Toano, Va.-based Lumber Liquidators (NYSE:LL) is bulking up to better support a business that grew revenues 22% in the most recent quarter.
On Wednesday, the largest specialty retailer of hardwood flooring in North America announced it has decided to build a new distribution center in Henrico County, Va., and also to lease a new West Coast distribution center in Pomona, Calif.
The first facility, with 1 million square feet in floor space, will be built on 110 acres of undeveloped land, not far from Lumber Liquidators headquarters in James City County, Va. Once constructed, it will add about a third to the 750,000 square feet of distribution space that Lumber Liquidators currently leases at four separate locations in Hampton, Va., the leases on which expire toward the end of next year.
Lumber Liquidators anticipates spending between $42 million and $46 million on this new distribution center, but says the investment will result in "significant increases in operational efficiency and unit flow, together with lower transportation and occupancy costs," boosting its operating profit margin.
The company's new lease on the West Coast will add 500,000 square feet of distribution space, and should be available to Lumber Liquidators beginning in November 2013. Lumber Liquidators expects to spend between $1.3 million and $2 million preparing the second facility for operation, with the costs spread between the third and fourth quarters of 2013. Here, too, the company expects to reap a "substantial reduction in international transportation costs and lower delivery costs," resulting in improved operating profitability.
Lumber Liquidators shares are up 0.5% in response to the news, currently trading just below $100.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators. The Motley Fool owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.