Please ensure Javascript is enabled for purposes of website accessibility

Why Lumber Liquidators Stock Rose Today

By Jeremy Bowman – Feb 25, 2020 at 12:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the flooring retailer rose after a strong earnings report.

What happened

Shares of Lumber Liquidators Holdings (NYSE: LL) were stacking higher today after the flooring specialist turned in a better-than-expected fourth-quarter earnings report. Profits surged as the company benefited from retroactive tariff relief and from lapping some costs related to legal matters.

As of 10:47 a.m. EST, the stock was up 13%.

A person installing wood flooring

Image source: Getty Images.

So what

Lumber Liquidators' growth on the top line was modest as comparable stores sales increased 0.4%, driving overall revenue up 1.8% to $273.9 million. That beat estimates of $272.4 million. 

However, what really pleased investors was the strong improvement from the home improvement retailer further down the income statement. Gross margin surged from 35.7% to 40.9%, largely due to the federal government's decision to reimburse the company $25 million for tariffs that were retroactively reversed. It also recognized $11 million in additional operating income from the decision. Meanwhile, selling, general, and administrative costs plunged from $151 million to $93 million as the company lapped $61 million in legal expenses from the quarter a year ago.

As a result, adjusted earnings per share jumped from $0.17 a year ago to $0.56, trouncing the average estimate of $0.15, according to Yahoo! Finance.

Interim President Charles Tyson said, "During the quarter, we made continued progress implementing our transformational plan designed to reinvigorate our brand and position us to deliver exceptional value in the hard-surface flooring marketplace."

Now what

Looking ahead to 2020, management acknowledged that the COVID-19 outbreak could impact the company in the second quarter, but for now its guidance excludes any potential challenges from the outbreak. For the full year, it expects revenue growth in the low-to-mid single digits, in line with analyst estimates, and it sees comparable sales in the low single digits. The company did not give earnings per share guidance, but sees adjusted operating margin of 2.7% to 3.5%, up from 2.3% in 2019. That, along with the revenue growth forecast, implies profit growth of 36% at the midpoint.

The stock has been incredibly volatile in recent days as a rally that started with a Reddit post last Thursday gave way to the coronavirus-based sell-off yesterday before shares jumped double digits again today.

While investors should be encouraged by the company's guidance as it expects more gains on the bottom line, they should also be mindful of the coronavirus, which will likely impact the stock if the outbreak drags on.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

LL Flooring Holdings, Inc. Stock Quote
LL Flooring Holdings, Inc.
$7.11 (2.60%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.