Guidance Conference Call From Lumber Liquidators Fails To Allay Concerns
Lumber Liquidators (NYSE: LL) was one of the hardest hit stocks Wednesday, giving up 8.1 percent in the regular hours session and an additional 18.8 percent after hours.
This intensified post-market selloff comes after the company significantly cut its guidance for the second quarter and full year. Lumber Liquidators held a brief conference call (less than 15 minutes) in Q&A format to discuss the update. Below are some highlights.
One of the biggest points emphasized during the call was supply constraints were a major reason for the drop in sales. The company indicated suppliers -- specifically in China -- had a hard time meeting quality requirements. The company's press release, released around 4:20 p.m. EDT, stated up to $18 million of products were affected.
The company indicated during the call areas hit hardest by the first quarter's harsh weather continued to have weaker than expected sales (ie. Midwest, Northeast). Lumber Liquidators said this was surprising because the firm expected pent up demand from weak first quarter sales in areas.
A Lumber Liquidators exec was asked about the advertising expenses during the quarter, to which he replied advertising was reduced. Demand was one cause of this, but the supply issues once again played a role. Regarding supply's effect on demand, the exec stated: “We didn't want to advertise items we wouldn't be able to sell.”
Several comments were made regarding the future of the company. Most importantly, no supply issues are expected for the third quarter.
When asked about whether the company is still considering vertical integration, the reply was yes. Although vertical integration will give the company more control over its supply chain to reduce issues seen in this quarter, the primary reason is still to facilitate future growth.
The company was also asked about the tile project it is trying in several stores. An exec said tile is still being sold in three stores to try the offering and no additional details can be given.
Shares of Lumber Liquidators are down 26.6 percent over the course of the regular and extended-hours session, last trading at $56.99.
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