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