Lumber Liquidators March sales drop after ‘60 Minutes’ report
Toano-based Lumber Liquidators said Thursday that its sales dropped to $89.4 million last month, down nearly 13 percent from March 2014.
The sales decline occurred after an early March “60 Minutes” report said the company’s Chinese-made laminate floors contained unsafe levels of formaldehyde. Despite the March decline, company sales for the first three months of 2015 increased to $260 million, 5.6 percent higher than the same time period last year.
Lumber Liquidators says its product is safe and has challenged “60 Minutes’” testing method. To reassure its clients, Lumber Liquidators is offering home tests kits to customers who purchased its Chinese-made laminate flooring. The company says about 10,000 customers have taken Lumber Liquidators up on the offer.
Despite its efforts to reassure the public, Lumber Liquidators’ stock has dropped sharply since Feb. 24, when it announced the “60 Minutes” report would air and said it was facing possible federal criminal charges for possible violation of the Lacey Act. The law prohibits trade in wildlife, fish, and plants that have been illegally sold. Additionally, the U.S. Consumer Product Safety Commission announced late last month it was investigating the safety of Lumber Liquidators’ Chinese-made laminate flooring.
Sales at Lumber Liquidator’s stores that had been open for a year or more decreased 1.8 percent from first quarter 2014 to first quarter 2015. Comparing March 2014 with March 2015, net sales at those stores decreased 17.8 percent.
The company’s laminate floor sales also dropped from 21.2 percent of total sales in February to 16.4 percent of all sales last month. When comparing March 2015 to the first two months of the quarter, the sales of bamboo, vinyl plank and cork fell 120 basis points while the sales mix of solid and engineered hardwoods rose 470 basis points.
Lumber Liquidators’ also expects its gross margin to be 35.5 percent to 36.5 percent this quarter. During the same time period last year the gross margin was 41.1 percent. “We believe the decline in gross margin is primarily due to adverse net shifts in sales mix, lower retail prices across product categories particularly in March, and certain planned changes in the marketing of the company's value proposition,” Lumber Liquidators said in a statement.
It expected cash on hand on March 31, to range from $41.5 million to $43.5 million, including $20 million in borrowings on the company's revolving credit facility.
Lumber Liquidators now has 356 stores, four which were opened in the first quarter of 2015.