Tempur Sealy International on Friday said that it has agreed, subject to bankruptcy court approval, to provide up to $14 million in debtor-in-possession financing to Innovative Mattress Solutions in connection with its Chapter 11 bankruptcy filing.
The financing will facilitate the bankruptcy process of Innovative Mattress Solutions, which runs the Sleep Outfitters, Mattress Warehouse, and Mattress King brands, "and is anticipated to be completed during the first half of 2019," according to a company press release.
The unit operates 142 specialty sleep retail locations primarily in the southeastern U.S. which for the year ended Dec. 31 represented less than 2% of the company's global net sales. As a result of the bankruptcy, the company will record a charge of about $21 million during the fourth quarter, Tempur Sealy said.
The set of brands preparing for bankruptcy-related restructuring is suffering from an "overextended retail footprint and thin capital structure ... not designed to effectively respond to the competitive pressures of the recent retail environment," according to Tempur Sealy Chairman and CEO Scott Thompson.
Those pressures include disruptive material and sales innovations from bed-in-box startups like Casper that have undermined traditional store-based marketing in the U.S. and felled other legacy players, including ubiquitous retailer Mattress Firm. That retailer filed for Chapter 11 protection in October, when it also announced the closure of some 700 stores.
Casper, which started off last year with plans to open its first standalone store and quickly expanded that to plans for 200 across North America, is taking the lead in what is a king-sized pack of such innovators. While Casper started out as an e-commerce pure-play in 2014, it, along with others like Tuft & Needle, Leesa and Purple, have also partnered with legacy retailers to make shopping even easier. Amazon also moved into the space last year with its own affordable and premium mattress options, plus partnerships with Tuft & Needle and Nest.
"Innovative Mattress Solutions has served over a million consumers and built equity for their and our brands in their markets," Thompson said. "We will review strategic alternatives related to iMS during its bankruptcy process with a focus on what is best for Tempur Sealy consumers in the affected markets."