Lumber Liquidators Is Tanking: What You Need to Know

Investors sent shares of Lumber Liquidators (NYSE: LL  ) behind the woodshed today, with the stock down 22% as of early afternoon trading. Shareholders were spooked by the flooring retailer's profit and sales warning for the next few quarters. Let's dig right in to the bad news.

A shockingly rough quarter
The company last night issued a business update for the second quarter ended June 30 that showed a scant 2% sales improvement. That's a far cry from the 16% revenue gain that Wall Street analysts expected. Comparable-store sales dove 7% as customer traffic levels sank. By comparison, Lumber Liquidators managed 15% comp growth in the prior-year period and just a minor dip in the first quarter of 2014. 

On top of that surprising revenue slowdown, the company now expects profit to fall by 18% to just $0.60 a share. Wall Street, meanwhile, targeted a 23% increase in earnings, to $0.90 a share. It's not a good sign for Lumber Liquidators' pricing power that big flooring discounts failed to keep sales growth humming along. 

It's more than weather
Management blamed residual effects from last quarter's harsh weather for part of the shortfall, but it's clear that something more fundamental is hurting the business. CEO Robert Lynch said in a press release that the housing market isn't providing the same lift that it did last year, citing "weak macroeconomic trends related to residential remodeling, including existing home sales." Still, even Lynch was caught flat-footed by the severity of the pullback: In April, he said that warmer weather was leading to a rebound in customer demand, but yesterday he explained that the March recovery "did not carry into May, and June weakened further." 

Given those trends, it isn't surprising that the company had to slash its outlook for the rest of 2014. Sales are now expected to reach about $1.1 billion, with comps potentially negative for the entire year. The new profit target is $2.82, or almost 20% below the forecast provided back in April. 

The (somewhat) good news for investors is that management at least seems aware that it has lots of work to do. Lynch said that his team has "a strong sense of urgency" around recovering business momentum over the next few quarters, with a multiyear housing recovery helping drive gains beyond that. 

Foolish bottom line
In light of those positive long-term trends, I wouldn't panic and sell the stock just based on this quarter's weakness. Still, I wouldn't look at today's dive as a buying opportunity, either. The company has some serious issues to tackle, and investors on the fence about purchasing Lumber Liquidators after this 20% discount should wait for a clearer outlook before jumping in.

The outlook seems more than promising for Apple's next smart device
Apple recently recruited a secret-development Dream Team to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out... and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3024602, ~/Articles/ArticleHandler.aspx, 8/23/2014 3:48:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement