Lumber Liquidators reported a loss of $56.5 million in 2015, a year when the company saw its reputation and stock crash because of allegations about the formaldehyde content in its Chinese-made laminate product.
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Lumber Liquidators reported a loss of $56.5 million in 2015, a year when the company saw its reputation and stock crash because of allegations about the formaldehyde content in its Chinese-made laminate product.
Lumber Liquidators’ loss in 2015 follows a profit of $63.4 million in 2014.
Net sales in 2015 decreased 6.6 percent to $978.8 million from $1.05 billion in 2014. Comparable store sales fell $116.2 million, or 11.1 percent compared with 2014.
In the fourth quarter of 2015, Lumber Liquidators reported a loss of $19.8 million, compared with the company’s $17.3 million profit recorded in the fourth quarter of 2014.
Net sales in the fourth quarter of 2015 were $234.8 million, a decrease of 13.7 percent year-over-year. Comparable store sales fell 17.2 percent due to a 15.6 percent drop in the number of customers invoiced and a 1.6 percent decline in the average sale.
Lumber Liquidators’ gross margin was 23 percent in the fourth quarter of 2015 compared with 39.2 percent in same period in 2014. The decrease is attributable, the company said, to a $22.2 million reduction in the value of its inventory of laminate flooring sourced from China, which it determined during the quarter that it would not sell.
A “60 Minutes” investigation in March 2015 alleged the company’s laminate product from China contained unsafe levels of formaldehyde. The report sparked more than 100 class lawsuits and sent Lumber Liquidators stock reeling.
The U.S. Consumer Product Safety Commission announced it would investigate; the results were recently released and subsequently corrected after an error was found in the study’s math. The results found that the laminate Lumber Liquidators sourced from China between 2012 and 2014 would likely cause cancer in six to 30 cases per 100,000 people, according to the Centers for Disease Control and Prevention.
“While we have made some progress in key areas such as compliance and core operational efficiency, we still have a long way to go,” said John Presley, CEO, in a statement. “That said, our business model is intact, we are addressing legacy issues with clarity and candor, and we are rebuilding our brand."
Lumber Liquidators stock at press time was trading at $10.34. The company’s stock was as high as $69.22 on the eve of the “60 Minutes” investigation announcement on Feb. 23.
The full financial filing with the SEC is available online.
The company on Monday also hired Dennis Knowles, a former executive at Lowe’s, as its chief operating officer. The position was vacant since 2012.
"I am excited to be joining Lumber Liquidators," Knowles said in a statement. "This is a pivotal time for the company to refocus our efforts on elevating store performance, underscore our commitment to customer service and enhance the quality and diversity of our product offering.”