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Mattress Firm Plans to Close 200 Underperforming Stores After Integrating Acquired Portfolios

Separately, Parent Firm Discloses Investigation into Accounting Irregularities, Resignation of CEO
December 26, 2017
Houston-based retailer Mattress Firm, which added more than 2,000 stores between 2013 and 2016, announced plans to cull approximately 200 under-performing stores following its purchase a year ago by Steinhoff International Holdings NV for $3.8 billion.

In other news, South Africa-based Steinhoff announced earlier this month that its CEO had resigned after the firm learned it was being investigated for accounting irregularities. It also announced that it would have to restate previous earnings reports. Steinhoff held its first meeting with its bankers last week following that announcement.

In that presentation, Mattress Firm chairman Steve Stagner disclosed that it was planning to accelerate Mattress Firm's store rationalization program following its "land grab" period last year. He said the firm was planning to close some 200 underperforming and surplus stores over the next 18 months.

That rationalization does not mean the end of growth, however. Mattress Firm generated about $2.6 billion in revenue from its 3,400 stores for the nine months ended June 30, 2017. Stagner said the goal was to reach $4 billion over the next five years. He said the chain would continue to expand in or enter under-penetrated markets.

This week, Mattress Firm announced that it entered into a new up to $225 million senior secured asset-based revolving credit facility.

"This new credit facility provides independent liquidity and capital to support our strategy, and demonstrates the strength of our business, the value of our assets and the quality of our brands," stated Ken Murphy, Mattress Firm's president and CEO. "Over the past year we have made multiple strategic investments that position us to build on our long-term vision to become the largest U.S. vertically integrated mattress retailer."

Whether the rationalization and expansion continues under Steinhoff's ownership is not certain at this point. Steinhoff revealed that following its announcement of accounting irregularities, it has received expressions of interest in some of its assets that would generate about $1.2 billion of liquidity. Mattress Firm accounts for about 15% of Steinhoff's business.

The South Africa-based conglomerate acquired Mattress Firm for $3.8 billion in August 2016 to become the dominant mattress retailer in the U.S. The acquisition followed Mattress Firm's February 2016 acquisition of HMK Mattress Holdings LLC, the holding company owner of Sleepy’s, for $780 million. At the time, Sleepy's was the second largest specialty mattress retailer in the U.S. with over 1,050 stores in 17 states in the Northeast, New England, the Mid-Atlantic and Illinois.

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