|Bloomberg | May 10, 2016|
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.
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.
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.