Lumber Liquidators' Stock Drops on Formaldehyde Report

By Bill Esler | Posted: 06/24/2013 10:05PM

 

Lumber Liquidators, hardwood flooring NEW YORK CITY - Wood flooring supplier Lumber Liquidators' stock fell 11% to $76.63 following reports of formaldehyde in its China-sourced engineered flooring. An analyst for SeekingAlpha.com said lab tests confirmed the high levels of formaldehyde.

The author of the report,  Xuhua Xu, said a number of consumers posted comments online complaining of allergic reactions characteristic of formaldehyde exposure, following installation of Lumber Liquidators flooring in their home. Xuhua Xu suggested a relationship between Lumber Liquidators' $8 million acquisition of Sequoia Flooring in Shanghai, and the appearance of potentially non-CARB compliant engineered flooring in its U.S. supply chain.

The report first surfaced June 20, 2013, at SeekingAlpha.com, which included lab reports and shipping labels backing up the  the alleged sales of hardwood flooring products that potentially contained illegal levels of formaldehyde, a known carcinogen. Lumber Liquidators' stock price dropped from the June 19, 2013 close of $86.03 to $82.16 on June 20, 2013 on unusually heavy trading volume.

On June 21, 2013, the company's stock price dropped further to close at $76.63, for a total two-day drop of approximately 11%. Last year, Lumber Liquidators' net sales rose 19.3% to $813.3 million; net income increased 79.2% to $47.1 million

For the year, net sales rose 19.3% to $813.3 million; net income increased 79.2% to $47.1 million. - See more at: http://www.woodworkingnetwork.com/wood-market-trends/woodworking-industry-news/production-woodworking-news/Lumber-Liquidators-Flooring-Sales-Up-20-Percent-192188461.html#sthash.vYSCW4Qu.dpuf

The SeekingAlpha.com site includes an open letter by author Xuhua Xu to Mary D. Nichols, Chairman of the California Air Resources Board, which begins:

I am writing this letter to express concerns about the potentially significant and egregious violation of Airborne Toxic Control Measures (ATCM) to reduce formaldehyde emissions from composite wood products by a major U.S. hardwood flooring company, Lumber Liquidators Holdings Inc.

Lumber Liquidators is one of the nation’s largest flooring companies specializing in hardwood, engineered hardwood, bamboo and laminated flooring products.The Company operates a total of 279 retail stores in the United States and sold over $800 millio n worth of hardwood flooring products in fiscal year 2012.

By the very nature of its operation, its products are subject to CARB regulations regarding formaldehyde emission compliance in composite wood products. There are reasons to believe the Company has been knowingly selling noncompliant products to consumers and the stated compliance on some of its products is inaccurate.

Lumber Liquidators, based in Toano, VA, had not issued a response to the reports.

 

About the Author

Bill Esler, Woodworking Network, WMS

Bill Esler

Bill Esler, Editorial Director, Woodworking Network Bill is responsible for overall content at WoodworkingNetwork.com Woodworking Network magazine, and related newsletters. Bill also manages event programs for Woodworking Network Live conferences at the Woodworking Machinery & Supplies Expo in Toronto and Cabinets & Closets Expo. He developing audience engagement programs using custom digital printing, live lead-generating events, custom websites, and custom digital and print content. Read Bill Esler's woodworking blogs. He can be reached at besler@woodworkingnetwork.com or follow him on Google+.

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