Market Overview

Lumber Liquidators' Headaches Include Traffic, Competition From Home Depot, Analyst Says

Lumber Liquidators' Headaches Include Traffic, Competition From Home Depot, Analyst Says
Related LL
Lumber Liquidators Q3 Earnings Preview
Benzinga's Top Upgrades, Downgrades For October 10, 2018

Lumber Liquidators Holdings Inc (NYSE: LL) shares soared in late 2017 when the company reported its first profit since a 2015 laminate scandal, implying that the company has navigated through major obstacles. But now Lumber Liquidators must grapple  with multiple business-related headwinds, according to Wedbush. 

The Analyst

Wedbush's Seth Basham downgraded Lumber Liquidators' stock rating from Outperform to Neutral with a price target slashed from $39 to $28.

The Thesis

Lumber Liquidators' focus on pro sales and installations throughout 2017 resulted on an improvement in average tickets, Basham said in the downgrade note. (See the analyst's track record here.)

Contributions from installation sales are now expected to fade, as Lumber Liquidators completed its installation rollout — and competition in the pro space continues to intensify with large players like Home Depot Inc (NYSE: HD) making a push in the market, Bashman said. Home Depot's sales growth in flooring in the high-single-digits over the past few quarters is outpacing the industry's 4.7-percent growth in 2017.

Lumber Liquidators' supply chain costs, at 9 percent of sales, could move higher if dry van rates continue to rise, the analyst said. The company could see a 25-percent increase in transportation costs, which would result in a gross margin headwind of at least 100 basis points, he said. 

Lumber Liquidators' comp traffic growth has remained "muted," with the second quarter of 2017 being an exception, Basham said. The company is likely struggling to figure out the ideal mix of merchandising, advertising and store personnel to boost traffic, he said.

Price Action

Shares of Lumber Liquidators were trading lower by nearly 9 percent Monday morning at $24.55. 

Related Links:

Lumber Liquidators Hits Highest Level Since April 2015

Whitney Tilson Closes Kase Capital: 'Reporting Sustained Underperformance Was Making Me Miserable'

Latest Ratings for LL

Oct 2018Credit SuisseMaintainsNeutralNeutral
Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Oct 2018CitigroupInitiates Coverage OnNeutral

View More Analyst Ratings for LL
View the Latest Analyst Ratings

Posted-In: Flooring home improvement retailersAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga


Related Articles (HD + LL)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Testing Times: Market Turmoil And Investment Serenity

Sterling Seen Boosted By The UK CPI Decelerating More Than Expected In January