many stores, faced competitive industry pressures and also had a corporate parent that was rocked by an accounting scandal,” said Daniel Lowenthal a New York attorney with Patterson Belknap Webb & Tyler who specializes in bankruptcy law.
“But now its goal is to get in and out of bankruptcy fast and regroup with new financing.”
