South African home furnishings retailer Steinhoff International Holdings NV will buy Houston-based Mattress Firm Holding Corp. for $2.4 billion, the Wall Street Journal reports. The deal is expected to close in the third quarter.
Mattress Firm includes 3,500 company-operated and franchised stores in 48 states. The company owns brands including Tempur-Pedic, Sealy and Sleepy’s, which it bought late last year.
Steinhoff, a family-owned furniture retailer based in Cape Town, South Africa that's known as “Africa’s Ikea,” has recently expanded in Europe. The Mattress Firm agreement signals Steinhoff's entry into the U.S. market.
Mattress sales have remained a steady business for U.S. department stores, whose mattress departments have weathered the first upstarts in mattress sales—discount mattress stores. Tempur-Pedic, Sealy and Serta Simmons made 70% of bedding wholesale shipments in 2014, when half of the industry’s revenue growth came from price increases.
Mattress Firm’s own acquisition of Sleepy’s last year increased its costs over sales, and the company said it expected a loss for the year, according to the Wall Street Journal.
Steinhoff’s plans for Mattress Firm’s stores or brands aren't clear. Its entry into the U.S. via the mattress space is fraught with recent disruption: Manufacturers have kept consumers on their toes by selling variations of mattresses to stores at a variety of prices. Consistent sales and markdowns have also made it difficult to compare on price.
Traditionally, purchasing a mattress has been a sensory experience—customers go to showrooms, listen to salespeople and lie on options to feel their comfort level. But online mattress startups like Casper, Lessa, Yogabed and Tuft & Needle, which eschew all those special sales or markdown events and keep their "mattress-fits-most" offers in basic bed sizes at one price each, have been disrupting the norm. These retailers offer long try-out times and free returns.
These web upstarts also are making inroads into brick and mortar. Casper last month said it will sell through furniture and home goods retailer West Elm to help compete with traditional retailers’ “touch and feel” advantage.