Leggett & Platt Expects Impairment Charge for Store Fixtures


Leggett & Platt Inc. (LEG), the manufacturer of diversified engineered products, announced the appointment of an investment banker to enable the company to consider different alternatives, including divestiture, for its Store Fixtures business.

Also, Leggett declared that for the second quarter of 2014, it envisions recording pre-tax non-cash goodwill impairment charge of nearly $108 million against the write off of the goodwill related to its Stores Fixtures business.

Leggett’s Store Fixtures business forms a part of its Commercial Fixturing & Components segment. In the last reported quarter, sales of Commercial Fixturing & Components plunged 22.2% to $89.9 million mainly because of the absence of specific key Store Fixture retailer programs in 2013. Also, the segment recorded an operating loss of $2 million due to the same reason.

Even in the second quarter, the company’s Store Fixture business was unable to revive sales, which majorly impacted profitability in May and June 2014. Following this, the current market value of the business is bound to fall below its recorded book value, calling for impairment. Owing to these factors, the company is considering divesting this business.

The expected impairment charge of $108 million is also anticipated to impact the second quarter earnings per share by 65 cents. However, apart from this it won’t have any effect on the company’s full-year guidance issued earlier.

In the last reported earnings, the company which competes with Stanley Furniture Co. Inc. (STLY) and Hooker Furniture Corp. (HOFT), forecasted full year earnings in the band of $1.70–$1.85 per share, compared to its previously predicted range of $1.65–$1.85. Its sales for the year are projected to grow in the range of 3%–8% and come in between $3.85 billion and $4.05 billion.

Apart from this segment, Leggett remains positive about its overall performance in the future, given the strength of various businesses like Bedding, Office, Furniture, Aerospace and Automotive. Also, the company strives to remain in the top 3 S&P 500 companies, on the basis of 3-year rolling period Total Shareholder Return (:TSR).

Currently, Leggett carries a Zacks Rank #3 (Hold). However, a better-ranked stock in the same industry would be Virco Mfg. Corp. (VIRC) with a Zacks Rank #2 (Buy).

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