Leggett & Platt Q2 2025 Earnings Report

Leggett & Platt EPS Results

• Actual EPS: $0.30
• Consensus EPS: $0.29
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.29

Leggett & Platt Revenue Results

• Actual Revenue: $1.06 billion
• Expected Revenue: $1.06 billion
• Beat/Miss: Beat by +$257.00 thousand
• YoY Revenue Growth: -6.30%

Leggett & Platt Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 8:30AM ET

Leggett & Platt (NYSE:LEG), Inc. engages in the manufacture and distribution of furniture and engineered components and products among homes, offices, automobiles, and commercial aircraft. It operates through the following segments: Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products. The Bedding Products segment supplies products and components for the home, including mattress springs and specialty foam, as well as adjustable beds, bedding machinery, steel rod, and drawn wire. The Specialized Products segment supplies titanium, nickel, and stainless-steel tubing for the aerospace industry, and serves the construction market with its hydraulic cylinders group. The Flooring, Furniture & Textile Products segment produces an extensive line of components and engineered systems for office, residential, and contract furniture manufacturers. The company was founded by J. P. Products and C. B. Platt in 1883 and is headquartered in Carthage, MO.

Leggett & Platt Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Leggett and Platt delivered Q2 adjusted EPS of $0.30, up 3% year-over-year, expanded adjusted EBIT by $4 million, reduced total debt by $143 million, and strengthened operating cash flow and working capital metrics.
• Positive Sentiment: The company expects to complete its restructuring plan by year-end 2025, lowering total costs to $65 – 75 million and targeting annualized EBIT benefits of $60 – 70 million with reduced sales attrition and increased real estate proceeds.
• Neutral Sentiment: Management maintained full-year 2025 guidance for sales of $4.0 – 4.3 billion (down 2 – 9%) and adjusted EPS of $1.00 – 1.20, reflecting metal margin expansion and restructuring benefits offset by softer volumes.
• Neutral Sentiment: Leggett views recent steel tariffs as a net positive for metal margin expansion, while cautioning that broader tariff actions could drive inflation, weaken consumer confidence, and pressure demand.
• Negative Sentiment: Bedding segment volumes improved sequentially in Q2 but remain down mid-single digits year-over-year, with merchandising changes and a major customer’s sales challenges expected to persist as headwinds.

Presentation

[Operator]

Greetings, and welcome to the Leggett and Platt Second Quarter twenty twenty five Webcast and Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve West, Vice President of Investor Relations. Thank you. You may begin.

[Steve West, VP - IR at Marimed]

Good morning, everyone, and welcome to Leggett and Platt's Second Quarter twenty twenty five Earnings Call. With me today are Karl Glassman, CEO Ben Burns, CFO Tyson Hagel, President of the Bedding Products segment Sam Smith, President of the Specialized Products and Furniture, Flooring and Textile Products segments and Cassie Branscombe, Vice President of Financial Planning and Analysis. This conference call is being recorded for Leggett and Platt and is copyrighted material. This call may not be transcribed, recorded or broadcast without our express permission. A replay will be available on the Investor Relations section of our website.

[Steve West, VP - IR at Marimed]

Yesterday, we posted our press release and a set of slides that contain a summary financial information along with segment details, a tariff overview and a restructuring update. Those documents supplement the information we will discuss this morning, including non GAAP reconciliations. Remarks concerning future expectations, events, objectives, strategies, trends or results constitute forward looking statements. Actual results or events may differ materially due to a number of risks and uncertainties, and the company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our most recent 10 ks and subsequent 10 Q entitled Risk Factors and Forward Looking Statements. I will now turn the call over to Carl.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Thank you, Steve, and good morning, everyone. I would like to start by introducing Steve West, who recently joined us as our new Vice President of Investor Relations. Steve brings more than twenty years of experience as both a sell side equity analyst and a corporate IR leader at multiple companies in the consumer discretionary sector, including Panera Bread Company and Dick's Sporting Goods. We're excited to have him on board and I know he is looking forward to engaging with all of you. I would also like to announce that Cassie Branscombe was promoted to a new senior leadership role as Vice President of our Financial Planning and Analysis Group.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

With this new focus, Cassie will continue to collaborate closely with Investor Relations while also playing a critical role in the formation and execution of our financial strategy. This appointment reflects her strong cross functional expertise, strategic insight and continued dedication to advancing our financial goals. Turning to our second quarter results, I am pleased we grew our earnings versus last year and continue to strengthen our balance sheet and cash flow generation. Our team has done a terrific job driving these results through the execution of our restructuring plan and disciplined cost management as well as making progress on our priorities of improving operational execution and paying down debt. In bedding, activities related to our announced restructuring plan are now largely complete.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

In flooring products, we made steady progress on Phase two of our consolidation efforts. In hydraulic cylinders, we continued implementation of manufacturing efficiency improvements. We expect company wide restructuring activity to be substantially complete by year end. We are also continuing to make progress on our strategic business review and optimization efforts. At the May, we sold a small operation in Work Furniture in Mexico, which enables the team to focus on larger core operations.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

We also remain on track to close the aerospace transaction this year after this As we execute our strategic priorities, we continue to navigate a very dynamic tariff landscape with discipline and agility across our businesses. Given the prominence of tariffs in the market today, let me provide an overview of how they are affecting our businesses. As a reminder, prior to the recently implemented tariffs, our U. S. Businesses sourced approximately $400,000,000 annually from trade and intercompany suppliers located in foreign countries, including approximately $100,000,000 from China.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

While tariff impacts vary across our businesses in aggregate, given what we know today, the recent tariff changes are a net positive for us. However, we remain concerned that wide ranging tariffs will drive inflation, hurt consumer confidence and pressure consumer demand. We continue to be actively engaged with customers and suppliers taking steps to mitigate tariff impacts whether by leveraging our global footprint to shift production and sourcing to less impacted regions or implementing pricing actions where appropriate. We're also pursuing increased demand opportunities domestically as a result of increased tariffs. Although reciprocal tariffs have the potential to support U.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

S. Mattress demand by creating a more level playing field between domestic and foreign producers, enforcement remains a key unknown. Historically, duties led to transshipment of mattresses to avoid higher rates, but recent comments by the administration appear to contemplate duties for those activities. This will be an important consideration for actual impact of reciprocal tariffs. Within our bedding segment, two thirty two steel tariffs have led to expanded metal margins and increased demand for our steel rod and rod wire operations.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

But we have not yet seen a noticeable improvement in our innerspring demand. In contrast, our domestic adjustable bed business continues to face significant tariff exposure. However, our Mexican adjustable bed operation is a strategic asset that should continue to be cost competitive assuming the reciprocal tariff exemption of USMCA compliant products remains in place. Within specialized products, our automotive business continues to have the largest potential indirect tariff exposure. The implementation of the auto parts tariffs has not directly impacted us, but could cause lower demand with our Tier one and OEM customers if consumer affordability becomes an issue.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

They will need to reduce production. Additionally, there is emerging disruption risk of the critical rare earth mineral supply chain, which feeds into Chinese source magnets used in semiconductors and electronics in vehicles. While this has impacted some of our customers, it has had minimal impact on us to date. In furniture, flooring and textiles products, tariffs impact our businesses to varying degrees. In home furniture, we experienced meaningful disruptions early in the second quarter.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Our Chinese operations faced shipment delays, order cancellations and customer shutdowns, which began to normalize later in the quarter with the postponement of the tariffs. We are making progress on setting up production within another low cost country that will help mitigate our tariff exposure and anticipate beginning production later this year. Within our Work Furniture business, our teams are pursuing new opportunities with customers who are looking for regionally supplied finished furniture and components. Finally, our textiles business continues to mitigate most tariff exposure by shifting to alternative sources in countries with lower tariffs. Our other businesses including aerospace have minimal impact from various tariffs in effect today.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

We're consistently executing against our priorities of strengthening the balance sheet, enhancing profitability and driving operational efficiency, while positioning the company for long term growth. This focus has enabled us to deliver improved margins and reduce our debt despite softness in many of our end markets and reinforces our confidence in navigating ongoing macroeconomic and trade related uncertainties. I'll now turn the call over to Ben.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Thank you, Carl, good morning, everyone. Second quarter sales were $1,100,000,000 down six percent versus 2024, resulting from continued soft demand in residential end markets, automotive and hydraulic cylinders, as well as restructuring related sales attrition. These declines were partially offset by strength in trade wire and rod sales, textiles, work furniture and aerospace. Looking at sales by segment, bedding product sales decreased 11% compared to the second quarter of last year. Additionally, specialized products declined 5% and furniture flooring and textile product sales were down 2%.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Digging deeper into bedding products, strong trade rod and wire sales were offset by weakness in mattresses and adjustable bases. Innerspring volume was in line with domestic mattress production, which we believe was down mid to high single digit, but sales weakness at a certain customer and retailer merchandising changes contributed to year over year volume declines in specialty foam and adjustable bed. We expect these merchandising changes will remain as headwinds through the remainder of the year. S. Mattress industry production improved sequentially versus the first quarter.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

While we are encouraged to see the sequential improvement as the industry continues to look for a positive inflection to the multi year downturn, second quarter volume remains soft outside of key promotional periods. We estimate total mattress consumption was down low single digits year over year. Mattress market volume is still expected to modestly improve on a sequential basis in the second half, resulting in full year volume down mid single digits and domestic production down high single digits. Within our Specialized Products segment, Aerospace growth of 6% year over year was more than offset by sales declines in Automotive and Hydraulic Cylinders. While automotive sales declined year over year, given the challenging industry backdrop compounded by the dynamic tariff environment, we are pleased with our team's efforts to manage our pricing and closely control manufacturing costs.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

And finally, within our Furniture, Flooring and Textile Products segment, Work Furniture and Textile showed positive sales growth versus the second quarter of last year, which was more than offset by year over year declines in Home Furniture and Flooring Products. We expect demand strength in civil construction to continue to support our geo components business as we move through the third quarter on normal positive seasonality. However, aggressive competitive discounting particularly in flooring and textiles has led to pricing adjustments which began late last year and we expect to continue through the rest of the year. Second quarter EBIT was $90,000,000 and adjusted EBIT was $76,000,000 up $4,000,000 versus second quarter twenty twenty four adjusted EBIT, primarily due to metal margin expansion, restructuring benefit and disciplined cost management, partially offset by lower volume. Second quarter earnings per share were $0.38 On an adjusted basis, second quarter EPS was $0.30 a 3% increase from second quarter twenty twenty four adjusted EPS of $0.29 Second quarter operating cash flow was $84,000,000 a decrease of $10,000,000 versus second quarter twenty twenty four.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

This decrease was primarily driven by less benefit from working capital and non cash earnings items. We ended the quarter with adjusted working capital as a percentage of annualized sales of 14.7%, a decrease of 20 basis points versus second quarter twenty twenty four. Moving to the balance sheet. We reduced total debt by $143,000,000 in the second quarter to $1,800,000,000 which includes $297,000,000 of commercial paper outstanding. At June 30, total liquidity was $878,000,000 comprised of $369,000,000 of cash on hand and $5.00 $9,000,000 in capacity remaining under our revolving credit facility.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

This led to a decrease in our net debt to trailing twelve month adjusted EBITDA to 3.5 times. As a reminder, our credit facility covenant calculation is more favorable than our publicly stated leverage ratio. And I'm pleased to say last week with the endorsement of our strong and supportive bank group, we amended our revolving credit facility agreement. The amended agreement provides for borrowing capacity of $1,000,000,000 down from $1,200,000,000 We believe the credit facility is appropriately sized to meet our liquidity needs and allows us to optimize borrowing costs. We will continue to use the facility as a backup to our commercial paper program.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

The financial covenant requires net debt to trailing twelve month adjusted EBITDA to be at or below 3.5 times. The facility now matures in July 2030. We expect to fully repay our commercial paper balance later this year using a combination of after tax proceeds from the aerospace divestiture, which are expected to be approximately $240,000,000 and cash generated by operations. In the near term, we plan to continue to use most of our excess cash flow to reduce net debt, while also considering other uses such as small strategic acquisitions and opportunistic share repurchases. Longer term, our priorities for use of cash remain consistent, investing in organic growth, strategic acquisitions and returning cash to shareholders through dividends and share repurchases.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Moving to our restructuring update. We now expect restructuring costs of 15,000,000 to $25,000,000 in 2025, down from our prior estimate of 30,000,000 to $40,000,000 Total restructuring costs are now projected at $65,000,000 to $75,000,000 also down from our prior estimate of 80,000,000 to $90,000,000 all to be incurred by year end 2025. This reduction is due largely to our decision to retain a small number of facilities that were previously identified for closure. We anticipate 35,000,000 to $40,000,000 in incremental EBIT benefits this year with an additional 5,000,000 to $10,000,000 in 2026 bringing the total annualized benefit to 60,000,000 to $70,000,000 We also expect $45,000,000 in related sales attrition in 2025 and $5,000,000 in 2026 with total attrition now estimated at $65,000,000 versus our prior expectation of $80,000,000 And we now estimate real estate proceeds associated with our restructuring to be 70,000,000 to $80,000,000 versus our prior estimate of 60,000,000 to $80,000,000 Today, we have realized approximately $40,000,000 of proceeds and expect up to $10,000,000 in the second half of twenty twenty five with the remainder in 2026. And finally, as announced yesterday, we maintained our full year 2025 sales and adjusted EPS guidance, including sales in the range of 4,000,000,000 to $4,300,000,000 or down 2% to 9% versus 2024.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Earnings per share is now $0.88 to $1.17 versus $0.85 to $1.26 previously. Our GAAP EPS includes approximately $08 to $0.13 per share of negative impact from restructuring costs, dollars $0.01 1 per share of fourth quarter impact from a non cash settlement charge related to the termination of a pension plan and $0.12 to $06 per share gain from sales of real estate. Adjusted earnings per share is still expected to be $1 to $1.2 The midpoint reflects metal margin expansion and restructuring benefit partially offset by lower volume. Adjusted EBIT margin range is expected to be between 6.56.9% and cash from operations remains at $275,000,000 to $325,000,000 With that, I'll turn the call back over to Carl for his closing remarks.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Thank you, Ben. As we near completion of our restructuring plan, which is strengthening in our profitability and balance sheet, the question I often get is what's next? I'm proud of what this company has achieved in a short amount of time. It hasn't been easy and the tariff volatility has only added to that challenge. As you all know, it's hard to predict the future.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

That said, when the consumer reengages, I am extremely confident this company is in a position of strength to leverage all the hard work that has been done. We are more efficient, more agile and more financially sound. We are well positioned for long term profit and cash flow growth and we are ready to take advantage of our strengthened position. As we continue to deleverage, we will utilize our cash to reinvest in organic growth. We will also look for strategic acquisitions and evaluate the merits of returning cash to shareholders by reengaging our existing share repurchase program.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

I would like to thank all of our shareholders who have supported us on this journey and our employees for all their hard work and dedication to this great company. Operator, we're now ready to begin Q and A.

[Operator]

Thank you. We will now be conducting a question and answer The first question is from Bobby Griffin from Raymond James. Please go ahead.

[Bobby Griffin, Managing Director at Raymond James Financial]

Good morning, buddy. Thanks for taking my question. Steve, official welcome to the IR function there at Leggett. Look forward to working with you. I'll probably give you a few days before I start doing the line by line modeling questions quite yet, but good to meet you over the phone.

[Bobby Griffin, Managing Director at Raymond James Financial]

Carl, I guess to start, I wanted to kind of maybe zero in on the bedding business. You guys have been called out a consumption number that you kind of estimate for the quarter. If there's a way you can connect that consumption to your U. S. Volume number and kind of what was the difference there?

[Bobby Griffin, Managing Director at Raymond James Financial]

I understand there's some sales attrition from the restructuring, but just anything there to help us kind of connect the two figures would be helpful to start.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes. Good morning, Bobby, thanks for the question. It is complicated because there's moving parts between the U. S. Innerspring side of things than specialty foam and aggregating it through and rolling it up to a segment.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

But Tyson, if you don't mind, we try to unwind all of that.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Sure thing. Good morning, Bobby. Let me start with U. S.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Spring. That's probably the actually the easiest to compare to The U. S. Market, U. S.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Domestic production market. So if you think about U. S. Spring and we showed year over year volume down 9% and like we've talked about for quite a few quarters in a row, that's impacted negatively by grid volume. But if you get to mattress cores, was down a little bit less than that. But also about a third of that 9% related to sales attrition to our structuring, specifically our Mexican spring operation. So really U. S.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Spring that's going into mattress cores down mid single digits. So pretty comparable to what we think the domestic market was actually probably more at the higher end of that estimate. Then when you get to our specialty foam and adjustable bed business, they were impacted by some pretty specific factors. One, a common customer that we share to both that's sales challenges and it's a large customer for both of those businesses. And then also another common customer at retail, where we've had some challenges in adjustable bed with a promotional base that we source and distribute from Asia, just some inventory work downs and a change at least from our observation and a change in the way that product is being promoted.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

And then also specifically there at our specialty foam business where we have a private label finished mattress that we sell that's being converted to an internal production. So it probably trades off over the mid to long term into a component opportunity for us, but it's a trade down for finished mattresses and specialty foam.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes. Bobby, I think it's important what Tyson said. When we look at it strictly from a U. S. Spring standpoint, it may look like we're losing share.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

We are not losing share. It's the melt off of the Mexican business, which was a good decision for us to get out of that operation. It was relatively small. But if anything, I think we're starting to regain share.

[Bobby Griffin, Managing Director at Raymond James Financial]

Very good. That's helpful. And that's good to hear on the starting to regain share part. Maybe can we switch over to the metal margin? It looks like that is a bright spot here.

[Bobby Griffin, Managing Director at Raymond James Financial]

I think it was called out in the EBIT bridge. Just curious, are you seeing that accelerate today? And is that is there a way to dive in? Is that starting to show the benefit of some of the tariffs against the rod, the imported rod? Or are we still kind of just at probably what the metal margin was doing before this tariff impact starts to show up and that potential expansion is still to come?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

I think it's expanding sequentially, it's expanding year on year now, it's expanding as we enter the third quarter. It is being impacted by the $2.32 tariffs. And I don't want anybody to think that the metal margins user us in any way. It's finally back to a point where it makes sense for The U. S.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Steel manufacturers. And Bobby, we think that the metal margin expansion is sustainable that as the administration has talked about tariffs, obviously a lot this week that the one thing that seems to be sacred is the two thirty two steel aluminum related tariffs. So we would expect for the duration of the current administration that The U. S. Steel industry for defense purposes will continue to be protected.

[Bobby Griffin, Managing Director at Raymond James Financial]

Very good. And I guess lastly for me, Karl, just I think in the prepared remarks, those referenced keeping a few facilities that maybe were up for sale or divestiture in the original restructuring plan. So just any further detail on what might have changed? Is it demand coming back a little better or just customer demographics or what might have changed in that decision making?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes, there was they were small. There was one in the bedding side of things and one in hydraulics as we continue to evaluate customer relationships that we need to continue to lean into those geographies.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Yes, Carl, I guess, I'll throw out just from betting, which is the largest part of this. We're just looking at the landscape and all the changes that are happening in the market and things are moving in a pretty dynamic way. Looking at our plan and then how we think about the longer term and balancing out the risk and opportunities that we have, we felt like they were the right decision. So it's just really updating our thinking on where we saw the market and our opportunities and risks and it made sense for us to make some adjustments.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

It's just indicative that the market is ever changing, Bobby. The restructuring plan was developed in the 2023, so business changes.

[Bobby Griffin, Managing Director at Raymond James Financial]

Absolutely. Completely understandable and I appreciate all the details here. Best of luck in 3Q.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes. Thank you, Bobby.

[Operator]

The next question is from Susan Maklari from Goldman Sachs. Please go ahead.

[Charles Perron-Piché, VP - Equity Research at Goldman Sachs]

Good morning. This is Charles Perron on for Susan. Thanks for taking my question this morning.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Absolutely. Good morning, Charles.

[Charles Perron-Piché, VP - Equity Research at Goldman Sachs]

Good morning. First, I want to talk about what you're seeing on the health of the consumer. What are you hearing from your key customers as the macro uncertainty remains elevated? And how does this inform your expectations for volume and demand through the second half across your businesses?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes, trying to do an assessment of the health of the consumers is a challenge. If we look at our residential businesses, so specifically bedding and furniture and to some degree, the flooring side of things, that what we saw was as business exited the first quarter, things were relatively soft. We had a tough April. We had just passed through Liberation Day and there was uncertainty from a demand perspective. The consumer didn't know what tariff impacts would have and they really effectively stopped purchasing.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

And then as we so April was very soft. As we move through the second quarter, we started to see a little bit of uptick, probably steeped in consumer confidence and maybe fears of longer term tariff impacts around the Memorial Day holiday. So Memorial Day was pretty strong. I think it's important to note that holidays are strong, but there's troughs behind holidays that people don't always capture. And then as we moved into the fourth of July selling holiday, it was promotional and the consumer was out and about and it was relatively good.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

So as we exited second quarter, we're certainly more optimistic going into the third quarter than we were than when we exited the first quarter. But we don't know. As you saw the consumer confidence statistics stepped up a little bit. At the end of the day, it's going to depend on the inflationary impacts that are driven by tariffs. The consumer hasn't seen them yet.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

They've seen actually input cost break on energy recently. So we'll see. But overall, we think it's helped that the health of the consumer is more positive today than it was three months ago for sure.

[Charles Perron-Piché, VP - Equity Research at Goldman Sachs]

Got it. That makes a lot of sense. Second, I just want to touch on the price cost dynamics you see across the different segments. Obviously, you've talked a lot about the impact of tariffs and how you're mitigating those impacts through sourcing strategies. But how do you approach decision to implement pricing to offset some of those and protect your price loss relationship across segments?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

On purchased product, we're working with the suppliers, trying to get them to absorb as much of that tariff exposure as possible. When that doesn't work, we're passing through that pricing. We do not believe in any way that tariffs will be negative, actually counter to that tariffs, as we said in the prepared remarks, should be positive to us in total, but it varies by each one of our business units. But I don't want anybody to think that we don't have pricing power as it relates to tariff impact. Our customers understand that pass through and we're very active in engaging in those conversations.

[Charles Perron-Piché, VP - Equity Research at Goldman Sachs]

Got it. That's good color. And maybe lastly, maybe for Ben, I appreciate all the color you provided in your prepared remarks, but can you help us walking through the guide by segment and the expectations for operating margin specifically?

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Yes, sure. Thanks, Charles. I'll kind of hit the sales volume and margins for you by segment. So first in bedding, we'd expect the midpoint sales to be down low double digits with volume down mid teens, but our margins we would expect to be up 150 basis points. On the specialized side, we'd expect sales and volumes to both be down mid single digits and our margins to be up about 100 basis points.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

And then in furniture, flooring and textiles, we would expect sales and volume to be down low single digits and margins to be down about 100 basis points.

[Charles Perron-Piché, VP - Equity Research at Goldman Sachs]

Thank you. That's very good color. Good luck with the quarter guys.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Thanks, Charles.

[Operator]

Next question is from Peter Keith from Piper Sandler. Please go ahead.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

Hi, thanks. Good morning, everyone. Morning. I wanted to kick it off with bedding. There's kind of a lot of numbers thrown around in terms of your depiction of the quarter, whether it's the total industry versus U. S. Production. So I guess two questions are, do you think the betting industry got better in Q2 as a whole?

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

And it sounds, Karl, like looking forward, you're a little more optimistic on the consumer, but the bedding guidance is coming down on a volume basis. Is that reduction from the customer change that you've been referencing?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes, short answer is yes, that we think that bedding demand certainly was stronger in 2Q than it was in 1Q. And our guide is based on those adjustments. But Tyson, anything that

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

Sure. Good morning, Peter. I agree with Carl. Second quarter was definitely better than the first. The first quarter was very challenged and we've talked a lot about that in our last call with the tariff uncertainty and coming off of a better into 2024.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

But at least kind of walking through the quarter in April, it was still pretty weak. Momentum, it wasn't great exiting the first quarter. We saw that nearly part of April. But we did start to see the market improve towards the April and definitely going through May leading up to Memorial Day and did hear from a lot of our customers they felt better about Memorial Day promotion. And And then we had from some prior holiday periods, especially Presidents Day.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

And then the follow through post Memorial Day was still improved from definitely what we saw in the first quarter. So felt more positive about the market for sure in the second quarter. But we do expect additional headwinds like Karl mentioned in the back half of the year in adjustable bed and especially foam from the factors you mentioned. General mattress consumption similar in the third quarter probably what we saw in the second quarter and then the seasonal slowdown in the fourth quarter, but also improved from what we saw in the first quarter.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. That's very helpful. And Carl, were talking about the mattress imports and how tariffs could help slow that. I think we've all been wanting to see import activity slow for a number of years. And I do agree that the enforcement is the key.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

Could you maybe expand on what you're seeing? I think you're referencing duties and there's tariffs kind of mixed in. I was getting a little bit confused, and maybe you could unpack if you think import flow is going to come down or kind of hold steady?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Peter, we are really optimistic as regards the impact that the recently announced, as recently as last night, tariffs may have on the finished mattress imports. So think of it this way that of the mattresses that are imported into The U. S. In recent months, greater than 50% of them have come from Indonesia. There is not an anti dumping tariff or duty on Indonesia at this point.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

So if the Indonesians have to pay now a 19% duty And as you know, Indonesia, Malaysia, Vietnam are all in that 19% to 20% range. South Korea, 15% and Laos at 40, all significant exporters of product into The United States. What's most important to us though is I don't believe and I'll say I on this one that very many of those mattresses are produced in those countries. They are Chinese produced. They are trans shipped and the administration's focus on trans shipment even in the executive order of last night, this proposed 40% penalty for transshipment.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

If the administration has the ability through customs or commerce to really control that process, The fact that they're focusing on it and they're, let's call it, threatening those countries to stop that facilitation is really important.

[J. Tyson Hagale, EVP & President - Bedding Products at Leggett & Platt]

And Karl, I'll throw in one other thing that I think is also could be really helpful, but the change on the exemption on de minimis shipments into The U. S, it's sort of a black hole. It's hard to track even how many mattresses might have been coming in underneath that threshold, but certainly there were a lot. And I think that change is also potentially beneficial update for The U. S. Market.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

That's And Peter to go down one more rabbit hole with you, I can't help but I apologize. We believe that about 75% of the mattresses through our own testing that have come into this country do not meet The U. S. Flammability laws. And there has been increased rigor by the CPSC to enforce those regulations as well.

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

So not only are these products being trans shipped and dumped, they're not meeting And the CPSC has become more aggressive in administration. So all we want, all The U. S. Manufacturing industry is once is a level playing field. And we may be starting to see that in the not too distant future.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. Thank you. That's very detailed and encouraging. Maybe I'll address my last question to Ben. Within the model, the SG and A leverage in the quarter was notable.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

It's the first time you've levered SG and A in several years. The SG and A stepped down from Q1. Anything to call out there in terms of changes that you might be able to hold this lower level for a while?

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Yes, Peter. Thanks for the question. So you might recall late last year, we talked about some G and A reductions that we made as part of our overall restructuring plan. So what you're starting to see is that flow through. And so, we feel really good about that continuing to hold.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

And as we move through the year, I would expect that to be consistent and maybe even expand a little bit as we go forward.

[Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. Very helpful. Thanks guys.

[Benjamin Burns, EVP & CFO at Leggett & Platt]

Bet. The

[Operator]

next question is from Keith Hughes from Truist Securities. Please go ahead.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Thank you. A question is in the home furniture. Since you're restructuring a couple of years ago, it was a bit performing better than Bedding Cousins. It took a little bit of step down in the second quarter. Could you talk more what's going on and what you're kind of expecting in the next six months or so?

[Karl Glassman, President, CEO & Chairman at Leggett & Platt]

Yes. Thanks for bringing that up, Keith. Sam, why don't you dive into it?

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

Yes. Thanks, Keith for the question. So when you're right, our volume was up pretty significantly in Q2. And when we look at home furniture business, there is an absolute bifurcation in that business right now.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

Our customers who are making higher price point furniture, their business is pretty decent. Their attitude and outlooks are pretty solid and our business with those guys both in The U. S. And in Europe is really solid as well. So that part of the business looks good.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

Now when you start moving down price point, the market starts looking a lot differently. And I'll just share a few factors that really impacted our volume in Q2. So for our large U. S. Kind of bellwether mid price point customers, this year just year over year they were simply making less volume.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

And so that was impactful to us. Just their drop in volume impacted us. And if you take another step down in price point and we go back to the April tariffs that we talked about, when those tariffs came out on Southeast Asia and China on April 2, it was as if somebody turned the switch from one day to the next. Business just ground to a halt in Asia. We've got a sizable operation in China that services primarily Asian customers with a little bit export to The U.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

S. And when those tariffs went into place, our U. S. Customers who buy from China also tap the brakes. And what we were hearing specifically from our Asian customers was that The U.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

S. Retailers were telling them we're not going to pay 40%, 50 plus tariffs because we have plenty of inventory to try to last this thing out and see what happens. So over the course of a week or so, Southeast Asia, Vietnam particularly the tariffs dropped from 46 to 10%. Manufacturers in Southeast Asia started ramping back up. Our Chinese customers who have operations in Southeast Asia started moving more production out of China down to Southeast Asia and business started to get back to normal.

[R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products at Leggett & Platt]

But as we went through the quarter and got into late May and into June, when that ninety day pause was looking like it was going to be over, some of those retailers said, hey, let's pause shipments again because we don't want to get stuck with goods on the water and then we have to pay a 46% tariff out of Vietnam. So we really kind of start and stop with our Asian operations throughout the quarter. Things seem to be in a better place now that we changed the trade policy with Vietnam and the Southeast Asian countries at least we know what the playfield looks like. So we anticipate that to continue to improve as we move through the back half of the year.

[Keith Hughes, MD - Sell Side Equity Research at Truist Securities]

Okay. That's really complicated. All right. Thank you very much. It's super complicated.

[Operator]

Teleconference. You may all disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Karl Glassman, President, CEO & Chairman
• Benjamin Burns, EVP & CFO
• J. Tyson Hagale, EVP & President - Bedding Products
• R. Samuel Smith, EVP and President – Specialized Products, Furniture, Flooring & Textile Products

Analysts

• Steve West, VP - IR at Marimed
• Bobby Griffin, Managing Director at Raymond James Financial
• Charles Perron-Piché, VP - Equity Research at Goldman Sachs
• Peter Keith, MD & Senior Research Analyst at Piper Sandler Companies
• Keith Hughes, MD - Sell Side Equity Research at Truist Securities