Letting Go of Goldman: Here Comes Inflation

You may never have heard of Leggett & Platt, but chances are good you’ve used their products—if, say, you ever slept on a bed, or sat in a chair or drove a car.

After all, it is precisely those basic but essential products that utilize pieces of metal, foam or plastic shaped at Leggett & Platt factories around the globe, whether they are springs for beds, rollers for office chairs, or lumbar controls for car seats.

Indeed, long-time readers may recall that we here at NotMakingThisUp check in with Leggett & Platt from time to time, for two reasons. The first is for its uniquely broad view into end-market demand among businesses ranging from bedding to automobiles. The second is because the company has virtual real-time insight into to the supply-and-demand characteristics of many industrial commodities.

And judging by Leggett’s most recent earnings call—i.e. yesterday’s—it is clear that not only is the demand for what Leggett makes going up (no surprise: the stock market began signaling this last fall) but the price of those industrial commodities is going up.

Quickly and broadly.

Here’s how Karl Glassman, the company’s Chief Operating Officer put it, in response to one of Wall Street’s Finest, courtesy of the indispensible Street Events:

Joel Havard – Hilliard Lyons – Analyst “Karl, you have made a few comments today about the inflation pressures coming your way, the price hikes are passing through.

“Is the environment changing, specifically with regard to the length of the timing curve that it takes to see these coming your way and your ability to pass them through?…”

Karl Glassman – Leggett & Platt, Incorporated – EVP, COO “…If there is a difference today, it is the magnitude and the variety of inflation. From our finished bedding and furniture customers’ standpoint not only are they getting it from steel but they are seeing it — everything petrochemical-based.

“So they are getting foam increases, fiber increases. The leather guys are seeing huge inflation in hides. Cardboard. All the MDFs [medium-density fiberboards]. So it is a challenge.

“Historically the retailers have said to the manufacturing customers, we won’t let you pass through. Our manufacturer customers are in a squeeze. They have to pass it through at retail. The magnitude and the velocity of this, retail has to move this time.” Fun as it has been to weigh in on the Goldman situation—and unless the entire Goldman crew takes the fifth in front of Congress next week, a la Mark McGuire, we see nothing to change our dollars-to-donuts bet that the final score in that case reads “Goldman 1, SEC 0”—it seems time to get back to what makes markets move.

Like, say, “the magnitude and the variety of inflation.”

Jeff Matthews I Am Not Making This Up

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