Sleepmaster collapses

One of Australia’s leading bedroom product companies, Sleepmaster, has gone into receivership as the tough retail sector claims another victim.

Sleepmaster is the owner of iconic brands including Jason, a pillow and quilt brand, blanket brand Onkaparinga and Trailmaster camping equipment. It describes itself as Australia and Asia’s leading manufacturer of bedroom product including quilts, pillows, mattress protectors, underblankets and underquilts.

The company has been operating in Victoria since 1938, and has manufacturing, warehousing and logistics facilities in China. Around 500 employees could lose their jobs, both in China and Australia, should the company be wound up.

Sleepmaster sells many of its products through major chain retailers such as David Jones Limited (ASX:DJS), Myer Holdings (ASX:MYR) as well as discount retailers such as Wesfarmers (ASX:WES) owned Kmart and Target, and Woolworths’ (ASX:WOW) Big-W stores.

According to BRW, Sleepmaster was placed into receivership on August 8 by secured creditor Bibby Financial. Bibby is one of Australia’s largest cash flow lenders, and operates in 15 different countries.

Australia’s tough retail sector is proving difficult for many companies to survive. Weak consumer confidence has seen many of our leading retailers suffer falling revenues since the global financial crisis. Add in online shopping and the rise of online retailers, along with stores trading on sites such as Ebay, and consumers have been choosing to go for products with the lowest prices, pushing traditional retailers and producers to the wall. Fashion brand Lisa Ho recently collapsed, while food manufacturer Spring Gully went into administration in April this year.

We also saw the demise of Darrell Lea, the chocolate manufacturer in September 2012 while iconic tomato sauce maker Rosella closed in March.

Foolish takeaway

Price deflation, the high Australian dollar, intense competition in the retail sector, cheap imports and online competition could all be blamed for the demise of Sleepmaster. It just goes to show what the retail sector has been forced to cope with over the past few years.  While it’s a sad moment, it’s no real surprise that some companies haven’t made it through the rough patch, given the conditions.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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