Shares of flooring retailer Lumber Liquidators Holdings, Inc. (LL 3.74%) rose 13.2% in February, according to data provided by S&P Global Market Intelligence, after reporting a quarter that gave investors hope the future is getting brighter.
Fourth-quarter 2016 revenue was up 4.3% versus a year ago to $245 million, and gross margin improved from 23% to 32.9% over the same time frame. Lumber Liquidators still lost $5.5 million, or $0.20 per share, in the quarter, but results are at least trending upward rather than downward after health and safety concerns and scandal plagued the last two years.
While this may not be a sure sign that Lumber Liquidators has a profitable future ahead, it's a sign the company is past the worst of the financial impact from those scandals. Now, management has a tough road ahead regaining its reputation and growing sales organically, which could take a very long time.
While investors were excited that financial results are improving, we have to keep in mind that Lumber Liquidators is still losing money and still has a lot of baggage going forward. I'm not yet convinced that the company will be able to return to where it was from either a sales or margin standpoint, and that's why I would be a little cautious reading too much into last month's jump in the stock.