What: Shares of flooring retailer Lumber Liquidators Holdings Inc (LL 0.67%) fell 12.1% in May, according to data provided by S&P Global Market Intelligence, after the company reported weak first-quarter results on May 10.
So what: Sales fell 10.2% in the quarter to $233.5 million as same-store sales fell 13.9%. Net loss ballooned from $7.8 million a year ago to $32.4 million, or $1.20 per share. While management pointed to gross margin stabilizing at 32.6% and one-time costs of $29.5 million related to lawsuits, the company isn't showing signs of a long-term rebound.
Most concerning may be the company's cash balance of just $22.0 million and $61.6 million available on its credit facility. Operations burned $8.2 million in the first quarter, so there isn't a lot of leeway for error going forward.
Now what: Any bet on Lumber Liquidators today is purely speculation on a future recovery, and I don't see a lot of positive signs right now. Margins may be stabilizing, but sales are falling rapidly and the company doesn't seem to be gaining customer trust back very quickly. Until we see some real improvement in both top- and bottom-line results, I wouldn't bet on this stock. Retail is too competitive, and Lumber Liquidators may never gain back enough trust to be a good long-term investment.
