What: Shares of flooring retailer Lumber Liquidators (NYSE: LL) dove 21% last month, according to S&P Capital IQ data.
So what: The stock was hammered after a report aired on 60 Minutes alleging that some of the company's flooring products contained dangerously high levels of formaldehyde. Lumber Liquidators responded to the story by maintaining that its products are subjected to rigorous quality assurance testing. Management also cast doubt on the chemical testing method used in the 60 Minutes report, saying that it is "unreliable," and "prone to inaccuracy."
Now what: The bad press has clearly hurt the company's sales. Last week, Lumber Liquidators announced that revenue fell 13% in the month of March. Management blamed the drop on the unfavorable product allegations.
However, the company is expecting the sales pressure to be short-lived: Comparable-store sales should drop by only 4% for the full first quarter, management believes. Meanwhile, the United States Consumer Product Safety Commission launched its own study on "whether [Lumber Liquidators'] products present a health risk." That investigation, with which Lumber Liquidators is cooperating, could go a long way toward clearing up whether management or its detractors are telling the truth. Investors can expect those results to be published in the coming months.
Demitrios Kalogeropoulos 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.