Why Lumber Liquidators Holdings, Inc. Stock Plummeted Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Lumber Liquidators Holdings  (NYSE: LL  ) were turning into sawdust today, falling as much as 23% after the company badly missed the mark in its second-quarter preliminary earnings report.

So what: The hardwood flooring specialist said a combination of slower home sales and internal operational problems weighed on results as comparable sales sunk 7.1% in the quarter and overall sales increased just 2.3% to $263.1 million, well below expectations of $299.3 million on 16% growth. Bottom-line results were even worse as earnings are now projected to drop to $0.59-$0.61 from $0.73 a year ago, well below the consensus at $0.90. CEO Robert Lynch said customer traffic was "significantly weaker than expected," and weakened over the course of the quarter. 

Now what: Lynch also said that the downturn in traffic correlated with a decline in existing home sales versus their level a year ago, a key driver of flooring purchases. Separately, insufficient inventory levels in some items ate into results as did production delays at some of its mills. Looking ahead, Lumber Liquidators' outlook was particularly woeful as it now sees near-flat comparable sales for the year, down from the mid to high single digits, and it lowered its EPS guidance from $3.25-$3.60 to $2.65-$3.00. Management said that the operational issues plaguing second-quarter performance have been solved and will not impact the third quarter, but it's hard to get behind the once high-flying home-improvement stock until it shows organic sales have recovered and are moving higher.

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  • Report this Comment On July 10, 2014, at 11:56 PM, glafaille wrote:

    No surprise to me. Visited our local Lumber Liquidators store when we were shopping for wood flooring for our home. Their prices were VERY high compared to other vendors. Plus the quality of their products were several grades LOWER than the competition. Higher prices for lesser quality is not the way to compete.

    I should have shorted this one 10 minutes after visiting their store.

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