TOANO, Virginia - Lumber Liquidators reported second quarter net sales were $283.5 million, an increase of 7.6 percent over last year and putting the firm on track for sales of more than $1 billion.

A standout was installation sales, which rose 51 percent. But Lumber Liquidators posted a net loss of $1.4 million, largely on a move to more engineered wood and vinyl floor, which raised costs and cut into margins. Stock analysts help drive a resulting sell-off in shares, which knocked down shares 21 percent. 

CEO Dennis Knowles announced the flooring firm would be eliminating its separate finishing center.
 
"For some time now, we have been looking particularly at our finishing operations. We have decided to exit that small part of our business so that we can focus more effectively on our core competencies, which are customer experience," Knowles said. "Our entry into the finishing business was originally a first step taken several years ago in a more ambitious vertical integration strategy, but that strategy was quite capital-intensive and limited our flexibility in terms of style, innovation and sourcing. The finishing step alone really offered no cost advantage."
 
Instead Lumber Liquidatores would "rely on our strong vendor network for innovation and cost-effective finishing that can be integrated into its manufacturing processes.
 
"This is a small operation that encompasses only the final finishing step in the flooring production," said Marty Agard, Chief Financial Officer. " It currently employs approximately 45 people. In terms of financial impacts related to the change, we will receive $1.8 million in proceeds from the sale of the production assets." Agard said that would take about a year. 
 
Knowles also talked about relocating Lumber Liquidators to Richmond, Virginia from Toano and Williamsburg, where with firm has been based for 15 years. 
 
"With a completely new senior team and growing business, it is the right time for us to relocate to a facility in a metropolitan environment. With our lease in Toano expiring at the end of 2018, this is an opportunity to consolidate our corporate functions into a single smaller facility, consolidate our customer contact teams in a nearby facility providing that recruiting and retention benefits of a metro area talent pool and it will drive operational efficiencies of co-location and provide growth capacity." 
 
 

 

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