Sleep Number has warned that ongoing debt and liquidity challenges have created “substantial doubt” about the company’s ability to continue operating as a going concern.
In financial filings released Thursday, the mattress manufacturer said it may need to pursue restructuring measures — potentially including bankruptcy — if it cannot secure sufficient capital to fund operations and meet its debt obligations.
The company’s financial performance deteriorated significantly last year. Net sales declined 16% year over year to $1.4 billion, while gross margin slipped by 60 basis points to 59%. Net losses widened sharply, increasing more than sixfold to $132 million.
As part of a broader turnaround effort, Sleep Number reshaped its leadership team in 2025. The company brought in a new CEO, independent board member and chief financial officer while working to restructure the business.
CEO Linda Findley, who joined the company in April after leadership roles at Blue Apron and Etsy, said the company has made significant structural changes to reduce costs and streamline operations.
“We are still in full turnaround mode, and our progress in 2025 doesn’t change the fact that we still have hurdles to clear in 2026,” Findley told analysts.
According to the company, Sleep Number has already cut more than $185 million in annualized expenses and identified an additional $50 million in potential cost reductions. The company has also begun reviewing its capital structure as part of its effort to stabilize finances.
Sleep Number’s turnaround comes amid a difficult backdrop for the home furnishings industry. After strong demand during the pandemic, home-related retail spending in the U.S. has weakened.
The mattress sector has also faced intensifying competition from direct-to-consumer brands and consolidation among major players. In 2025, U.S. retailer Mattress Firm merged with global manufacturer Tempur Sealy to form a larger combined entity known as Somnigroup.
Analysts say Sleep Number still faces significant financial pressure. Researchers at UBS, led by analyst Dan Silverstein, said in a research note that the company may need to close additional stores as part of its turnaround.
“Our math suggests there’s not a lot of room for cushion, especially looking ahead to 3Q, as the Y/Y benefit of cost-outs will be tougher to come by in the second half of the year,” Silverstein said.
The company also faces a high risk of default in the near term, according to financial analytics firm RapidRatings.
Despite the financial pressure, Sleep Number is attempting to accelerate its turnaround through product innovation. The company recently introduced five new mattresses, describing the launch as its largest product refresh in nearly a decade.
The new beds are scheduled to go on sale March 23 through both the company’s website and retail stores.
Analysts say the strategic review process announced by the company could provide additional options to improve liquidity and extend the company’s operational runway as it works through the turnaround.
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