Markus Jooste, CEO for Steinhoff and Ben la Grange acting CFO, both step down under growing concerns about accounting irregularities. Markus led Steinhoff on a great run acquiring companies and growing Steinhoff into the second largest retailer in all of Europe finishing right behind IKEA. Their stock took a 60% dive yesterday wiping out over $8 billion in shareholder value. According to Reuters, “Steinhoff did not tell investors about almost $1 billion in transactions with a related company despite laws that some experts believe require it to do so.”
Markus admits he made some big mistakes. “Now I have caused the company further damage by not being able to finalize the year-end audited numbers and I made some big mistakes and have now caused financial loss to many innocent people… It is time for me to move on and take the consequences of my behavior like a man. Sorry that I have disappointed all of you and I never meant to cause any of you any harm.”
The question for us here in the United States is what impact will this have on Mattress Firm and Sherwood? Does the loss of value in Steinhoff negatively impact the loan covenants in a material way? What position will the new CEO at Steinhoff take when it comes to the foreign investments Markus has made in the U.S.? There will surely be a bounce back on the stock, the question is how much and how soon? I guess we will know more when the details surface on what actually happened.
I have not talked to anyone at Mattress Firm about this but I did have a conversation with Sherwood and the feeling there is that nothing will change for them. They will continue to build high-quality bedding products and serve them up to their retail base.
Mattress Firm is a large company with the ability to drive the market if they figure out the correct approach. This year they have been struggling with the loss of Tempur-Pedic, many changes to their management team, a massive shift to de-centralization, and now will need to deal with this news. So can they get through it? With the right leadership team and favorable business conditions, you can do just about anything.
Steinhoff started us out this year with some pretty big disruption with their acquisition of Mattress Firm and it looks like they will disrupt the industry again as we finish up 2017. For now, we should just wait and see what happens and hope the best for the people in the Steinhoff companies. As I have said in the past, put your seatbelts on, this ride isn’t over.