The vertical model in the home furnishings space—a single company managing the entire process from manufacturing to retail sale—is about to get its biggest test, on a scale the industry has never seen before.
With this week’s announcement that Tempur Sealy International, the world’s largest mattress manufacturer, will acquire Mattress Firm, the nation’s biggest bedding retailer, for $4 billion, the home business is getting an unprecedented merger of players.
There are, of course, other vertical models in the furnishings business. Ashley is both the largest furniture producer and the biggest brand in specialty retailing, but many of its stores are franchises or licensed and ultimately not under its total control. Other home brands—like La-Z-Boy and Bassett in furniture and Yves Delorme in textiles—have similar structures but are on a smaller scale, and again, some of their retailers are franchisees.
This mattress deal is different—and big. Tempur Sealy’s purchase of Mattress Firm will create a company with about 3,000 retail locations, 30 e-commerce platforms, 71 manufacturing facilities and several R&D workshops. It will also have 21,000 employees selling in more than 100 countries. And it will be by far the biggest entity in the mattress business in the U.S., and probably the world.
The acquisition is not exactly a surprise, having been rumored and even talked about in public for the past few years. Indeed, in announcing the deal during its first-quarter earnings call, Tempur Sealy CEO Scott Thompson said this union has been under consideration as long as seven years ago. He said the two companies had been in conversations on and off for the past two years, even as Mattress Firm tested going public last year, a move it eventually withdrew.
Neither company is a stranger to acquisitions. Tempur Sealy is itself the result of a 2013 merger of Tempur-Pedic and Sealy, and there have been several smaller acquisitions along the way. (The other big player in the mattress business, Serta Simmons Bedding, is the result of a $760 million merger between Serta and Simmons in 2009.) Mattress Firm has rolled up numerous smaller competitors over the past decade or so, and itself was acquired by a South African company, Steinhoff International Holdings, in 2016. For several years, as Steinhoff has dealt with its own financial issues, there has been much speculation that it was looking to sell Mattress Firm, which filed for Chapter 11 bankruptcy in 2018.
This latest deal, still subject to regulatory approval, is expected to close in the second half of 2024. There may be divestitures along the way, reports have suggested, but more important is any potential pushback from Tempur Sealy’s other retail customers, who may raise issues with possible favored treatment of its new retail arm. Tempur Sealy has always operated its own stores, nearly 700, but this takes its retail penetration to a new level.
A taste of what’s to come is ironically in the joint history of these companies. In 2017, Tempur Sealy’s products were pulled from all Mattress Firm stores, and for two years they feuded over accusations that Mattress Firm had illegally sold look-alike products, only to kiss and make up in 2019 when they realized they needed each other.
Now, they will have no other choice: They will really need each other.
Homepage photo: © Wolterke/Adobe Stock
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.