Recent bankruptcy cases: Introduction
The assault on brick-and-mortar retailers in North America continues. One of the most recent bankruptcy cases out of the USA is that of Houston-based Mattress Firm Inc. (Mattress Firm). Mattress Firm is the biggest mattress seller in the USA, has declared Chapter 11 bankruptcy. The firm plans on closing to 700 stores.
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Recent bankruptcy cases: Paid too much?
The South African company, Steinhoff International Holdings, purchased Mattress Firm for $2.4 billion in August 2016. Steinhoff’s deal of $64 a share was greater than double the firm’s closing share price of $29.74 at the time. Mattress Firm’s debt at the time raised the deal’s worth to about $3.8 billion. Just a several years ago the mattress sector was forecasted to boom. Some of the reasons for the growth forecast was the expected continued rise of the US economy, jobs and housing growth.
Recent bankruptcy cases: The Chapter 11 filing
Court documents show Mattress Firm has more than $1 billion in liabilities, owing to its largest vendor almost $65 million. The company is getting in bankruptcy with 3,300 locations. Mattress Firm has 9,600 permanent and 285 part-time workers. It had sales of $3.2 billion in the fiscal year finished Sept. 30 as well as being $3.2 billion in the red, according to its bankruptcy filing.
The former CEO was replaced last March 1. Mattress Firm has obtained $250 million in DIP funding to support the business while it reorganizes. The company also obtained funding for operations by way of $525 million senior secured debt to use after it comes out from Chapter 11. Mattress Firm is beginning on what is called a prepackaged restructuring plan. It wants to arise from the bankruptcy process with a strong balance sheet. The company is confident that its brand-new strategy, when carried out, will enable it to reclaim a large section of the US mattress market.
Recent bankruptcy cases: The retail assault continues
Mattress Firm has dealt with a lot of the same conditions, and some different from, various other big retailers. The high-profile bankruptcy of Toys “R” Us, as well as the death of Sears Canada, are other examples. Some of the issues Mattress Firm faced leading to its bankruptcy protection filing are::
- Extra traditional retail stores that were necessary
- Being strapped with way too much debt
- Cheaper priced goods from China
- New direct-to-consumer bed mattress companies Casper and Leesa.
With appropriate stock management, overstocking should not have been an issue in the mattress industry. By its nature, each store does not warehouse the range of products waiting to be sold. Central storage facilities warehouse and ship the mattresses. Using proper supply management, there is no overstocking.
The assault on the retail mattress industry is not new. When the Chinese identified years ago how to make mattresses in China, and deliver them to North America, pricing pressures began. The brand-new phenomenon which did take the retail mattress sector by surprise was the idea in the industry that everybody first wanted to test mattresses before buying. No one ever before conceived that people would buy a mattress online, sight unseen. In the United States, 50% of consumers consistently purchase on the internet. The percentage is undoubtedly greater within the Gen-X and Millennial age groups. With generous return policies, online mattress buying has so far worked.
Recent bankruptcy cases: Do you or your company have too much debt?
Are you unhappy about the direction your debts or your company’s debts are taking you? Is the online shopping craze driving your business into financial ruin? Do you or your company not have enough cash flow to make it through another season? Is the stress of too much debt affecting your health and life?
Call us now for a free consultation. The Ira Smith Team can help you sort through all the issues. We will create a plan to get you back on the road to financial health. Many times, we can avoid bankruptcy, using one of the various bankruptcy alternatives. Call us today so we can help you get your life back, Starting Over, Starting Now.
