Leggett & Platt's Profit Rebounds as Sales Decline Narrows
Leggett & Platt posted adjusted earnings of $.39 a share, more than double the prior quarter, even as trade sales fell 6% to $999.7 million.
Leggett & Platt (LEG) reported a second-quarter profit rebound alongside a narrowing sales decline, as the furniture and bedding-components maker showed signs of stabilizing demand while it worked through a pending merger with mattress maker Somnigroup. Trade sales fell 6% to $999.7 million from $1,058.0 million a year earlier, but organic sales dropped just 1%, an improvement from the 5% organic decline in the first quarter. Volume fell 4% year over year, a marked slowdown from declines of 9% in the first quarter, 9% in the fourth quarter of 2024 and 7% in each of the two quarters before that.
Adjusted earnings before interest and taxes rose 18% to $89.0 million from $75.6 million a year earlier, and jumped from $43.4 million in the first quarter, pushing adjusted EBIT margin to 8.9% from 4.7% in the prior quarter. GAAP EBIT margin moved the opposite direction, slipping to 8.0% from 8.5% a year earlier, a divergence the company attributed to one-time items separating reported results from the adjusted figures. Adjusted earnings per share came in at $0.39, up $0.09 from $0.30 in the second quarter of 2024 and more than double the $0.15 posted in the first quarter.
The earnings gain was driven by metal margin expansion, a restructuring benefit and other favorable items that management said are "not expected to repeat in future quarters," a caution flag absent from prior releases. The company also disclosed $10 million in Somnigroup merger costs for the quarter, up from $3.5 million in the first quarter and $3.4 million in the fourth quarter of 2024, which reduced earnings per share by $0.07 and marked the third consecutive quarter of escalating deal-related costs.
Segment results showed uneven progress. Bedding Products organic sales improved to -1% from -6% in the first quarter and -9% in the fourth quarter of 2024, aided by strong trade rod and wire performance that offset continued mattress demand weakness. Furniture, Flooring & Textile Products organic sales turned positive at 1%, reversing from -6% in the first quarter, with segment EBIT up $5 million on IEEPA tariff refunds the company disclosed for the first time this quarter. Specialized Products moved the other direction, with trade sales down 19%, 16 points of which reflected the 2024 Aerospace divestiture, and adjusted EBIT down $15 million on lost Aerospace earnings, currency and lower volume.
Cash generation lagged the earnings recovery. Operating cash flow was $46 million, down $38 million from $84 million a year earlier, and only partially recovered from a negative $56.1 million in the first quarter. Net debt to adjusted EBITDA improved to 2.57x from 3.51x a year earlier but ticked up from 2.36x at the end of 2024 and 2.75x in the first quarter, and total debt has held near $1.50 billion since the third quarter of 2024 after falling from $1,936.4 million in the first quarter of that year, indicating the deleveraging that followed 2024 restructuring has plateaued.
Leggett & Platt withdrew its full-year 2025 guidance of $3.8 billion to $4.0 billion in sales and $1.00 to $1.20 in adjusted earnings per share in the first-quarter release because of the pending Somnigroup acquisition, and did not reinstate it in the second-quarter results, marking two straight quarters without a forecast. The company also said it will not hold a conference call to discuss the results, a change tied to the merger process that was not flagged in either of the two preceding quarters.
The U.S. mattress market's unit decline held at "low double digits" in the second quarter, matching the "high single to low double digits" characterization from the first quarter, suggesting the underlying demand backdrop has stopped worsening without yet showing a clear recovery.