Lumber Liquidators Offer Update on Supply Chain Optimization Initiative, Sees Expenditures $42-46M

Lumber Liquidators

, the largest specialty retailer of hardwood flooring in North America, today announced the next phase in its multi-year supply chain optimization initiative with the planned construction of a new distribution center in Henrico County, Virginia and the leasing of a new West Coast distribution center in Pomona, California.  Lumber Liquidators has reached an agreement to purchase 110 acres of undeveloped land within the White Oak Technology Park in Henrico County, Virginia and plans to construct a 1.0 million square foot distribution center to consolidate and enhance its current East Coast operations.  The Company currently leases approximately 750,000 square feet of distribution space across four separate buildings in Hampton, Virginia, whose leases generally expire prior to the end of 2014, and these locations would be consolidated into the new facility upon its completion.  The Company expects capital expenditures of approximately $42 million to $46 million, including land of approximately $5 million, to be incurred to construct the new facility, which is expected to be completed in the third quarter of 2014.  Additionally, the new facility will only require approximately $4 million in equipment, computer hardware and software.  The Company expects to fund all expenditures using existing cash and operating cash flow.  Upon full implementation of the new facility, the Company expects that significant increases in operational efficiency and unit flow, together with lower transportation and occupancy costs, will benefit operating margin and further strengthen the availability of product to its stores.  Lumber Liquidators has also reached an agreement to lease an approximately 500,000 square foot distribution center in Pomona, California.  The Company expects to begin operating that facility by November 2013, with full implementation planned for the first quarter of 2014.  The Southern California distribution center will enable the Company to further strengthen the availability of its entire industry-best product assortment, allowing customers shopping in its Western U.S. stores even greater flexibility in the timing of their flooring projects.  The Company estimates costs associated with the opening of the facility of approximately $300,000 to $500,000 in the third quarter of 2013 and approximately $1.0 million to $1.5 million in the fourth quarter of 2013.  Once in full operation, the Company expects a positive impact on operating income primarily from the combined benefits of a stronger value proposition, substantial reduction in international transportation costs and lower delivery costs.