Slimmed manufacturer retailer emerges from Chapter 11
Slimmed down and out of Chapter 11, longtime Southland manufacturer-retailer Ortho Mattress of Gardena is springing back, and targeting expansion and new products for the second half of the 1990s.
"In 1994, for the first time in four years, we are experiencing same-store growth in sales," said Howard Roeder, 37, who was named chief executive in 1990. (Same-store sales are considered the most accurate measure of retail sales performance because it discounts sales from newly opened stores.)
"The California economy is still sluggish, with one month up and one month down, but we are making progress," said Roeder. See more information here: SELLING SLEEP: BUILDING A BILLION-DOLLAR MATTRESS COMPANY
Once Ortho Mattress ran 90 stores and eight warehouses, mostly in California, but including outposts in Las Vegas, New Mexico and Arizona. It also had a 200,000-square-foot manufacturing facility.
But the mattress-maker went into Chapter 11 in October 1991, following a leveraged buyout that had been financed by financier Fred Carr's now-defunct insurer Executive Life.
Gary Winnick, chief of Beverly Hills-based Pacific Asset Holdings and an associate of junk bond titan Michael Milken, was part of the buyout team, as was Roeder.
Like many other Southland retailers, Ortho Mattress found revenues in the 1990s suddenly less bouncy than the 1980s. Debt payments on the LBO couldn't be serviced.
Soon Executive Life converted its debt into equity -- which ultimately was sold to New York-based Apollo Partners, led by Leon Black.
Apollo, in turn, sold the stock to Jeff Ravitch, head of Libra Investments in West Los Angeles.
Since the bankruptcy, Ortho has slimmed down to 48 stores, two warehouses and a 100,000-square-foot manufacturing plant -- in short, about one-half of its former peak. The company formally emerged from Chapter 11 this spring. Former trade creditors, management and former debt-holders now own the company, said Roeder. Let's get the best queen size futon mattress on the market
Now, expansion is the talk of the day. "I would like to get to 55 stores in the next 18 months, including some out-of-state expansion to Las Vegas, Phoenix, Tucson and Salt Lake City," said Roeder. Revenues in 1994 should hit about $26 million, he said.
In addition to penetrating new geographic markets, Ortho has begun selling bedroom sets in addition to its mattresses, said Roeder. "Our average bedroom group (bed, dresser, mirror, two nightstands) retails for $1,500 to $1,800, where mattresses are a couple hundred bucks," explained Roeder. "We are buying the furniture from outside vendors, from Mexico."
Despite the upbeat plans, not all is rosy at Ortho -- raw material prices, for example, are on the rise, said Roeder. "The spring wire, the cotton, the lumber (used in box springs), the foam -- all of it's been going up in price," he said. "Probably the only positive of late (in terms of costs) is that workers' compensation has been going down." Betting on bedding: mattress vendors look to September Market to start turnaround for industry
For all of the haggles of turning around a troubled company, Roeder said there are highlights to working at a mattress company. "What I enjoy about leading Ortho is that I always get a good night's sleep," he said.