Lumber Liquidators scheduled a conference call for investors today to explain its side of the safety concerns raised by 60 Minutes last week. That call is scheduled for 10 a.m. Eastern, but the company released the slides for the presentation in a regulatory filing with the Securities and Exchange Commission early this morning. Shares are up 4.65% in pre-market trading on Thursday, after a 10.65% rally yesterday.
Lumber Liquidators releases slides
Lumber Liquidators released the slides of its presentation this morning after releasing the agenda on Wednesday. The presentation will be in three parts: “Taking Care of the Customer;” “Safety and Quality Come First;” “What’s Causing the Confusion;” and “Business Update.”
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In addition to the typical assurances we would expect from a company that faces allegations about the safety of its products, the flooring retailer also said they will offer free air quality testing to qualifying customers and test kits used under the Occupational Health and Safety Act (OSHA). A third party will administer those tests, and if the results show that the formaldehyde content is higher than “accepted thresholds,” the company will evaluate to see whether professional retesting is required.
Lumber Liquidators also shared a slide indicating that its sales are starting to rebound from the low they hit right after the damaging broadcast (slides sourced from Lumber Liquidators’ SEC filing):
Additionally, the company showed that its flooring supposedly releases less formaldehyde into the air than other common household products:
Lumber Liquidators also went through the various testing methods that can be used and explained the different agencies that enforce restrictions on formaldehyde content and how their guidelines vary. Additionally, the flooring retailer explained its product testing methods.
Also the company noted that the plaintiffs in the lawsuits that have been filed against it have admitted to being affiliated with short-sellers of its stock.
Lumber Liquidators rallies on activist investment
Shares of Lumber Liquidators soared on Wednesday after it was revealed that activist investor Robert Chapman had initiated a long position in the flooring retailer. Chapman said Lumber Liquidators makes up about 15% of its fund and that part of that position is through call options.
Shares of the company climbed 10.65% to close at $32.73 per share on Wednesday and then kept climbing today in premarket trading. As of this writing, the stock was up by 7.85% to $35.30 per share.
Is Whitney Tilson wrong?
CNBC‘s Fred Imbert reports that Chapman took up a long position in Lumber Liquidators because of the headline risk the company faces in connection with the allegations about the formaldehyde content of its flooring. Chapman called the headlines “precisely the fodder that makes for good investments.” He noted that there will be a lot of volatility right now but that the fear surrounding the stock offers a “huge opportunity” for investors.
Short-seller Whitney Tilson presented his concerns about Lumber Liquidators to 60 Minutes. Chapman believes he’s wrong about the company, which has been accused of cheating its operating margins by between 6% and 10%. However, he points out that Home Depot also saw its operating margins double from 6% to 12%. Also Wal-Mart’s margins rose from 4% to 6% in eight years.
What analysts are saying about Lumber Liquidators
Analysts from multiple firms are weighing in on Lumber Liquidators ahead of today’s business update. Goldman Sachs analyst Matthew Fassler and his team don’t believe the allegations raised by Whitney Tilson and other short-sellers. However, they also question why the company released the agenda for today’s conference call a day early.
Stifel analysts John Baugh and Dillard Watt suspended their rating and target price for Lumber Liquidators until after today’s business update.