Lumber Liquidators has signed an $8 million deal to purchase a trading company-Sequoia Flooring-in Shanghai, China, that provided quality control, product control and logistics services for approximately 40 percent of Lumber Liquidator's 2010 merchandise purchases. The move is part of the retailer's long-term sourcing strategy of purchasing directly from mills.
Lumber Liquidators paid for $5 million of the deal in cash. Lumber Liquidators will retain certain key personnel in Sequoia Flooring's Shanghai office and assume direct control of sourcing previously managed by Sequoia. Lumber Liquidators will also open a representative office in Shanghai after the government of China approves the deal, which is expected to happen this month.
"One of the core components of Lumber Liquidators' strategy and a key competitive differentiator has always been our ability to purchase products directly from mills," said CEO Jeffrey W. Griffiths. "We are excited to launch the third phase of our sourcing initiatives with the significant expansion of direct sourcing in China. By entering into this transaction, we will be able to better control product cost and quality through our own international sourcing operations, further strengthen our value proposition and increase our competitive position. Additionally, we believe that this acquisition will allow us to expand operating margin, while at the same time provide greater flexibility in our marketing programs to help us attract consumers with aggressive opening price points."
On the same day it announced the deal for Sequoia, Lumber Liquidators narrowed its fiscal outlook for 2011 and new expects:
- net sales for the full year in the range of $673 million to $686 million, narrowed from the previous range of $670 million to $700 million
- third quarter net sales in the range of $168 million to $171 million, narrowed from the previous range of $165 million to $180 million
- fourth quarter net sales in the range of $170 million to $180 million, narrowed from the previous range of $170 million to $185 million
- the opening of seven to nine new store locations in the fourth quarter of the year, for a total of 40 to 42 new store locations in 2011, narrowed from the previous range of 40 to 44 new store locations
- earnings per diluted share for 2011 in the range of $1 to $1.08, narrowed from the previous range of approximately $1 to $1.15.
