Lumber Liquidators Shares Plunge About 6 Percent

By Spencer Mann,   
Money and Investing Writer
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On Monday, October 31, Lumber Liquidators (NYSE: LL) did an admirable job “spooking” the market. Its third quarter finance reports released, and the losses were much larger than anticipated.

At open, the company’s shares were selling for $18.14. By the end of the trading day, each share tumbled down to $15.51.  This drop of 16 percent is the result of a panicked, skeptical market.

In the company’s report from last quarter, it shared a net loss of $18.4 million, which translates to a damage of 68 cents per share. These losses occurred despite the report indicating that the wood floor retailer has attained sales growth for the first time in six quarters.

Lumber Liquidators has been pushing to recover from a scandal that has led to an investigation by the Center for Disease Control as well as multiple lawsuits across the country.

The biggest of the litigations is a securities lawsuit regarding the company’s sales practices in the selling of their flooring.

Reports claim that the laminate flooring made in China contains the Formaldehyde, a toxin linked to cancer. The various lawsuits revolve around the use of the chemical itself, as well as the company’s marketing practices during this period.

Since the scandal broke out in early 2015, losses kept mounting for the Lumber Liquidators. Just a year later, the entity’s net losses grew by more than double from the third quarter of 2015, just a year earlier.

Part of the firm’s net losses during the third quarter are due to a large sum of legal fees, totaling $4.3 million according to Fortune.

Along with ongoing litigation, the company has already settled with the Department of Justice, as well as the California Air Resources Board, agreeing to create a comprehensive environmental policy moving forward.

Additionally, Lumber Liquidators has spent a notable portion of its budget in marketing efforts to recover the name that stood at the top of the wood flooring industry.

These reported losses come despite a rise of 3.4 percent in total sales from a year ago.

According to CNBC, the organization has said during an interview that they are working to drive sales while balancing the need to maintain a profit. Last quarter was an important step for the company in their effort to drive sales.

Investment analysts have mixed views on the future of Lumber Liquidator’s stock value.

Many see this time as a turning point for the company’s fortunes, despite the current panic.

Even with a significant net loss, consumers appear to be willing to return to the business that once was profitable.

Those that hold a more pessimistic view see the third quarter report as an indication that Lumber Liquidators has an even larger hole to climb out of than previously expected.

Over 18 months have passed since news of the scandal has erupted, and the wounds seem just as fresh.

The only certainty regarding this matter is that nobody knows exactly how this case will play out.

The company hopes, however, that there will be no more Halloween scares in its future.

 

A version of this article appeared in the Tuesday, November 8th print edition.

Contact Spencer at
spencer.mann@student.shu.edu

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