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Lumber Liquidators Holdings Inc. tumbled after reporting
first-quarter results that were weaker than expected, showing that
allegations it sold tainted flooring continue to dog the chain.
The
net loss was $1.20 a share, the Toano, Virginia-based company said
Tuesday in a statement. Analysts projected a deficit of 22 cents, on
average, but the figures may not be comparable. Revenue sank 10 percent
to $233.5 million, which was less than analysts estimated.
The
quarter marked Lumber Liquidators’ fourth straight sales decline since
the “60 Minutes” news program reported in March 2015 that the chain sold
Chinese-made laminate flooring with cancer-causing levels of
formaldehyde. The company denied those allegations and eventually
stopped selling those kinds of floors.
The
shares fell as much as 18 percent to $11.07 for the biggest intraday
drop since Feb. 22. The stock already had declined 23 percent this year
through Monday.
Once a fast-growing retailer, Lumber Liquidators
is now trying to revive a damaged brand and rebuild confidence with
investors. The stock has lost more than 70 percent since the
allegations, which were fueled by short sellers such as Whitney Tilson.
Management Changes
The
company has gone through a management shakeup as well, with several
senior executives leaving. John Presley, a longtime board member, became
chief executive officer in November. He has since been diagnosed
with leukemia and yet has remained involved in day-to-day operations.
The falloff in the business was
swift
after the “60 Minutes” report last year. Revenue tanked, and those
declines accelerated, with sales at established stores going from a 1.8
percent drop in the first quarter of 2015 to a 17 percent decrease in
the final three months of last year. Revenue by that measure dropped 14
percent last quarter. The lack of demand has led to losses and forced
the company to borrow from its credit revolver.
Involvement
by the U.S. Centers for Disease Control and Prevention hasn’t helped.
The agency, which was helping the U.S. Consumer Product Safety
Commission with a
probe
of the company’s products, said in February that testing on the
flooring in question showed minimal health risks. It then came back and
said it made a basic
math error
and that the exposure to formaldehyde was three times higher. That
brought a whole new round of negative headlines for the brand.
Legal Challenges
The
company also is facing a wave of litigation from consumers and
shareholders. One potential headache for the chain was alleviated in
April, when a judge
ruled in its favor in a lawsuit over label regulations in California.
Lumber
Liquidators has been dealing with other regulators, too. The company
received a third subpoena from the U.S. Securities and Exchange
Commission in March, regarding an investigation into compliance with
disclosure, financial reporting and trading requirements.
