Q4 2024 Earnings Summary
- Despite the loss of a significant customer in specialty foam, Leggett & Platt is successfully diversifying its customer base and increasing sales of specialty foam components and specialty chemicals, helping to offset the loss.
- The company's restructuring efforts have been executed flawlessly, leading to increased expectations for EBIT benefit. There is potential upside as more volume is funneled through now more efficient assets.
- Despite anticipated volume declines, the company expects margins to improve in the Bedding Products segment by about 150 basis points in 2025, indicating operational efficiency improvements.
- Leggett & Platt expects continued demand challenges in 2025, including volume declines across all segments, due to poor consumer health, declining consumer confidence, and affordability issues, which could get worse. The company notes that "our asset base is so volume sensitive... we need volume... most of them are very much deferrable", and that consumer confidence has dropped as interest rates have flattened and inflation has reignited.
- The company is projecting declines in volumes in its key Bedding Products segment, expecting volumes to be down mid-single digits, negatively impacted by restructuring-related sales attrition, loss of a specialty foam customer, and lower volume in adjustable beds. Additionally, LEG expects to underperform the bedding industry as a whole, which is expected to be flat.
- Increased import pressure from low-priced imported finished mattresses, both foam and innerspring, is negatively impacting Leggett & Platt's market share in the low-end segment, causing further volume declines in open coil products. The company notes that imported finished mattresses are "priced at the extreme low end of the market, and that's where we think it's having the biggest impact on the open coil products."
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales Guidance | FY 2024 | $4.3 billion to $4.4 billion | no current guidance | no current guidance |
Volume Expectations | FY 2024 | “Down mid‑single digits overall; Bedding down high single digits; Specialized down mid‑single digits (from flat); Furniture/Flooring/Textile down mid‑single digits (from low single digits)” | no current guidance | no current guidance |
Deflation & Currency Impact | FY 2024 | Reduce sales by low single digits | no current guidance | no current guidance |
EPS Guidance | FY 2024 | Full‑year adjusted EPS of $1.00–$1.10, revised from $1.10–$1.25 | no current guidance | no current guidance |
EBIT Margin Guidance | FY 2024 | Adjusted EBIT margin of 6.0%–6.4%, revised from 6.5%–6.9% | no current guidance | no current guidance |
Cash from Operations | FY 2024 | Approximately $300 million | no current guidance | no current guidance |
Debt Reduction | FY 2024 | Repayment of $300 million in notes via commercial paper | no current guidance | no current guidance |
Restructuring Benefits | FY 2024 | Expected EBIT benefit of $10–15 million and total annualized benefit of $50–60 million | no current guidance | no current guidance |
Sales Attrition | FY 2024 | Estimated at $15 million, revised from $25 million | no current guidance | no current guidance |
Real Estate Proceeds | FY 2024 | Expected $20 million in FY 2024 plus additional $40–60 million in 2025 | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales | FY 2024 | $4.3B to $4.4B | $4.38B (sum of Q1: $1,096.9, Q2: $1,128.6, Q3: $1,101.7, Q4: $1,056.4) | Met |
EPS | FY 2024 | $1.00 to $1.10 (adjusted EPS) | GAAP EPS ~ -$3.73 (sum of Q1: $0.23, Q2: -$4.39, Q3: $0.33, Q4: $0.10) | Missed |
EBIT Margin | FY 2024 | 6.0% to 6.4% | -9.8% (Operating Income sum: $63.0- $614.3+ $77.7+ $43.7= -$429.9 on $4.38B revenue) | Missed |
Cash from Ops | FY 2024 | ~$300M | ~$300.7M (derived by summing net income + adjustments for non-cash items + changes in working capital for Q1, Q2, Q3, and Q4) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Volume & Demand in Bedding | Persistent declines each quarter (Q1: -15%, Q2: -13%, Q3: -8%) with weak consumer demand and import pressures. | Down 6% in Q4 year-over-year, driven by restructuring-related attrition and continued low demand. | Continues |
Restructuring & Efficiency | Plans announced in early 2024; consolidations in U.S. Spring, Specialty Foam, and Home Furniture; EBIT benefits of $10–$15 million targeted. | Exceeded targets at $22 million EBIT benefit for 2024; restructuring extends into 2025 with further cost saves. | Accelerating |
Product Mix Shift | Open coil decline and gradual ComfortCore adoption noted in Q1–Q3; specialty foam restructuring continuing. | Open coil impacted by low-end imported mattresses; ComfortCore remains stable or slightly better than market. | Ongoing |
Bedding Margins | Pressured by low volumes and unfavorable mix in Q1–Q3; restructuring expected to help offset near-term headwinds. | Anticipated 150 bps improvement in 2025, with upside possible if volumes rebound through optimized assets. | Improving |
Import Pressure | Low-priced imports grabbing share, pressuring domestic producers, particularly in lower-priced bedding segments. | Imported finished mattresses now up to 50% of U.S. units, significantly impacting open coil demand. | Sustained |
Loss of Specialty Foam Customer | Mentioned in Q2 as an earlier-than-expected customer exit; partially offset by diversification into new products and private labels. | Impact quantified at $15 million in sales attrition for 2024, partly offset by other foam components. | Managed |
Debt Reduction & Allocation | Focus on deleveraging; dividend reduction frees cash; real estate sales used to pay down debt; net debt/EBITDA targeted at 2x. | Reduced debt by $126 million in 2024; continuing push toward long-term leverage goal of 2x. | Progressing |
Steel Mill & Diversification | Must run rod mill at full capacity to manage fixed costs; selling trade rod for other industrial uses. | Maintaining capacity utilization through disciplined trade rod sales; exploring diversified markets. | Steady |
Consumer & Macro Factors | Weak consumer confidence, high rates, and affordability issues dampened discretionary spending across Q1–Q3. | Poor consumer health persists; inflation reigniting and low home turnover suggest caution for 2025 outlook. | Uncertain |
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Bedding Market Dynamics and Imports
Q: How are imports impacting the bedding market, and what does it mean for LEG?
A: Imported innerspring mattresses sold on marketplaces like Amazon and Wayfair reached nearly 50% of units by year's end. This surge in low-end, "throwaway" mattresses priced up to $250 at Queen has created a market gap before mid-price points starting around $495 at Queen. LEG anticipates that as demand recovers, consumers will return to higher-quality products, benefiting mid and higher price points. -
Margin Expectations for 2025
Q: What are the margin expectations for each segment in 2025?
A: Despite expected volume declines, LEG anticipates margin improvements. In Bedding, volumes may decline mid-single digits, but margins are expected to increase by about 150 basis points. Specialized Products volumes might decrease mid-single digits, with margins remaining flat. Furniture, Flooring & Textile volumes could drop low single digits, with margins decreasing by about 50 basis points. Seasonal factors and higher Q1 expenses will impact earnings and cash flow. -
Impact of Tariffs on Steel and Downstream Products
Q: How will potential steel tariffs affect LEG's business?
A: Tariffs could raise U.S. steel prices, positively impacting LEG's Sterling steel mill. However, without tariffs on downstream products, the price gap between U.S. and foreign steel may widen, increasing pressure on global pricing for products like innersprings. This could offset benefits from higher steel prices at the mill. -
Restructuring and Margin Upside
Q: Is there potential for further upside from restructuring efforts?
A: LEG's restructuring has reduced its manufacturing footprint, enhancing efficiency. Historically, contribution margins range from 25% to 35%. With increased volume through efficient assets, margins could reach the higher end of this range. Optimism remains, but realizing this potential hinges on boosting volume. -
Specialized Products Segment Challenges
Q: What trends are affecting the Specialized Products segment?
A: In Aerospace, volumes increased in '24 and are expected to continue growing. Hydraulics faced a demand drop after a peak in '23 due to reduced OEM orders but has now stabilized. In Automotive, global production declined, with non-Chinese markets down about 4 million units or 7%. The rise of Chinese EV manufacturers shifted market share, affecting LEG due to lower content with Chinese OEMs compared to multinationals. -
Macroeconomic Concerns and Consumer Health
Q: How are macro trends affecting LEG's outlook?
A: LEG is concerned about the poor health of the consumer, noting weakening consumer confidence, rekindled inflation, and low housing turnover. These factors create demand uncertainty for LEG's largely deferrable products, many of which are sensitive to housing demand. The company anticipates 2025 to resemble 2024 from a macroeconomic standpoint. -
Adjustable Beds Mix Impact
Q: What is impacting the Adjustable Beds segment?
A: A shift toward lower-priced, promotional adjustable beds is outpacing sales of higher-end models. In 2024, units sold increased, but revenue declined due to this unfavorable mix. This trend is expected to continue, affecting revenues despite stable unit sales. -
Underperformance in Bedding Segment
Q: Why is LEG guiding to underperform the bedding industry?
A: Factors include sales attrition from restructuring, the loss of a specialty foam customer, and headwinds in open coil and grid products due to low-end imported mattresses. While LEG doesn't believe it's underperforming in U.S. springs, these issues impact overall bedding segment performance. -
Effect of Imports on Open Coil Products
Q: How are imports affecting open coil products?
A: Low-end imported mattresses, both foam and innerspring, priced at the market's lowest end, significantly impact open coil products. This competition leads to declines in LEG's open coil volumes as consumers opt for cheaper imports. -
Seasonality and Cash Flow Impacts
Q: What seasonal factors are affecting earnings and cash flow?
A: LEG expects typical seasonality with lower sales and earnings in Q1 and Q4. In Q1, higher stock compensation expenses due to incentive plans and increased inventory investment for anticipated Q2 and Q3 sales will impact cash flow. Additionally, potential bad weather and tariff-related demand shifts may affect results.
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