Leggett & Platt, Incorporated (LEG) recently declared the divestiture of a major chunk of its Store Fixtures operations, which form a part of the company’s Commercial Fixturing & Components segment.
The company sold a major part of this business unit to Lozier Corporation for roughly $62 million. The part of the business sold generated nearly 75% of its revenues and comprised operations situated in Fort Worth, TX; Middlebury, IN and Union, MO.
The sale took place on Nov 1, but the company classified this business as discontinued operations in its third-quarter 2014 results. Moreover, it anticipates this sale to impact the fourth quarter by a loss of 4 cents a share, which will be recorded in discontinued operations. Although Leggett has sold major parts of its Store Fixtures business, it is looking forward to selling the remaining facilities as well.
The company had been considering this sale for a long time. In July, this 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.
This is because in the quarter preceding the announcement made in July, sales of the Commercial Fixturing & Components segment plunged 22.2% to $89.9 million, mainly because of the absence of specific key Store Fixtures retailer programs in 2013. Also, the segment recorded an operating loss of $2 million due to the same reason.
In fact, even in the second quarter, the company’s Store Fixtures business was unable to revive sales, which majorly impacted profitability in May and Jun 2014. As a result, this business unit called for impairment, leading the company to consider divesting this business.
Apart from this segment, Leggett, which competes with Stanley Furniture Co. Inc. (STLY) and Hooker Furniture Corp. (HOFT), is optimistic about its performance, given the strength of its various businesses like Automotive, Aerospace, Bedding, Home Furniture and Office Furniture. Also, per its third-quarter 2014 results, this Zacks Rank #2 (Buy) company has generated Total Shareholder Return (“TSR”) of 22%, on the basis of a 3-year rolling period.
Another stock in the industry, looking attractive at current levels, includes Select Comfort Corp. (SCSS) with a Zacks Rank #1 (Strong Buy).
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