Lumber Liquidators Conference Call Highlights

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Lumber Liquidators
LL
reported its third quarter earnings on Tuesday. Shares of the company are down ten percent. Below are some key highlights from its conference call: Results: • Our results for the third quarter included a net sales increase of 4.6% to • $266.1 million with a comparable store net sales decrease of 4.9%, operating margin of 9.7%, and net income of $15.7 million resulting in diluted EPS of • $0.58. • Overall, we were disappointed that our results were at the low end of our third quarter estimates. • We believe consumer demand for large-ticket discretionary projects such as residential flooring was weaker in the third quarter of 2014 than it was in the prior year. • We expect that clearance to be completed by the end of the second quarter of next year. • We will periodically run special promotions that we expect to drive customer traffic that yield lower-than-average gross margins. • While these transitions place additional pressure on our gross margin, we believe this planned investment in our value proposition will further enhance • Lumber Liquidators' industry-leading position. • We have implemented solutions for the short-term challenges impacting our business to date this year. • We have remained focused on executing our strategic initiatives planned for 2014. • These included continuing to deliver our value proposition to a broader customer base, opening two new distribution centers. • Net sales increased $11.8 million or 4.6% to $266.1 million with an increase in non-comparable stores of $24.2 million and a decrease in comparable stores of $12.4 million. • We estimate an aggregate net sale shortfall in the third quarter of up to $6 million as constrained inventory in certain laminate, vinyl plank, and engineered hardwood reduced our ability to convert customer demand to invoice sales. • We have opened 31 new locations, including five opened within the quarter. • We have 61 stores opened with the expanded showroom format and another 37 existing stores remodeled, either in place or through relocation within the primary trade area. • Together, these 98 stores represented 28% of the 349 stores we were operating at the end of the quarter. • Our average sale for the third quarter was $1,700, generally weakening each month during the quarter in comparison to the prior year. • We expect product margin in the fourth quarter to benefit from a return to targeted availability of our continuing assortment, but that benefit to be more than offset by greater clearance promotions. • Based on our more recent sales trends, we expect adverse changes in our sales mix led by clearance of products which are not a part of our continuing assortment to reduce gross margin. • We now expect full-year earnings per diluted share in the range of $2.38 to $2.52 based on a diluted share count of approximately 27.5 million shares. • We believe we have significant opportunity to grow our customer base within an available market of 74.5 million owner-occupied homes and that we have only penetrated one room in less than 4% of those homes. • We will continue to utilize our market optimization model in targeting annual unit growth in the range of 8% to 12%. • As we look toward 2015, we have a significant opportunity to grow the business, drive continuous improvement, and further invest in the customer.
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Posted In: EarningsNewsConsumer DiscretionaryHome Improvement Retail
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