Image source: Lumber Liquidators Holdings Inc.

What happened

Shares of Lumber Liquidators Holdings (LL 37.33%) were down 13.7% as of 12:30 p.m. EDT Monday after the specialty flooring retailer released weaker-than-expected third-quarter 2016 earnings.

So what

Quarterly revenue rose 3.4% year over year, to $244.1 million, including 1% growth in comparable-store sales. That translated to a net loss of $18.4 million, or $0.68 per diluted share, compared to a net loss of $0.31 per share in the same year-ago period.

By contrast, analysts' consensus estimates predicted Lumber Liquidators would turn in lower revenue of $231.6 million, with a significantly narrower loss of $0.19 per share.

"We are pleased with the direction of our sales performance this quarter but recognize we have work to do to restore Lumber Liquidators to growth and profitability for the long term," added CEO John Presley, who took the helm late last year after the company's prior CEO abruptly resigned. "We continue to invest in our value proposition while focusing on execution within the business and have taken steps to strengthen our financial position."

Now what

Lumber Liquidators' sales performance is indeed encouraging, as this marks its first year-over-year revenue increase in six quarters. Those consistent declines were driven by the fallout of a negative 60 Minutes report in early 2015 alleging the company had sold laminate flooring products containing illegally high levels of formaldehyde (a known carcinogen). And though Lumber Liquidators has largely resolved the matter, including a favorable settlement with the Consumer Product Safety Commission earlier this year, higher advertising and legal costs continue to weigh on the company's profitability. That's also not to mention the risk of a negative decision with a pending class action lawsuit, which itself was the result of combining at least 10 class action cases into a single case earlier this year.

In the end, while it might be tempting to pick up shares of Lumber Liquidators on signs its sales are headed in the right direction, I personally remain content continuing to watch its progress from the sidelines.