Lumber Liquidators Holdings Inc. (NYSE: LL)


Lumber Liquidators Holdings Inc. (NYSE: LL)


Lumber Liquidators Holdings Inc. has been quite active as of late after the “60 Minutes” report aired in early March alleging the flooring giant had been installing Chinese made product with exorbitant levels of formaldehyde that far exceeded acceptable levels.


Shares of the Virginia based company were slammed and closed down nearly 25% on March 1, 2015 following a morning trading halt for a pending news release. Since the initial report, Lumber Liquidators, Inc has lost close to $1 billion in market capitalization


In the scathing 60 Minute report, claims were made that the formaldehyde levels present in the laminate flooring were well beyond the CARB-2 compliance levels. Furthermore, CARB-2 Compliant is a label which Lumber Liquidators, Inc products display attesting that standards have been met and/or exceeded for formaldehyde existence in wood flooring.


After the team at 60 Minutes conducted their independent studies they found that the levels of formaldehyde present in the flooring was well above the CARB-2 emission standard.


Formaldehyde, a deadly chemical, has been linked to causing severe cancers such as leukemia, along with other respiratory issue affecting the eyes, throat and nose.


The CEO Defends

“Our goal is to sell a good product at a good price, and we don’t get the price by skimping on anything. We get the price by low overhead, huge volume and being very efficient at what we do. And we’re never going to sell something unsafe.” Tom Sullivan, Chief Executive Officer and founder of Lumber Liquidators Holdings Inc., told 60 Minutes.


Mr. Sullivan and the company also made a filing with the SEC expressing their strict belief that the tests conducted by 60 Minutes were incorrect and there was no law specifying the testing of finished product.


Fast forwarding to the present, Lumber Liquidators Holdings Inc. has added to its headache by posting a 1Q loss along with the CFO leaving the company permanently. The Company posted a loss of $.29 cents/share or $7.8M compared to analyst’s expectations of a $.15/share profit. You can read further into Lumber Liquidators First Quarter results here.


Bottom Line

Lumber Liquidators does have a chance to shore up its latest struggles. If the company can successfully identify and prove the validity of its sources along with heightened quality control, Lumber Liquidators Holdings Inc., has an opportunity to restore its reputation.