Ice House

Those Million Mattress Firms Aren’t Going Anywhere—for Now

Wondering what will change with the Firm’s purchase by a South African furniture giant? So were we.

By Roxanna Asgarian October 24, 2016

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The mattress stores stay—for now.

Over the past few years, as mattress stores began to pop up next to mattress stores around town, Houstonians started to imagine a dystopian future full of streets lined with shopping centers full of mattress stores. And we started to wonder: How long can this last?

For a time this summer, the market appeared to confirm what we already suspected. Stock in Houston-based Mattress Firm—largely responsible for the influx of storefronts—dropped to $29 per share, having reached $68 per share in April 2015. But not for long: On August 8, South African mega-retailer Steinhoff International announced a deal to enter the U.S. market by scooping up Mattress Firm for more than $64 a share—a number that Gustavo Grullon, professor at Rice’s Jones Graduate School of Business, calls “a once-in-a-lifetime opportunity.” “It’s like somebody offering you 100 percent more than you paid for your house,” he adds. “You take it.”

The offer was surprising. “On the day of the announcement, the market believed Mattress Firm was worth $29 a share, and these guys have expressed that they think it can be worth more than double that,” he says. “To me, that says the acquiring firm is probably overpaying.”

As for Mattress Firm, over email, CEO Ken Murphy tells Houstonia that he’ll remain at the helm of the company’s U.S. operations and that he doesn’t “expect significant changes in headcount” of its 440 local employees, although the company’s consolidating offices here.

What about all those storefronts? “As a function of acquiring several companies in recent years, we have naturally gained many strong retail locations as well as some under-performing and/or duplicative stores,” Murphy writes. “As always, we evaluate each store on a case-by-case basis as lease end dates approach, with the intention to optimize our fleet of stores.”

With the new buyers looking to cut costs and maximize profits, those duplicates are likely to go. Still, there’s one clear winner in the deal. “If you’re a shareholder of Mattress Firm at this point,” Grullon laughs, “you’re really happy.” 

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