My praise and contempt for CEO actions is pretty well-known around these parts. I've been running a weekly series looking at CEO gaffes for nearly 10 months now (with seemingly endless material, may I add), and recently I've begun highlighting incredible CEOs who deserve a pat on the back. Last year I even listed my top 10 CEOs of the year and my 10 worst CEOs of the year.
However, this year we're changing things up a bit, and we're putting the ball in your court! This year, The Motley Fool community is going to decide who the best CEO of the year is, and which CEO should be banished to a distant island.
Each week, over the remaining three weeks, I'm going to highlight one CEO who's worthy of being the best CEO of 2012, as well as a CEO who could easily be called the worst of 2012. In total, you and your community members will have eight great CEOs and eight terrible ones to choose from when voting commences in November. For reference, here is last week's best-CEO nominee.
In the meantime, I encourage you to get the discussion started on the "CEO of the Week" board. Although I do have all CEOs hand-picked already, these selections are by no means set in stone. If you can offer me your top picks for best and worst CEO, as well as your reasoning, you may just find your nomination in the spotlight.
Without further ado, I give you the sixth nominee for CEO of the Year: Robert Lynch, CEO of Lumber Liquidators (NYSE:LL).
Why Robert Lynch?
- Driving traffic into his stores: It's hard to believe given the amazing share price appreciation we've witnessed this year from Lumber Liquidators, but Robert Lynch has only been CEO of the company since Jan. 1. In that short time, he has implemented a turnaround plan focusing on three key strategies, of which driving traffic into his stores was key. One primary way Lynch has done this is by switching up Lumber Liquidators' marketing strategy to focus not only on the do-it-yourself consumer, but also on the casual homeowner who plans to hire a professional to install their flooring for them. This strategy has paid off, as is evidenced by the 5.8% increase in customers invoiced in the second quarter.
- Kept costs under control and focused on value: The second and third components of Lynch's turnaround plan involved lowering Lumber Liquidators' costs and focusing on its value. To handle the former, while serving as Lumber Liquidators' chief operating officer last year, he oversaw the purchase of the product development and logistics operations of its distributor, Sequoia Floorings. By establishing direct-to-mill relationships, the company has been able to cut out a middleman and boost margins. This, in turn, is allowing Lumber Liquidators to do what it does best: drive customer traffic through deep discounts that puts its peers to shame.
- Phenomenal quarterly results: Calling Lumber Liquidators' results "phenomenal" might be the understatement of the year. In its most recent quarter, the company reported a comparable-store sales increase of 12.4%, a net sales boost of 19.9%, a 330 basis-point rise in gross margins, and a ridiculous 130.4% explosion in net income -- all, in part, because of those factors mentioned above. It definitely helps, as well, that the housing market has finally found stronger footing. Home remodels are stronger than they've been in years, as is evidenced by the strong results we've witnessed from do-it-yourself retail chain Home Depot (NYSE:HD). But keep in mind that success isn't a given just because the housing market is rebounding. Lowe's (NYSE:LOW) has suffered through shrinking margins and lost market share, which only adds to my assumption that Lumber Liquidators is run by a fantastic CEO.
- Performance is king: Earlier this month I highlighted Home Depot's CEO, Francis Blake, as an incredible CEO, and came very close to nominating him for CEO of the year instead of Robert Lynch, save for one key point: stock performance. Home Depot's share price has nearly doubled over the trailing 12 months, while Lumber Liquidators' share price is up 186% just since Lynch took the CEO position. He has been most directly responsible for his stock's share appreciation in 2012 and is without question the MVP for Lumber Liquidators in 2012.
- Understands his competitors: The final factor that makes Robert Lynch stand out as a great leader is his understanding of his competitors. Specifically, that's because Lynch at one time or another worked for many of Lumber Liquidators' competitors. Prior to joining the company, Lynch was the CEO of home improvement specialist Orchard Supply Hardware, and held various positions within Home Depot and Wal-Mart. It's through these companies that Lynch learned the ins and outs of the home improvement sector, as well as received a hands-on education about what type of value consumers expect to receive when purchasing a product. Based on Lumber Liquidators' results, I'd say Lynch got the message -- and shareholders got themselves a fantastic CEO.
Is Robert Lynch the CEO of the year? That's going to be up to you and the rest of The Motley Fool community to decide. In the meantime, come back on Tuesdays and Thursdays for the next three weeks for the latest CEO nominations, and be sure to hit up the "CEO of the Week" board to voice your opinion to the community.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves giving credit when credit is due. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
Motley Fool newsletter services have recommended buying shares of Lumber Liquidators and Home Depot, as well as writing covered calls on Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.