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Sleep Number has gone to bankruptcy court to work out a deal to merge with Sleep Country Canada. The Canadian bedding brand is the stalking horse bidder, although Sleep Number may end up fielding better offers, the company said Friday.
The 40-year-old U.S. bedding company, known for its individualized, adjustable mattresses, has been in turnaround mode for a while, but its “capital structure remains unsustainable,” CEO Linda Findley said in a statement. In court filings Friday the company listed debts of $1.3 billion.
In its most recent quarter, net sales fell 19% to $319 million, gross margin contracted, in part because the company was off-loading unsold inventory, and net loss ballooned to $50 million from $9 million the previous year.
“Following a comprehensive review of our strategic 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. “It will also position us to expand our business, helping more people achieve their best sleep both in the United States, and through future international expansion.”
Sleep Number’s day-to-day operations are continuing through the bankruptcy, with stores open at regular hours, and vendors will be paid. To support that, the company expects to secure as much as $260 million of debtor-in-possession financing, $65 million of that new financing. The company has nearly 3,000 full-time employees, plus part-time employees and contract workers.
Findley arrived in March 2025 as the turnaround faltered, though it seemed to pick up some steam under new leadership. Still, the company issued a going-concern warning earlier this year.
Sleep Number essentially ran out of time to see its turnaround through, according to GlobalData Managing Director Neil Saunders. The mattress business has become fiercely competitive, and rivals like Mattress Firm have wider assortments and price points.
Plus, running its own stores, an advantage in good times, has become an operational burden, he said in emailed comments. Sleep Number runs 572 stores, with locations in all 50 states.
All this makes the tie-up with Sleep Country Canada a sensible move, Saunders said.
“Sleep Number remains a relevant brand with products that have some value,” he said. “However, it arguably needs to be part of a bigger group with more financial firepower and better distribution to survive.”