Alessandra Jimenez

Alessandra Jimenez followed up on capital allocation, asking about Leggett & Platt's long-term leverage targets, further details on capital allocation priorities, and specific areas for potential bolt-on acquisitions, given that long-term debt is well-termed out.

Answer

Ben Burns, EVP and CFO, stated the long-term net debt leverage target is two times. He reiterated that capital allocation will prioritize debt reduction, while also considering small strategic acquisitions, most likely in the textiles business, where they have a successful track record of driving immediate synergies. Share repurchases are also on their mind, though with no specific timetable.

Alessandra Jimenez asked about Leggett & Platt's primary opportunities for organic growth now that the majority of restructuring is nearing completion, assuming a supportive macro environment. She also followed up on capital allocation, seeking clarification on long-term leverage targets, further details on capital allocation priorities, and potential areas for bolt-on acquisitions.

Answer

President and CEO Karl Glassman identified finished bedding, particularly private label work, as the largest long-term growth opportunity. EVP and President of Bedding Products Tyson Hagale noted increased innovation and customer engagement in new product development. EVP, President of Specialized Products and Furniture, Flooring and Textile Products Sam Smith highlighted new products in home furniture and nearshoring opportunities in work furniture. EVP and CFO Ben Burns reiterated the long-term net debt leverage target of 2x, with continued prioritization of debt reduction, and mentioned considering small strategic acquisitions, most likely in the textiles business, and share repurchases.

Alessandra Jimenez of Raymond James & Associates, Inc. asked about the portion of cost of goods sold subject to new tariffs, any planned pricing actions, and the top-line impact from store count rationalization in 2025.

Answer

CFO Francis Lee explained that the largest tariff exposure is from Mexico, which supplies about one-third of materials, and that mitigation plans are in place. CEO Shelly Ibach noted the company will be decisive with pricing but is mindful of the already pressured consumer. Francis Lee added that store closures created a couple of points of top-line pressure in 2024 and the company was pleased with the associated sales transfer rates.

Alessandra Jimenez, on for Bobby Griffin, asked for more detail on the 2025 revenue guidance, specifically the expected full-year GMV drag from the Big Lots bankruptcy. She also inquired about current customer behavior, asking if performance changes were broad-based or concentrated among new, lower-funnel customers.

Answer

CEO Steven Michaels clarified that while the company doesn't guide to full-year GMV, the Q1 impact from Big Lots is estimated to be in the $135 million to $150 million range on an annualized basis. He noted this was a significant change from expectations prior to the liquidation announcement. Michaels also confirmed that performance stress is concentrated at the lower end of the portfolio and within the new customer cohort, which is harder to underwrite than repeat customers, leading to slightly higher delinquencies.