Minneapolis-based Sleep Number enters bankruptcy, has sale deal with Canadian company

Mattress maker Sleep Number Corp. announced Friday that it has filed bankruptcy, with an agreement to sell the firm to one-time retail partner Sleep Country Canada Inc. after years of weak demand, mounting financial pressure and unpredictable tariffs.

Minneapolis-based Sleep Number blamed its bankruptcy, in part, on “the unpredictable shifting of trade rules imposed by the current U.S. government on top of an already vulnerable global supply chain,” according to the Friday court filing.

Even after the U.S. Supreme Court struck down some of President Donald Trump’s tariffs, “the broader trade landscape remained complex and the company continued to manage ongoing regulatory uncertainties, particularly regarding potential alternative tariff frameworks that may be imposed” on U.S. imports, Chief Financial Officer Amy O’Keefe said in the filing.

Sleep Number filed for Chapter 11 protection from creditors in order to hold an auction, at which Sleep Country would be the so-called stalking horse bidder. Its all-cash opening offer for “substantially” all of the firm’s assets is $415 million, O’Keefe said.

Because the firm tried to sell itself in the months leading up to the Chapter 11 filing, O’Keefe said Sleep Number is seeking a 26-day sale process. Any competing bids would be due July 8 and the sale would close by July 31 under the company’s proposed timeline.

Sleep Number, which operates 572 stores and is known for its customizable beds, will continue operations while seeking a quicker-than-usual court-supervised sale process, according to the filing.

The company, whose shares have plunged more than 95% the past four months, has been hurt by declining store traffic amid broader industry pressures.

In response to mounting financial woes, O’Keefe said Sleep Number restructured its real estate portfolio and launched a number of cost-cutting initiatives in recent years. The firm had reported its operating costs fell by $136 million last year, but its net loss still widened as net sales dropped 16%.

Sleep Number said in a statement that will continue to review its footprint with the aim of retaining as many retail locations as possible. It added that as much of $65 million of new borrowing has been arranged to pay for the restructuring process. Sleep Number would also refinance $195 million of older debt should the loan package be approved by the judge overseeing the bankruptcy case.

The company listed assets of between $500 million and $1 billion and liabilities of between $1 billion and $10 billion, with lenders owned about $672.5 million.