Leggett & Platt's Q3 2025: Contradictions Emerge on Consumer Demand, Tariff Impacts, and Restructuring Outcomes

Date of Call: October 28, 2025

Financials Results

• Revenue: Just over $1.0 billion, down 6% year-over-year
• EPS: GAAP EPS $0.91; adjusted EPS $0.29, down $0.03 year-over-year

Guidance:

• Sales expected $4.0B to $4.1B, down 6%–9% vs 2024
• GAAP EPS $1.52 to $1.72; adjusted EPS $1.00 to $1.10
• Adjusted EBIT margin 6.4%–6.6%
• Cash from operations ≈ $300M
• 2025 CapEx $60M–$70M; normalized CapEx expected nearer ~$100M in future years
• Prioritize net-debt reduction while considering small strategic M&A and share repurchases

Business Commentary:

* Strong Financial Performance Amid Challenges: - Leggett & Platt reported third quarter sales of over $1 billion, down 6% year-over-year, primarily due to continued soft demand in residential end markets and divestitures. - Despite these challenges, the company is reaffirming the midpoint of their full-year sales and adjusted EPS guidance, driven by significant cash flow improvements and restructuring efforts.

• Restructuring and Cost Management:
• The company completed the divestiture of its Aerospace business, using proceeds to pay down all commercial paper and reduce net debt to trailing 12-month adjusted EBITDA ratio to 2.6x.

• This restructuring has delivered significant EBIT contribution with lower associated costs and proceeds of $43 million, with expectations to reach up to $17 million more in the fourth quarter.

• Market Dynamics and Tariffs:

• Leggett & Platt continues to navigate a dynamic tariff environment, with wide-ranging tariffs potentially impacting consumer confidence and demand.
• U.S. Customs and Border Patrol actions, like dismantling a Chinese mattress transshipment scheme and product safety warnings, indicate efforts to support fair competition and combat understated product values.```

Sentiment Analysis:

Overall Tone: Positive

• Management said they were "pleased with another quarter of solid results" and are "reaffirming the midpoint" of full-year guidance; CFO highlighted $296M debt reduction, net debt to trailing-12-month adjusted EBITDA of 2.6x, and $126M operating cash flow in Q3, emphasizing successful restructuring and balance-sheet strengthening.

Q&A:

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): Can you parse out the benefit from cost actions and restructuring and the upside going forward?
  Response: Restructuring is nearly complete and meeting/exceeding targets; expect $60–$70M annualized EBIT benefit (≈$60M realized in 2025) with sales attrition reduced to ~$60M and real-estate proceeds $70–$80M ( $43M realized).

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): Can you talk about Bedding demand—monthly improvements in Q3 despite macro headwinds and what is happening on the ground?
  Response: Bedding demand is stabilizing with sequential monthly improvement but remains down low-single-digits Y/Y; performance is choppy across channels and a broader macro recovery (housing, confidence) is needed for sustained recovery.

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): How should we think about CapEx plans for 2026, growth opportunities and potential resumption of shareholder returns?
  Response: Expect normalized CapEx around $100M in 2026; prioritize using excess cash to reduce net debt while also funding growth, pursuing small strategic acquisitions and considering share repurchases.

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): Can you walk through how you're thinking about segment margins for this year?
  Response: Bedding segment margins expected to be up ~200 basis points Y/Y; Specialized up ~50 bps; Furniture/Flooring/Textiles down ~150 bps.

• Question from Alexia Morgan (Piper Sandler & Co., Research Division): How do you interpret sequential improvement in Home Furniture (Q3 volumes down 5% vs Q2 down 12%)—does this indicate broader category improvement?
  Response: Home furniture is normalizing after tariff disruption; unit volumes remain down but price increases have masked declines; new Vietnam factory reduces tariff exposure and should help customers.

• Question from Alexia Morgan (Piper Sandler & Co., Research Division): Are you observing divergence across price points—lower price points vs mid/high?
  Response: Higher-price segments remain more stable week-to-week; lower-price tiers continue to face significant pressure.

• Question from Alexia Morgan (Piper Sandler & Co., Research Division): Why did steel rod volume drop to down ~20% in Q3?
  Response: The headline drop reflects the absence of last year's one-time billet sales; trade rod volumes and mix remained healthy and actually improved margins.

• Question from Robert Griffin (Raymond James & Associates, Inc., Research Division): With restructuring largely complete, where do you see the most opportunities for organic growth?
  Response: Largest long-term opportunity is finished bedding/private-label and product innovation across segments; additional growth from new product activity in home furniture and near-shoring opportunities in Work Furniture.

• Question from Robert Griffin (Raymond James & Associates, Inc., Research Division): What are long-term leverage targets and capital allocation priorities; where might bolt-on acquisitions occur?
  Response: Long-term net-debt target is ~2x; priority is debt reduction while selectively pursuing small textile bolt-on acquisitions and considering buybacks.

• Question from Keith Hughes (Truist Securities, Inc., Research Division): U.S. Spring was only down 1–2%; do you expect Bedding to track the industry near-term?
  Response: Spring volumes are roughly tracking the domestic mattress market; content gains (e.g., Comfort Core) and semi-finished growth (>20% Y/Y) are driving margin improvement and momentum.

• Question from Keith Hughes (Truist Securities, Inc., Research Division): For adjustable and specialty, when will you lap the customer issue and return to industry-like performance?
  Response: Two large customer-specific headwinds (including Mattress Firm) impacted specialty foam and adjustable beds; resolution will take through next year—it's customer-specific rather than permanent market-share loss.

• Question from Keith Hughes (Truist Securities, Inc., Research Division): Which retail channels are showing sequential improvement and which are still struggling?
  Response: Stronger unit volumes in lower-end online e-commerce, big-box retailers and Mattress Firm; recovery is uneven and not broad-based across all retailers.

• Question from Keith Hughes (Truist Securities, Inc., Research Division): Textiles were up—where do you see price pressure and where is growth coming from?
  Response: Textiles are bifurcated: traditional furniture/bedding textiles face price pressure, while geo/engineered markets (civil construction, automotive, filtration) are driving growth.

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): How should we think about the future trajectory of textiles and the types of bolt-on deals you would pursue?
  Response: Target small bolt-on textile acquisitions that provide immediate purchasing synergies, expand geographic reach or add convert-to-order capabilities to serve customers just-in-time.

• Question from Susan Maklari (Goldman Sachs Group, Inc., Research Division): How should we think about price/mix benefits from Bedding innovation if macro remains weak?
  Response: About half of recent EBIT improvement is from restructuring; the other half is margin enhancement driven by improved content/mix (higher-value springs, specialty foam) which increases selling prices and profit potential even amid weak volumes.

Contradiction Point 1

Consumer Demand and Market Recovery

It involves differing assessments of consumer demand and market recovery, which are crucial for understanding the company's financial outlook and strategic direction.

Can you discuss demand in Bedding compared to overall demand trends? - Susan Maklari(Goldman Sachs)

2025Q3: The Bedding segment has shown stability rather than recovery, with low single-digit unit declines. - Karl Glassman(CEO)

How do you assess consumer health based on customer feedback? How do you adjust pricing to offset tariff impacts? - Charles Perron-Piché(Goldman Sachs)

2025Q2: Consumer demand improved from April to the 4th of July, with Memorial Day and July promotions showing positive response. The health of the consumer is more optimistic than in April. - Karl G. Glassman(CEO)

Contradiction Point 2

Impact of Tariffs on Home Furniture

It pertains to the effect of tariffs on the Home Furniture segment, which can impact revenue and pricing strategies, affecting investor expectations.

Can you explain the sequential improvement in Home Furniture and if it indicates broader category growth? - Alexia Morgan(Piper Sandler)

2025Q3: The improvement is due to normalization after April tariffs affected the segment last quarter. - R. Smith(EVP)

What caused the decline in Home Furniture performance in Q2, and what are the expectations for the next 6 months? - Keith Brian Hughes(Truist Securities)

2025Q2: The tariff impacts in Asia and mid-price point customer volume reductions affected Q2. - Robert Samuel Smith(EVP)

Contradiction Point 3

Bedding Segment Demand and Market Performance

It reflects differing perspectives on the bedding segment's demand and market performance, which are crucial for assessing the company's growth prospects and operational strategies.

Can you discuss the demand environment in Bedding and how it compares to broader demand trends? - Susan Maklari(Goldman Sachs, Research Division)

2025Q3: The Bedding segment has shown stability rather than recovery, with low single-digit unit declines. The team is working on new product development and innovation. - Karl Glassman(CEO)

What is the status of bedding volume demand following April’s Liberation Day? - Peter Keith(Piper Sandler)

2025Q1: January was very soft, with improvement through the quarter but not to pre-election levels. Post-Liberation Day, demand has remained stable, with some hesitance in inventory investments due to tariff and consumer activity uncertainties. - Karl Glassman(CEO)

Contradiction Point 4

Demand Environment in Bedding

It involves differing perspectives on the demand environment in the Bedding segment, which impacts revenue projections and operational strategies.

How is demand in the Bedding category performing compared to overall demand trends? - Susan Maklari(Goldman Sachs)

2025Q3: The Bedding segment has shown stability rather than recovery, with low single-digit unit declines. - Karl Glassman(CEO), J. Hagale

How does the current bedding dynamic compare to Q4 results and the 2025 outlook? - Peter Keith(Piper Sandler)

2024Q4: October was soft, November strengthened, and December was abnormally strong. There may be demand pull-forward due to tariff concerns. - Karl Glassman(CEO)

Contradiction Point 5

Restructuring and EBIT Benefits

It highlights differing expectations and realizations regarding the benefits from restructuring activities, which impact financial performance and operational efficiencies.

Can you discuss the benefits of cost-cutting and restructuring and how they are impacting margins? - Susan Maklari(Goldman Sachs)

2025Q3: The restructuring plan has been executed well, meeting or exceeding initial expectations in EBIT benefits, costs, and sales attrition. - Benjamin Burns(CFO)

How are you raising EBIT expectations from restructuring activities? - Susan Maklari(Goldman Sachs)

2024Q4: There is potential upside, but more volume is needed. Contribution margins could be near the high end of the 25-35% range if volume increases. - Karl Glassman(CEO)