Please ensure Javascript is enabled for purposes of website accessibility

Why Lumber Liquidators Stock Went Higher on Thursday

By Jon Quast - May 28, 2020 at 10:42AM

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

It reported a surprise quarterly profit, but that will be hard to sustain.

What happened

Shares of Lumber Liquidators (LL -3.14%) traded sharply higher on Thursday, after the company reported upbeat earnings for the first quarter of 2020. As of 11:20 a.m. EDT, the stock was trading 19% higher. 

Today's move from Lumber Liquidators continues a trend for 2020. Shares are now up 16% for the year and have more than doubled from March lows.

LL Chart

LL data by YCharts

So what

Lumber Liquidators' comparable sales were up 4% for most of the quarter. But in late March, comparable sales fell 45% as consumers stayed home and as the company was forced to close 56 stores due to COVID-19. This resulted in Q1 net sales of $267 million -- up less than 1% year over year.

Analysts expected Lumber Liquidators to report a net loss, but the company instead reported earnings per share (EPS) of $0.42. This is mostly due to an $11 million increase in gross profit. Lumber Liquidators has tried to improve its operations and supply chain over the past year, aiding this gain. But it also scored exclusions on tariffs from Chinese imports.

Lumber Liquidator's surprise net profit is likely providing the fuel for this consumer-discretionary stock's gains today.

A businessman draws an upward arrow on a chart displayed on a transparent touchscreen.

Image source: Getty Images.

Now what

It's important to remember that Lumber Liquidators' quarterly results only included a short period of being affected by the coronavirus. So far in the second quarter, comparable sales are down 30% from the second quarter of 2019. This means Q2 is trending toward being unprofitable. In its press release today, Lumber Liquidators said the gross margin improvements from Q1 are only partially offsetting the impact from lost sales.

While Wall Street is rightly excited about this quarter's profit, shareholders should understand that profits may be elusive in coming quarters.

Jon Quast 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.
LL
$10.18 (-3.14%) $0.33

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

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.