The overall U.S. bed and mattress sector may have performed well in 2025, with revenue rising by 1.3% to $28.4 billion year over year, according to IbisWorld analysis, but some major mattress retailers say they are experiencing a historic industry recession.
Among the struggling mattress retailers is iconic chain Ortho Mattress, which filed for Chapter 11 bankruptcy to reorganize its business on June 1 in the U.S. Bankruptcy Court for the Central District of California.
A much larger mattress chain, Sleep Number, faces more serious economic issues requiring it to file bankruptcy and sell its business.
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Sleep Number files bankruptcy
Sleep Number Corporation filed for Chapter 11 bankruptcy reorganization, seeking a sale of substantially all of its assets as a going concern to Canadian rival mattress retailer Sleep Country Canada Inc., as stalking-horse bidder for $415 million in cash and assumed liabilities.
The debtor has filed a bidding procedures motion, which calls for an auction to be held if a qualifying bid other than the stalking-horse bid is received before a bid deadline.
The debtor began a marketing process in February 2026 seeking to identify a stalking-horse bidder for the purchase of the company’s assets.
The Minneapolis-based mattress retail chain filed its petition on June 12, along with an asset purchase agreement, in the U.S. Bankruptcy Court for the Southern District of New York, listing $642 million in assets and $1.28 billion in debts, according to court papers provided by Kroll.
Sleep Number’s debts include $672.5 billion in secured credit facilities. The debtor’s largest unsecured creditors include Leggett & Platt Inc., owed over $10.2 million; Horizon Media, owed over $7.3 million; Elite Comfort Solutions, owed over $6.1 million; Flextronics International Europe, owed over $6 million; Gumotex, owed over $3.7 million; and NFL Ventures LLP, owed over $2.6 million.
Debtor seeks a $65 million DIP loan
The 39-year-old mattress retailer will seek bankruptcy court approval of a $65 million new money debtor-in-possession financing facility, along with a roll-up of $195 million in prepetition debt obligations.
“While we have made meaningful progress advancing our turnaround efforts and strengthening our operations, our capital structure remains unsustainable,” Sleep Number CEO Linda Findley said in a statement.
“Following a comprehensive review of our strategy options and a robust sale process, we are confident that moving forward with the Sleep Country Canada agreement and this court-supervised sale process will enable us to address our financial constraints,” Findley said.
Historic industry recession blamed
Sleep Number blamed industry-specific macroeconomic headwinds that strained its business and resources as the reason for its bankruptcy filing. The company said a market shift to e-commerce, a decline in foot traffic and in-store sales, difficulty in maintaining a sufficient real estate portfolio and distribution network and diminishing profit margins led the company to consider a bankruptcy filing, according to court papers.
A culmination of these issues resulted in a historic industry recession with the company facing increased competition in the mattress industry, a reduction in discretionary consumer spending, an unpredictable regulatory environment, increased inflation and interest rates, a less dependable supply chain, and a growing tariffs burden.
Sleep Country’s strong interest to buy
“Sleep Country has expressed a strong interest in acquiring the company’s assets since day 1 of the prepetition marketing process and has continued throughout the process to actively engage in diligence and negotiations with the company,” Sleep Number CFO Amy O’Keefe wrote in a June 12 declaration.
Sleep Number, founded in 1987, opened its first retail store in 1992. It operates 572 stores in 50 states and employs 2,920 workers.
The company has not announced any store closings or layoffs.
Sleep Country, founded in 1994, is Canada’s leading specialty sleep retailer with over 300 corporate-owned stores, court papers said.
Sleep Number financial data:
- Total assets: $642 million
- Total liabilities: $1.28 billion
- Secured credit facilities: $672.5 million
- Proposed sale price: $415 million cash plus liabilitiesSource: Bankruptcy Petition
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