Mattress Firm chairman Steve Stagner said this week that the Houston-based bedding retailer plans to close 200 stores within the next 18 months in a bid to improve performance as parent company Steinhoff International grapples with a deepening financial scandal.
Steinhoff, which last year acquired Mattress Firm for $3.8 billion, is quickly running out of cash amid an accounting investigation involving the validity of its past financial statements and the value of some $7 billion in assets.
The company recently released an audio recording of a Tuesday meeting with lenders during which it revealed that it did not have “detailed visibility” into the cash flows of its many subsidiaries.
During the meeting, Stagner sought to reassure Steinhoff’s lenders of Mattress Firm’s ability to turnaround declining sales and boost margins with private-label products. He said the company will need $200 million next year, mostly to terminate store leases and purge Tempur-Sealy mattresses after a split from the manufacturer earlier this year.
The goal, he said. is to boost Mattress Firm’s revenue to $4 billion within the next five years, in part by scaling down its chain of roughly 3,400 locations. Many of its stores exist within blocks of each other in cities throughout the country.
“History has proven that those results will improve to our historical norms,” he said.
He acknowledged that the company, which expanded at a breakneck pace through a series of major acquisitions, now has about 300 “underperforming or duplicative” stores across the country. The company has already closed about 90 within the past year, he said.
Stagner, who started his career at Mattress Firm 22 years ago as a franchisee with one store and $1,300, detailed how the company exploded to become the largest mattress retailer in the U.S. with a 20 percent share of a $16 billion industry. It made 28 acquisitions, adding hundreds of stores at a time by snapping up all of its major competitors.
It now has 2,800 more stores than Sleep Number, the next largest mattress chain.