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Court Grants Mattress Firm Permission to Close 209 Stores as Retailer Asks to Reject Another 97 Leases

Many of The Closed Stores Are in Premium Locations, But Filling Space May Be Challenging
October 11, 2018

Mattress Firm has received permission to close 209 stores and focus on profitable locations as it works to exit Chapter 11 bankruptcy protection.

A bankruptcy court approved Mattress Firm's request to close 209 stores nationwide as it works to emerge from Chapter 11 bankruptcy protection, according to filings in U.S. Bankruptcy Court in Delaware. The company also has requested approval to reject an additional 97 leases.

The Houston-based retailer said the store closings would save the company $1.6 million in rent and other costs. Mattress Firm said it planned to close as many as 700 underperforming stores leading up to the holiday season. The objection deadline for creditors or other parties is Oct. 23, and the next hearing date is Nov. 9.

Many Mattress Firm stores are in prime locations, but filling space in many of its vacated, freestanding buildings could prove challenging, said Stephen Dombrovski, senior associate at Suntide Commercial Realty in St. Paul, Minnesota.

Dombrovski, who did deals with rival firm Mattress Giant in the Twin Cities before it was purchased by Mattress Firm, said the company was often sparse with store improvements and landlords may have to renovate space before renting to new tenants.

"Some locations are very high profile, but the question is, can you go back in there without putting additional dollars into the deal?" he said.

When it filed for Chapter 11 bankruptcy protection, Mattress Firm said it had $3.2 billion in debt and faced challenges from operating too many stores in close proximity to one another.

Dombrovski said Mattress Firm simply oversaturated the market, which has become more competitive recently as mattress provider Casper plans to open 200 brick-and-mortar stores and Amazon ramps up its bedding business.

"If they were on a main thoroughfare east and west, they wanted north and south, even if they were within shadows of each other," he said.

The company also said it planned to pay $152.7 million to suppliers and contractors in full, according to documents filed Oct. 9.

Mattress Firm President Steve Stagner said in a statement that the moves will give the company the resources to "strategically expand into new and existing markets."

Mattress Firm did not respond immediately to requests for comment.

At the time of the bankruptcy filing, Mattress Firm operated about 3,230 stores in 49 states. It said it expects to complete the bankruptcy process within 45 to 60 days.

Rob Smith, National Retail Reporter  CoStar Group   
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