Sleep Number Corporation filed for Chapter 11 bankruptcy on Thursday and agreed to sell substantially all of its assets to Sleep Country Canada Inc. for $415 million in cash, plus the assumption of certain liabilities.
The Minneapolis-based smart-bed maker filed for bankruptcy in the Southern District of New York with about $672.5 million in debt. Tariffs and inflation were key reasons for its financial troubles. Court filings cited by Reuters say that President Donald Trump's tariff policies disrupted the company's international supply chain, increased costs, and hurt profits.
In the first quarter of 2026, the company reported net sales of $319 million and a net loss of $50 million, according to a May SEC filing. Before filing for bankruptcy, the company tried to improve its finances by refinancing debt, closing stores, and reducing its product lineup, CNBC reported.
Under the agreement, Sleep Country Canada's wholly-owned subsidiary SNBR, Inc. will serve as the "stalking horse" bidder in a court-supervised sale process under Section 363 of the Bankruptcy Code. The deal remains open to higher bids, with an auction scheduled for July 13 if a competing offer emerges. The company has set a July 15 deadline for court approval of the sale and hopes to close the transaction by July 31.
The Chapter 11 process is being funded by a debtor-in-possession financing package of up to $260 million from the company's current lenders. This includes $65 million in new funds, according to the company.
Sleep Number President and CEO Linda Findley said in a statement that while the company had made progress on its turnaround, "our capital structure remains unsustainable." Sleep Country Canada President and CEO Stewart Schaefer said the deal would expand Sleep Number's products into Canada and other markets.
With 572 U.S. retail locations and roughly 2,920 employees, Sleep Number would join forces with Sleep Country Canada, which operates a network of more than 300 stores throughout Canada. Together, the two companies said they would form a major North American player in the mattress and bedding industry.
Throughout the court-supervised restructuring, Sleep Number said customers can continue shopping, receiving deliveries, and using their warranties and smart-bed services without interruption. Sleep Number has also filed a motion to reject leases on 44 already-closed locations.
The company warned that its common shares are "significantly out of the money" based on the sale price and are unlikely to recover. Sleep Number expects its shares to be delisted from the Nasdaq $NDAQ.