Lumber Liquidators (LL) Shares Hammered After CDC Revised Report

Shares of Lumber Liquidators Inc. (LL) were trading down -2.33 or -16.40 percent to $11.88 per share in Monday’s premarket after news early this morning that the Centers for Disease Control and Prevention had said it had incorrectly assessed the cancer risk in the company’s flooring, saying there was a much higher risk than the agency had originally determined. Lumber Liquidators stock closed at $14.21 per share, down -0.21 or -1.46 percent in Friday’s regular trading session.

Toano, Virginia based Lumber Liquidators Inc. was founded by contractor Tom Sullivan in 1993 when he began selling excess wood bought from other companies out of a trucking firm’s yard in Stoughton, Massachusetts.
The company’s first store opened in West Roxbury, Massachusetts in 1996 and subsequently growing to 220 stores with more than 1,000 employees. Lumber Liquidators had their initial public offering at $11 per share in November of 2007, raising $110 million. The company expanded in 2010, adding an additional 40 stores in Canada.

In 2013, a report by the Environmental Investigation Agency showed that the company’s poor and indiscriminate sourcing practices had led to the destruction of the forest habitats of endangered tiger species. On March 1st of 2015, 60 Minutes aired a report on laminated flooring manufactured in China, which contained twenty times the legal amount of formaldehyde permitted in the State of California.

In October of last year, Lumber Liquidators pled guilty in Federal Court to charges of illegally importing hardwood flooring and on February 1st, the company was sentenced in Federal Court in Norfolk, Virginia. Lumber Liquidators will pay over $13 million in criminal fines, community service and forfeit assets related to the illegal importation of hardwood flooring manufactured in China from timber illegally logged in eastern Russia.

Sunday night, the CDC released its findings that its report released on February 10th about the possible effects from formaldehyde exposure emitted from some of the company’s laminate flooring samples, had used an incorrect value for ceiling height. This caused the estimates of airborne concentration from the samples to be three times lower than they should have been.

The original results of the tests showed that the modeled levels of formaldehyde in indoor air had a low risk of cancer at two to nine cases per 100,000 people. At these levels, the concentration in indoor air could result in eye, throat and nose irritation and could cause complications in people with asthma and other respiratory conditions. The amended results showed an estimated risk of cancer in six to thirty cases per 100,000 people.

This morning’s news is a blockbuster reversal for the company’s fortunes. The news puts Lumber Liquidators in a negative news cycle that could be worse than when the allegations against the company were first made public. The company’s stock had already lost over -70 percent of its value since the airing of the 60 Minutes piece in March of last year. With this morning’s premarket action, the stock is poised to test its 52-week low of $10.53.

Other News About LL

Lumber Liquidators CEO Diagnosed With ‘Treatable Form’ of Leukemia

CEO John Presley will continue to be involved in the firm’s day to day operations.

Lumber Liquidators To Report Fourth Quarter And Full Year 2015 Results On February 29, 2016

The company will also host a conference call on that day at 8:00 a.m. EST.
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Published on Feb 22, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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