Lumber Liquidators posted a first-quarter loss that was much worse than expected, on lower sales and continued legal costs due to last year’s carcinogenic laminate flooring scandal.
The hardwood-flooring company company posted a loss of $32.4 million, or $1.20 a share in the first quarter, compared with a loss of $7.8 million, or 29 cents a share, a year earlier.
Net sales fell 10.2% to $233.5 million, which included a 13.9% decline in comparable store net sales.
The company attributed the declines to changes in its promotional strategy and “continued negative consumer sentiment regarding us, which was in part a result of heightened negative media coverage during the first quarter associated with certain Chinese laminate product that the company discontinued in May of last year.”
Overhead expenses rose 20% to $117.2 million, due to a $16 million charge related to the company’s consolidated securities class action lawsuit and a $13.5 million increase in certain legal and professional fees and related accruals.
Lumber Liquidators’ chief executive John Presley said in a press release said that while sales fell short of expectations, gross margin improved to 32.6%% from 35.2% a year earlier due to strategic pricing initiatives.
The company has also made progress on several legal and regulatory issues, and “while there is still work to do, we believe we have the right team in place to address these challenges.”
“We continued to execute on our plan to strengthen our business, including enhancing compliance and sourcing, as well as improving training for our store associates,” Presley said. “Our management team is confident in the potential of our business, and we believe that by continuing to work our plan, we will return Lumber Liquidators to growth and profitability.”
The company has had troubles since a “60 Minutes” segment last year alleged the company sold laminate flooring from China with unsafe levels of formaldehyde, a carcinogen, according to The Wall Street Journal. The report pummeled the company’s stock, led to sharp declines in sales and the departure of several top executives, including the CEO at the time. Presley was named CEO in November 2015.