TOANO, VA - Sales at flooring giant Lumber Liquidators (NYSE: LL) jumped 24.5% third quarter, and profits rose a whopping 58.4%.
The largest specialty retailer of hardwood flooring in North America, Lumber Liquidators reported $254.3 million in revenue and net income was $20.4 million. Gross margin rose about 10% reflecting lower costs, increased up-sales at retail of mouldings, butcher block, grills and other accessories, says Lumber Liquidators.
"We think we are in the early stages of a multi-year housing recovery," CFO Daniel Terrell said during an analyst call in this morning. "We recognize the potential for volatility," he said, but nevertheless expects the year to end at $985 million - up from $940 million previously projected.
Lumber Liquidators' new 1 million square foot consolidated warehouse and production center is under construction on 110 acres acquired near its Virginia headquarters. Lumber Liquidators will spend $53 million on that project, which consolidates four facilities in Virginia that currently total 750,000 square feet. A 500,000 square foot West Coast plant will open in the first quarter of 2014.
Lumber Liquidators also opened seven new stores and remodeled six existing stores during the period. Now 10% of its 305 stores feature its new, larger "Store of the Future" style, and these units are selling even more than average.
Sales were also boosted as Lumber Liquidators moves beyond do-it-yourself customers and by Hurricane Sandy rebuilding.
"We continue to gain share in a highly-fragmented market through our outstanding team of hardwood flooring experts," said Robert M. Lynch, CEO.
Lynch briefly addressed the investigation by Federal authorities into Lumber Liquidators hardwood supply chain practices. A search warrant was executed at its headquarters and a nearby store by Federal agents on Sept. 26, possibly in regard t Lacey Act violations.
"We are continuing to cooperate with federal authorities, there is no further update I can provide you at this time," Lynch said this morning. " I can assure you of our ethical conduct, and we require the same of our suppliers."
During its supply chain vetting process, "Many mills are disqualified" after a due diligence process, Lunch said. "We work collaboratively with suppliers, and we terminate suppliers who are not meeting those policies."
In its SEC filing yesterday, Lumber Liquidators said:
"We currently work directly with more than 110 domestic and international vendors, primarily mills, with whom we have generally cultivated strong relationships.
We select suppliers based on a variety of factors, including their ability to supply products that meet industry grading standards and our demanding product specifications, which support the high-quality nature of our brands.
We believe that we are the largest customer for most of our suppliers, which we believe enables us to exercise greater control from quality to pricing.
In 2013 to-date, approximately 51% of our product was sourced from Asia, 39% from North America, 7% from South America and 3% from other locations, including Europe and Australia. Our top 20 suppliers accounted for approximately 65% of our supply purchases, but no single supplier provided more than 4% of our hardwood purchases. Further, no single hardwood product represented more than 1% of our sales mix.