Stocks

Lumber Liquidators Down (LL); FTC Set To Reveal Major Consumer Fraud Case

The shares of Lumber Liquidators Holdings declined as much as $24.69 per share today after the announcement of the Federal Trade Commission (FTC) regarding a major consumer fraud case.

The FTC and State Attorneys General are scheduled to announce their actions on a major consumer fraud case during a press conference tomorrow, May 19. The announcement will be held at the FTC’s headquarters in Washington.

“Senior FTC officials and state law enforcement officials involved in the case, as well as a representative of the Better Business Bureau, will be available at the press conference to answer questions from the media,” according to the Commission’s press release.

Lumber Liquidators

Lumber Liquidators woes

The shares of Lumber Liquidators were trading $25.87 per share, down by 1.45% at the time of this writing around 2:54 in the afternoon in New York. The company lost more than 60% of its stock value year-to-date. The stock was primarily impacted by the allegations that its flooring products from China contain a high level of formaldehyde.

The U.S. Consumer Product and Safety Commission confirmed its investigation on Lumber Liquidators’ flooring products after 60 Minutes reported that its products failed a series of tests.

Earlier this month, Lumber Liquidators decided to stop the sales of laminate flooring products from China. The company also engaged the services of a former FBB director to review its sourcing procedures.  The hardwood flooring retailer has been strongly defending its “flooring products” from China as “completely safe” and repeatedly argued that its suppliers comply with California standards.

Last month, Lumber Liquidators disclosed that the Department of Justice (DOJ) intends to file criminal charges related to the ongoing investigation on its imported products. The company estimated that it may incur around $10 million in potential losses that may arise from DOJ’s action.

Lumber Liquidators filed a lawsuit against nine insurance carriers. The company alleged that its insurance carriers “wrongfully refuses to defend [Lumber Liquidators) in accordance with the terms of commercial liability insurance policies they issued.”

Analysts’ actions on Lumber Liquidators stock

Analysts at Oppenheimer recently initiated coverage on Lumber Liquidators with a Perform rating although the company is currently facing low confidence from consumers.

In a note to investors, Oppenheimer analysts expressed their belief that the company has long-term opportunities for growth.  The analysts wrote, “In the near term, we think Street EPS forecasts remain too optimistic, and the valuation of shares has yet to reach level characteristic of investor capitulation. We could see LL shares trading down to the low- to mid-20s before setting up for a prolonged move higher.”

Last month, Jefferies maintained its Hold rating while Longbow Research downgraded its recommendation to Neutral.

Whitney Tilson sent the following to investors:

I have no idea about this – but one can always hope!

 

Lumber Liquidators Quickly Drops to Session Low

By Arie Shapira and Joshua Fineman

(Bloomberg) — Lumber Liquidators drops as much as 4.5% to lowest since April 2012.

  • FTC earlier said will host press conf. tomorrow 12pm to announce action on major consumer fraud case; no companies were mentioned by FTC
  • LL wasn’t immediately available for comment; FTC declined to comment
  • LL hosts annual meeting May 21
  • NOTE: HLF earlier quickly erased gain after FTC statement

2) An ABC affiliate in Florida did an excellent four-minute segment that clearly exposes LL’s bogus testing program – its “Bio-Badges” are such a joke compared to the proper formaldehyde testing equipment shown in the segment: Link.

Separately, ValueWalk has learned that Bob Chapman is now short LL.