Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: For the third day in a row, shares of Lumber Liquidators Holdings (NYSE:LL) jumped double digits, up more than 13% as of 11:30 a.m. Thursday, this time thanks to encouraging comments during the company's planned business update conference call.
Why it's happening: Remember, investors cheered on Tuesday when the hardwood flooring specialist provided an initial agenda for the call. In light of a recent negative 60 Minutes report on the company, that agenda indicated management would shed light on why they believe Lumber Liquidators' products are safe, what they would do to support customers, as well as updates on the company's liquidity and first-quarter 2015 outlook.
To read the full 50-page update, click here (opens PDF). But in short, during the call Lumber Liquidators CEO Rob Lynch first thanked customers for their support, insisted their products are safe, and promised "We do not cut corners [and] are committed for the long haul."
However, because "media reports provided very little context" and ignore the unreliable nature of the type of "deconstructive" testing featured in the 60 Minutes report, Lumber Liquidators wants customers to know it understands their concerns, so is initiating an air quality testing program to qualifying customers at no cost. Those tests will involve kits of the same quality used to test workplace exposures under the Occupational Health and Safety Act, and will be administered by an independent third party and analyzed by accredited labs.
Lumber Liquidators also noted since the 60 Minutes broadcast, roughly 8% of consumers say they would not consider buying from Lumber Liquidators at this time. Net sales and comparable-store sales have also fallen around 7.5% and 12.7% year over year in the nine days following the report. As a result, first-quarter net sales are now expected to be $253.6 million to $265.6 million, which estimated comparable-store sales in the range of negative 4.4% to positive 0.5%. Analysts were modeling first-quarter sales of $276 million.
Finally, Lumber Liquidators detailed its financial position, saying it would take "extreme assumptions" to exhaust its current liquidity -- notably including a 27% year-over-year drop in sales for the first nine months of this year -- before it would need to seek additional financing.
In the end, today's pop is no surprise given Lumber Liquidators' comprehensive defense of its business. But keep in mind shares are still down more than 40% over the past month as of this writing. Though investors still have a ways to go to recoup their recent losses, this is undoubtedly a great start.