Stocks

Lumber Liquidators Holdings Inc Sales Held Up Better Than Anticipated

Lumber Liquidators unveiled first-quarter results with revenue of $260 million, beating analysts’ estimates of $258.1 million even though its sales dropped 12.8% from a year ago following allegations made in a TV report. The embattled flooring retailer plans to provide its full first-quarter financial results on April 29.

Lumber Liquidators

Lumber Liquidators’ sales slumped due to safety claims

As reported by ValueWalk, Lumber Liquidators shares plummeted after 60 Minutes aired a report indicating that the company’s floors failed safety tests in California. Last month, CBS aired the 60 Minutes report indicating that its reporters had tested the flooring and found that it had levels of formaldehyde that were too high. The report highlighted that some of the floors were more than 13 times the limit in California.

The 60 Minutes report showed Lumber Liquidators’ factories in China allegedly misidentifying certain laminate flooring products as compliant with regulatory standards when they were in fact not compliant. Following the report, the flooring retailer earned mixed analyst views, with Goldman Sachs downgrading the stock and trimming its price target, while Jefferies analysts slashed their target price.

In late March, the U.S. Consumer Product Safety Commission disclosed that it was investigating the Chinese-made laminate flooring but could expand the investigation if the agency finds reason to do so.

Lumber Liquidators results beat Goldman’s estimates

On Thursday morning, Lumber Liquidators gave a business update disclosing that in March, sales dropped 12.8% compared to March 2014. The retailer attributed the drop to “unfavorable allegations surrounding the product quality of the Company’s laminates sourced from China.”

However, in the first quarter, the flooring retailer’s sales totaled $260 million, up 5.6% from a year ago, while analysts at Goldman Sachs had been anticipating sales of $257 million. The retailer’s same-store sales in the quarter dropped 1.8% against Goldman’s expectations for a 2% decline. The embattled flooring retailer anticipates profit margins to be in the range of 35% to 36.5%, down from 41.1% in the same quarter last year.

Reacting favorably to the latest results, the retailer’s stock rose 89 cents or 2.7% to $33.90 in premarket trading Thursday about an hour before the market open. Lumber Liquidators’ shares are down 36% since late February.

The retailer also disclosed Thursday that about 10,000 of its customers have requested in-home air quality test kits following the TV report. The company recently offered the free air quality testing program in order to reassure its customers.