Lumber Liquidators revises outlook for 2014

Lumber Liquidators doesn’t report its second-quarter results until July 31. But reduced customer traffic along with weak macroeconomic trends related to residential remodeling and a drop in home sales have prompted the company to revisit its outlook for the quarter and full year.

The company’s net sales for the quarter increased 2.3% to $263.1 million, from $257.1 million in the prior-year quarter. At comparable stores, however, net sales decreased 7.1% for the quarter, in comparison to an increase of 14.9% for the second quarter of the prior year.  

"Customer traffic to our stores was significantly weaker than we expected, particularly in geographic areas severely impacted by the unusually harsh weather in the first quarter,” said president and CEO Robert M. Lynch. “The improvement in customer demand we experienced beginning in mid-March did not carry into May, and June weakened further. Our reduced customer traffic has coincided with certain weak macroeconomic trends related to residential remodeling, including existing home sales, which have generally been lower in 2014 than the corresponding periods in 2013. We now believe the prolonged purchase cycle associated with our customers' discretionary, large-ticket home improvement projects is likely to be delayed for some customers into the fall flooring season, and for others, into spring of 2015."

Lynch added that in certain key merchandise categories, primarily laminates, vinyl plank and engineered hardwoods, lower-than-planned inventory levels reduced the company’s ability to convert customer interest into invoiced sales. Certain mills experienced production delays in meeting its open orders as the company continued to enhance its quality assurance requirements.  

“We estimate an aggregate net sales shortfall in the second quarter of up to $18 million in those products impacted. We expect full product availability for our customers during the third quarter, with no material impact to our product costs,” added Lynch.

As of June 30, the company operated 344 stores, including 13 new stores opened during the second quarter, up from 300 at June 30, 2013.  

Based on year-to-date results and current trends, the company has revised its outlook for the full year 2014 and now expects net sales in the range of $1.05 billion to $1.10 billion, from the previous range of $1.15 billion to $1.20 billion. It anticipates change in comparable store net sales in the low single digits, either positive or negative, from the previous increase ranging from mid to high single digits. And it now expects to open a total of 33 to 37 new store locations in the expanded showroom format, rather than 35 to 40 new store locations as previously forecasted.

"Though we continue to believe we are early in a multi-year housing recovery that will drive home improvement spending, a number of the factors weighing on our second quarter results are likely to continue in the second half of 2014,” concluded Lynch. “We are focused on continuous improvement in our operations, strengthening our leadership in product price and quality and elevating customer recognition of our superior value proposition. While we believe the third quarter may be weaker than we originally anticipated, we have a strong sense of urgency and we expect to regain traction to deliver operating margin expansion in the second half and in coming years.  We remain confident in the long-term strength of our business model and believe that the investments we have made in our strategic initiatives will continue to drive market share gains in the future."



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