Sleep Number Corporation shares crashed after multiple outlets, including The Wall Street Journal and Bloomberg, reported that the mattress and bedding retailer is preparing to file for Chapter 11 bankruptcy.

WSJ said that Sleep Number is "expected to use the Chapter 11 process to restructure its balance sheet while continuing operations. The reorganization could also include a potential sale of the business."

As of late 2024, Sleep Number had 640 retail stores across the US, with a footprint actively shrinking in recent years.

The company has been hit hard by a confluence of factors - think higher interest rates have reduced demand for big-ticket items, like a $5,000 bed, industry pressure, and tariffs. Plus, let's not forget that all the demand was pulled forward during the easy-money bubble of the Covid era.

Revenue fell 16% in 2025 to $1.4 billion ...

... while the stock has plunged about 97% over the past four months to roughly 32 cents.

WSJ noted that Sleep Number recently hired Guggenheim Securities to evaluate opportunities to strengthen its balance sheet and improve liquidity. The struggling retailer has secured $55 million in additional liquidity through a new $25 million term loan and $30 million in added flexibility from existing lenders.

Our read-through: another consumer discretionary story has collapsed, with demand for big-ticket home goods continuing to sink under elevated interest rates and a tapped-out consumer nearing the end of the tax-refund sugar high.