It’s been a difficult past several years for legacy retailers.
The large, typically big box stores have struggled as the consumer landscape undergoes some pretty rapid changes. What used to be considered the status quo for the retail industry is now largely a thing of the past.
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Related: Popular retail chain eyes another Chapter 11 Bankruptcy
For example, just a decade or two ago, a successful business model for a large retailer was to have a big presence across many states — perhaps even internationally.
This meant having many brick-and-mortar locations, often within high-foot-traffic urban areas with large footprints.
Even better if that store was located in a huge shopping district, like a mall.
And it didn’t matter so much how its online presence was. As long as it had sound brand recognition, a retailer could rely on a steady flow of shoppers simply because its label pulled a lot of weight.
Nowadays, though, things have changed.
Operating in places like shopping malls is increasingly expensive, with diminishing returns. Malls tend to charge outsized rents to their tenants, and with their popularity dwindling, it’s no longer advantageous to operate solely out of malls.
In fact, having a huge physical presence is not necessarily advantageous. Brick-and-mortar operations are costly, and unless a retailer is flush with cash, having too many locations can actually hurt a business.
Mattress Firm will become part of the Tempur Sealy family.
Legacy retailers have struggled
It’s a tale as old as time.
Or at least as old as the internet.
Legacy retailers that enjoyed any degree of popularity before our shopping habits changed were used to operating in the status quo.
This meant achieving success, expanding locations across the U.S., rinsing, and repeating.
But brick-and-mortar expansion became a liability when operations shifted online, and many consumers began to prefer making many purchases without leaving their homes.
Related: Popular brand files for Chapter 11 bankruptcy, closing all stores
Such was the case with Mattress Firm, which saw a period of rapid expansion, growing its footprint from around 700 stores to over 3,500 in just a few years. This expansion largely coincided with more mattress and furniture companies transitioning to e-commerce operations, many of which were direct to consumers like Casper.
Mattress Firm then went on to acquire some competitors, like Sleepy’s, which only added to its mammoth footprint and cost of operations.
It thus struggled with high rent costs, debt, and competition from sleeker online operations.
So, in 2018, it filed for Chapter 11 bankruptcy and closed about 700 stores.
Mattress Firm gets acquired
But in 2023, Mattress Firm was offered something of a lifeline.
Tempur Sealy, the product of Tempur Pedic’s more successful merger with Sealy, offered to buy Mattress Firm.
The offer was met with a great deal of antitrust skepticism by the FTC but was eventually given the green light after a U.S. District Court judge in the Southern District of Texas denied its request for a preliminary injunction.
The acquisition will go through for about $5 billion, and the new conglomerate will change its parent name to Somnigroup International. Tempur Sealy, Mattress Firm, and Dreams will all operate as separate units.
More bankruptcy:
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To appease antitrust concerns, Tempur Sealy will sell off 103 Mattress Firm-owned Sleep Outfitters stores and divest an additional 73 Mattress Firm stores.
“We are now the world’s largest bedding company, with superior capabilities in design, manufacturing, distribution, and retail, while also owning a portfolio of the most highly recognized brands in the industry,” CEO Scott Thompson said.
Tempur Sealy also plans to upgrade some Mattress Firm stores, though management hasn’t specifically mentioned the kinds of changes customers could see.
“There are some stores that need to be refreshed, and we’ve allocated some capital … to freshen up the stores, to make sure that we provide our customers and our employees a working environment that is fresh, clean and crisp,” Thompson said, adding the process will be “data-driven.”
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