Lumber Liquidators Holdings Inc (LL) Halts Chinese Laminate Sales

By Mani
Updated on

Lumber Liquidators is halting sales of all its Chinese-made laminate flooring effective immediately amid widespread concern over the safety of its products.

The home improvement retailer is also bringing in a former Federal Bureau of Investigation director to review its sourcing procedures.

Lumber Liquidators to pull the product from 356 stores

Citing people having knowledge of the developments, CNBC reports that Lumber Liquidators Holdings Inc. has issued a directive to its 356 stores Wednesday to pull the Chinese laminate flooring. Following a quarterly loss announced last week, CEO Robert Lynch announced the home improvement retailer would scale back its sourcing of laminate flooring from China in response to “customer demand”.  According to the CNBC sources, the new announcement goes further to eliminate the Chinese laminate completely.

There is also some evidence pointing to the company changing its product mix. For instance, as of Wednesday evening, the company’s website listed 55 varieties of laminate flooring for sale, compared to 84 on March 26. The home improvement retailer indicated last week that it would move toward North American and European manufacturers for its laminate flooring, though it is doubtful whether those sources can replace the Chinese products that are now being eliminated at the same price.

Lumber further reviewing supplier’s certification

Lumber Liquidators has so far been defending its Chinese-made flooring as “completely safe” and insisted that its suppliers comply with California standards. However, in a statement Thursday, the company said it is further reviewing its supplier’s certification and labeling processes. The hardwood retailer has brought on Freeh Group International Solutions LLC, founded by former FBI director and federal judge Louis J. Freeh, to help in reviewing its sourcing and compliance policies. The latest moves are among the most significant announced by the hardwood-flooring company in the past two months.

As reported by ValueWalk, last March, Lumber Liquidators shares plummeted after CBS aired a 60 Minutes report indicating that its reporters had tested Chinese-made 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.

Interestingly, the U.S. doesn’t have a national standard for indoor formaldehyde concentrations, and guidelines vary across organizations. Lumber Liquidators unveiled Thursday initial results of an analysis of about 3,400 kits it sent out to customers to test indoor air formaldehyde levels. The company said it had received 11,000 kits in total and the results revealed over 97% of households had indoor air concentrations of formaldehyde that were within World Health Organization guidelines. The home improvement retailer noted that formaldehyde levels can be affected by several factors such as cigarette smoke and emissions from wood-burning fireplaces.

Lumber Liquidators has had to grapple with a plethora of problems in the recent past. Last month, the company disclosed in a regulatory filing that the U.S. Department of Justice intends to file criminal charges in connection with the ongoing investigation regarding its imported products. The company anticipated it would incur approximately $10 million in potential losses that may result from the DOJ’s action.

The company also faces over 100 lawsuits seeking class-action status, alleging violations ranging from breach of warranty to false advertising.

Investors do not seem concerned as shares are up2% in early trading.

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