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Lumber Liquidators
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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