Sleep Number Files for Bankruptcy, Agrees to $415 Million Sale to Canadian Retailer

MINNEAPOLIS — Sleep Number Corporation, the well-known adjustable mattress retailer, filed for Chapter 11 bankruptcy protection on Friday, June 12, 2026, after struggling with mounting debt and declining sales. The Minneapolis-based company simultaneously announced it has entered into a merger agreement with Sleep Country Canada Inc., which has made a stalking horse bid of at least $415 million to acquire its assets.

The filing was made in the U.S. Bankruptcy Court for the Southern District of New York. According to court documents, Sleep Number entered bankruptcy with approximately $672 million in debt. The proposed sale to Sleep Country Canada is structured under Section 363 of the U.S. Bankruptcy Code, which allows for the sale of assets free and clear of liens and interests. The deal consists of $415 million in cash and the assumption of certain company liabilities.

As a stalking horse bidder, Sleep Country Canada’s offer sets the minimum price for an auction. The agreement is subject to higher and better offers from other potential buyers, as well as final approval from the bankruptcy court. To facilitate the purchase, Sleep Country has created a U.S. subsidiary named SNBR, which matches Sleep Number’s stock ticker symbol.

The bankruptcy marks a dramatic downturn for the 40-year-old retailer, which has 572 stores across the United States. The company cited a combination of factors for its financial distress, including persistent inflation, tariffs, and what one report called a “disastrous post-pandemic decision to stick with the high-end mattress market” as consumer spending habits shifted. The company reported a net loss of $50 million in the first quarter of the year, driven by a significant decrease in sales.

Prior to the Chapter 11 filing, Sleep Number had undertaken several initiatives in an attempt to stabilize its finances. According to company statements and court filings, these efforts included refinancing some of its debt, closing underperforming stores, and streamlining its product lines. The company also recently completed the largest product redesign in nearly a decade and launched a major integrated marketing campaign. As part of its marketing push, Sleep Number had entered into a sponsorship agreement with National Football League star Travis Kelce, though the status of that agreement and any equity he may have acquired is now uncertain under the bankruptcy proceedings.

Despite these turnaround efforts, the company said it was unable to overcome its financial challenges. The bankruptcy filing will be funded by $65 million in new financing from Sleep Number’s existing lenders, which will allow the company to continue operations during the court-supervised process.

For customers, Sleep Number stated that its stores and website will remain open for business. The company also said it intends to honor customer warranties and gift cards throughout the bankruptcy and merger process, which it expects to continue without interruption.

For Sleep Country Canada, the acquisition represents a significant strategic move to enter the U.S. market and expand its product portfolio. As Canada’s largest mattress retailer, the company operates over 300 stores under various banners, including Sleep Country Canada, Dormez-vous, Endy, and Casper Canada. The combination with Sleep Number, if approved, would create what the companies described as a “leading North American mattress and bedding company.”

The collapse of a household name like Sleep Number is a cautionary tale that extends far beyond large corporations. In our experience, the critical errors that lead to bankruptcy often occur long before the filing date, rooted in strategic decisions made during periods of market uncertainty. Sticking to a high-end strategy as consumer spending tightened post-pandemic proved to be a fatal miscalculation. This is precisely why objective, external guidance is invaluable. For small and mid-sized businesses, having an advisor who can challenge assumptions and model financial outcomes is not a luxury, but a necessity for survival. Navigating distress, whether through restructuring or a sale, requires a specialized skill set. Our firm's work in mergers and acquisitions focuses on helping business owners find the best possible path forward, even in the most challenging circumstances. For a confidential consultation on your company's strategic options, business owners facing similar crossroads should contact C&S Finance Group LLC at csfinancegroup.com.

Moving forward, the bankruptcy court will oversee the sale process. The next key steps involve the court’s approval of the stalking horse bid and its associated protections for Sleep Country Canada. Following that, an auction will be scheduled to allow other interested parties to submit competing bids, with the goal of maximizing the value of the company’s assets for its creditors.