Supply Chain

Lumber Liquidators Tries to Regain Its Footing

The flooring company's stock rebounded after it offered its customers free safety testing of the product installed in their homes.
Katie Kuehner-HebertMarch 12, 2015
Lumber Liquidators Tries to Regain Its Footing

Lumber Liquidators Holdings on Thursday fought back against a “60 Minutes” segment earlier this month alleging its imported laminated flooring product from China is laced with high levels of formaldehyde. The company offered its customers free safety testing of the product installed in their homes by independent third-party labs.

“The customer is in control of the process, with clear instructions on the test and its results,” Rob Lynch, president and chief executive of the Toano, Va.-based company, said in a conference call Thursday that was released in a Securities and Exchange Commission filing.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

laminate“Unfavorable results will lead to further steps to determine air quality and the source,” Lynch said. “Once a full analysis of a home’s air quality is completed and if the customer is still not satisfied, we will consider a reinstallation, the cost of which is expected to range from $3,000 to $4,000.”

The executive contended that such testing would likely lead to negative results of the unhealthy presence of formaldehyde emitting from installed flooring, “because lamination actually helps seal-in the formaldehyde from the core, as ’60 Minutes’ acknowledged.” However, “formaldehyde emissions arising from our products are a small fraction of the levels the media has discussed.”

The company’s total net sales in the nine days following the “60 Minutes” broadcast were down roughly 7.5% to the same period in 2014, with comparable store net sales down roughly 12.7%, Lynch said. Its open orders remained higher than last year, currently up 12.6% to $45.9 million, and include roughly $5.3 million, or 11.5%, of laminate orders.

A USA Today article Thursday said that the “60 Minutes” segment was spurred by hedge fund manager Whitney Tolson, who had taken a short position against Lumber Liquidators.

The company’s share price fell after the broadcast, but on Wednesday rose 6% to $29.58 after hedge fund manager Robert Chapman of Chapman Capital said he had taken a long position. The stock surged further Thursday after the company’s call, up more than 13% to $37.30 in midday trading.

“To be sure, Lumber Liquidators isn’t out of the woods yet,” USA Today wrote. “Sen. Bill Nelson [Florida Democrat] has asked the Consumer Product Safety Commission and other federal agencies to investigate whether the company’s flooring poses a health risk.

“And prior to the 60 Minutes segment, management warned that the company faced criminal federal charges over imported bamboo harvested illegally from protected animal habitats.”

Image: Thinkstock