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SSB, Tempur Sealy and other drivers shake up the mattress industry in 2023

SSB, Tempur Sealy and other drivers shake up the mattress industry in 2023

A few days ago, there were two things on almost everyone in the mattress industry’s mind: SSB’s potential bankruptcy filing and Tempur Sealy’s (TSI) bid for Mattress Firm.

And in those last couple of days, Mattress Firm pulled its IPO, and SSB officially filed Chapter 11.

However, there’s still a possibility that TSI could buy a controlling stake in Mattress Firm, and that could mean turmoil for the industry.

The dynamic of the two potential moves is interesting, as SSB’s move could potentially help smaller companies, while TSI’s can hurt them.

A company so large filing Chapter 11 — like Mattress Firm did a few years back — could mean difficulties for retailers and manufacturers across the country. And if there’s one thing it absolutely creates, it’s uncertainty.

Representing some 19% of U.S. bedding sales, SSB brands collectively accounted for $2.4 billion in sales for the 12 months that ended in June 2022. The company is also one of the largest employers in the industry with more than 3,600 employees.

According to a declaration filed by Chief Financial Officer John Linker, the company sells to about 2,200 independent retailers in the U.S. that include mattress specialty stores, furniture stores, department stores, furniture rental stores, mass merchandisers and juvenile specialty stores. In addition, the company sells to the hospitality channel including hotels, casinos and resort properties, through SSB Hospitality.

Many in the industry, including myself, felt SSB’s bankruptcy filing was imminent because they cannot pay out their promised year-end rebates to retailers that had a rebate program. That, if anything, is the most detrimental to them, and therefore could have a positive impact on their competitors. 

“At the end of the day, the only positive impact of filing would be for their competitors,” says Stuart Carlitz, CEO of Bedding Industries of America. “As far as their dealers go, they are going to be disrupted, to an extent, but then if it’s a prepackaged Chapter 11, and they have a debtor in possession financing, there may be a little disruption in the very beginning. And the dealers that depend on SSB for their floor samples and for sales on those models really won’t be affected.”

Carlitz says he thinks the biggest thing that could really hurt SSB long-term is that they didn’t pay these rebates to some big customers. 

“It’s kind of a sweetheart industry,” he adds, “where the suppliers work with the manufacturers, the manufacturers work with the retailers, the retailers work with the manufacturers — they want everyone to survive. And at the end of the day if the suppliers really get hurt, then they wind up being forced to adjust their pricing to the whole market to make it up.”

King Koil CEO David Binke has similar feelings.

“SSB filing for Chapter 11 is not good for our industry,” he says. “Just like the rumors of Tempur Sealy buying Mattress Firm,  those types of potential moves could wreak havoc. But for us, we look at it as an opportunity for a smaller company. They are by far the two largest, so with SSB filing, dynamics of the whole marketplace could change”

Binke is no financial wizard, but he says after looking at the number, SSB didn’t have much of a choice avoiding filing. 

“There was no white knight that would come to rescue it, especially with low-interest rates escalating and credit tightening” Binke adds. “It’s not good for our industry and I don’t wish that upon anybody, even our competitors.”

Carlitz agrees, and says, unlike some other players that filed for bankruptcy and came back stronger, SSB likely won’t be stronger when it comes out. 

And though TSI’s bid for Mattress Firm didn’t happen, Boise Mattress Owner Steve Houk says they don’t need to buy Mattress Firm to own it. 

“Mattress Firm, we’ve already seen, ceases to exist without Tempur,” he says. “They had a huge failed attempt with Serta, and they can’t bring it right now because of Chapter 11. The only brand that can keep them alive is TSI. So Mattress Firm needs TSI more than TSI needs Mattress Firm. In the event that Mattress Firm goes bankrupt, Temper Sealy will absolutely buy off select locations. But as a whole, I don’t think TSI needs Mattress Firm.”

While these are two major companies making big moves, they aren’t going to be the only ones shaking things up for the industry in 2023.

“You’ve got two dynamics that have happened over the last several years, including this year,” Carlitz explains. “One, you’ve got the internet players who have taken a larger piece of market share. And I don’t mean the individual internet players, but the onslaught of the internet. I believe it’s accounting for roughly 30% of mattress sales today. Whereas in the past decade, it grew from five percent to 10 to 15 and then 28%. And then when COVID hit it went on steroids and jumped up to 30%, or maybe even 35%”

He explains that this is hurting traditional manufacturers who do not have a slice of the internet pie. However, companies like Tempur Sealy are pushing online sales and they do have a direct-to-consumer model

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“With Temper Sealy — the writing’s on the wall — they’re trying to go direct to consumer, in multiple ways, through brick and mortar and through the internet,” he explains. “And Serta Simmons tried to an extent with Groupon but they have not been as successful with it.”

Scott Tesser, CEO of Precision Textiles, says direct-to-consumer (DTC) brands have disrupted the industry quite a bit and that through the course of this year we’re going to see some type of shakeout in that whole world.

“Some of the weaker will tend to go away and some of the stronger will actually get stronger,” he says. “But I also see the DTC guys really seeing a parallel between more driving their product through retail traditional retailers, in addition to the direct to consumer. A lot of our customers, a lot of our DTC guys today are clearly looking to join up with a retailer that gets their bids into more of a traditional market. So I think there’s going to be a blurring of that line over the course of time where the Caspers of the world will become more mainstream.”

The other dynamic that’s happening throughout the industry, according to Carlitz, is that this last year as the interest rates rose and the number of new home builds fell, has taken a particular consumer out of the market. 

“BIA is in a unique position because we have one of the larger disruptors in the mattress industry — Saatva — and then we have grown our brick and mortar business significantly over the last several years, and Saatva is growing their brick and mortar business presence now, too,” he says. “We finished up 2022, basically, even with 2021, and when you look at the rest of the industry they have been down 20 to 30%.” 

Tesser adds, “Everyone’s a little bit stuck in the same position, everyone’s trying to find a little different niche for themselves. We’re all stuck with some of the same properties — cooling is huge, and breathability is huge. It’s those that are going to differentiate themselves by not necessarily chasing the bottom that will succeed. Across the board, we’re seeing our customers looking for better products. They’re looking at sustainability today, which we’ve never looked at before, and we’re getting a lot of inquiries about more natural fibers than we ever have before.”

And with that, the health and wellness trend comes into play as the younger generation starts buying mattresses. 

“The younger consumer is going to start to look more at sustainability and a bed that they can perceive as being a little more technical and allow them to sleep better,” Tesser says.

With all of these factors in play, the word of the year in the mattress industry is shaping up to be  “dynamic” with a side of “uncertainty.”

SSB’s filing has already created a stir in the industry, and if TSI buys a controlling share of Mattress Firm — or if Mattress Firm files for bankruptcy again —it’s going to be a wake-up call to others in the industry that a serious amount of market share is up for grabs. The question is, will they be ready to take it?

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