Key Takeaways:
Sleep Number Corp. filed for Chapter 11 bankruptcy on June 12 and agreed to sell its assets to Sleep Country Canada after a turnaround effort failed to reverse a 19% sales decline.
Sleep Number Corp. filed for Chapter 11 bankruptcy protection June 12 and agreed to sell its assets to Sleep Country Canada, as the mattress retailer's turnaround efforts failed to overcome a punishing debt load and a 19% drop in first-quarter sales to $319 million. The company posted a $50 million net loss for the period, according to court filings in the U.S. Bankruptcy Court for the Southern District of New York.
"While we have made meaningful progress advancing our turnaround efforts and strengthening our operations, our capital structure remains unsustainable," said Linda Findley, president and chief executive officer of Sleep Number, in a statement.
The Minneapolis-based company operates about 570 stores. Under the stalking-horse agreement, Sleep Country Canada will provide about $260 million in debtor-in-possession financing. The transaction is subject to higher or better offers, court approval and other closing conditions. Davis Polk & Wardwell LLP is serving as legal counsel to Sleep Number in the case, docketed as 1:26-bk-11399.
The bankruptcy marks the end of a 40-year-old brand that pioneered adjustable smart beds with individualized firmness and temperature controls. Sleep Number hit more than $2 billion in annual sales during the pandemic-era mattress boom, but a constrained housing market reduced household moves — a key trigger for mattress replacement cycles. The International Sleep Products Association reported U.S. mattress dollar sales fell 3.5% in 2025, with unit sales down 5.5%.
What the Sale Means for Customers
Sleep Number said it will continue day-to-day operations during the court-supervised process, including fulfilling orders, honoring the 100-night in-home trial and servicing its 10-year limited warranties. The company's connected smart bed infrastructure and mobile app will remain operational. If the sale to Sleep Country Canada is approved, the combined entity would create a North American sleep products leader with a broader retail footprint across the U.S. and Canada.
A Retail Icon's Decline
The company launched "To a Good Life's Sleep," its first major integrated campaign in several years, earlier this year and completed the largest product redesign in nearly a decade. It also began pruning underperforming stores, which now number 570 from a peak of about 620. Those efforts were not enough to offset the impact of tariffs on imported components and a shrinking addressable market as consumers pulled back on discretionary spending. Sleep Number shares will be delisted from the Nasdaq stock exchange next week, extinguishing value for public shareholders who held the stock after it peaked above $140 in 2021.
This article is for informational purposes only and does not constitute investment advice.
