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's happening: Shares of Lumber Liquidators (LL) were down 18% as of 12:30 p.m. EST Wednesday after the hardwood flooring retailer announced disappointing fourth-quarter results.
Quarterly net sales rose 5.2% year over year to $272 million, helped by a $24.5 million increase from locations outside Lumber Liquidators' comparable-store base, and hurt by a 4.2% decrease in comparable-store sales. Net income fell 16.8% year over year to $17.3 million, or $0.64 per diluted share. Analysts, on average, were looking for earnings of $0.76 per share on sales of $279.5 million.
Why it's happening: "The availability of our assortment was materially restored in the fourth quarter," stated Lumber Liquidators CEO Robert Lynch, "and though our results were short of our expectations, we implemented changes to the marketing of our value proposition during the quarter which were the primary drivers of significant customer traffic late in the quarter and into 2015."
As a result, Lumber Liquidators expects full-year 2015 sales of $1.14 billion to $1.21 billion, or an increase of 8.6% to 15.2% over 2014, with a single-digit increase in comparable-store sales. Lumber Liquidators also plans to open 30 to 35 new locations, and to remodel 15 to 20 existing stores, all featuring its successful expanded showroom format. This should result in earnings per share in the range of $2.50 to $3.
That said, while the revenue range is roughly in line with expectations, analysts were already modeling earnings near the high end at $2.96 per share. With shares trading around 21 times the midpoint of Lumber Liquidators' expected 2015 earnings range, it's hard to blame the market for bidding the stock down for now.
