TOANO, Va., July 9, 2014 -- Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today provided a business update for the second quarter ended June 30, 2014, and revised its outlook for 2014.
Net sales in the second quarter of 2014 increased 2.3% to $263.1 million, from $257.1 million in the second quarter of 2013. At comparable stores, net sales decreased 7.1% for the quarter, in comparison to an increase of 14.9% for the second quarter of the prior year. The Company operated 344 stores at June 30, 2014, including 13 new stores opened during the second quarter, up from 300 at June 30, 2013.
Gross margin in the second quarter of 2014 is expected to contract in comparison to the second quarter of 2013 due primarily to adverse net shifts in sales mix and greater discounting at the point of sale. Selling, general and administrative expenses are expected to be approximately 9.0% higher than the second quarter of 2013 primarily due to higher advertising, occupancy, legal and professional expenses. The Company anticipates second quarter 2014 earnings per diluted share will be in the range of $0.59 to $0.61, compared to earnings per diluted share of $0.73 in the second quarter of the prior year.
Robert M. Lynch, President and Chief Executive Officer, commented, "Customer traffic to our stores was significantly weaker than we expected, particularly in geographic areas severely impacted by the unusually harsh weather in the first quarter. The improvement in customer demand we experienced beginning in mid-March did not carry into May, and June weakened further. Our reduced customer traffic has coincided with certain weak macroeconomic trends related to residential remodeling, including existing home sales, which have generally been lower in 2014 than the corresponding periods in 2013. We now believe the prolonged purchase cycle associated with our customers' discretionary, large-ticket home improvement projects is likely to be delayed for some customers into the fall flooring season, and for others, into spring of 2015."
Mr. Lynch continued, "In certain key merchandise categories, primarily laminates, vinyl plank and engineered hardwoods, lower than planned inventory levels reduced our ability to convert customer interest into invoiced sales. Certain mills experienced production delays in meeting our open orders as we continued to enhance our quality assurance requirements. We estimate an aggregate net sales shortfall in the second quarter of up to $18 million in those products impacted. We expect full product availability for our customers during the third quarter, with no material impact to our product costs."
Based on year-to-date results and current trends, the Company has updated its outlook for the full year 2014 and now expects the following:
Net sales in the range of $1.05 billion to $1.10 billion, from the previous range of $1.15 billion to $1.20 billion.
Change in comparable store net sales in the low single digits, either positive or negative, from the previous increase ranging from mid to high single digits.
The opening of a total of 33 to 37 new store locations in the expanded showroom format, from the previous range of 35 to 40 new store locations.
Earnings per diluted share in the range of $2.65 to $3.00 based on a diluted share count of 27.6 million shares, which is exclusive of any future impact of the stock repurchase program, from a previous range of $3.25 to $3.60.
Mr. Lynch concluded, "Though we continue to believe we are early in a multi-year housing recovery that will drive home improvement spending, a number of the factors weighing on our second quarter results are likely to continue in the second half of 2014. We are focused on continuous improvement in our operations, strengthening our leadership in product price and quality and elevating customer recognition of our superior value proposition. While we believe the third quarter may be weaker than we originally anticipated, we have a strong sense of urgency and we expect to regain traction to deliver operating margin expansion in the second half and in coming years. We remain confident in the long-term strength of our business model and believe that the investments we have made in our strategic initiatives will continue to drive market share gains in the future."
Full Second Quarter Results Conference Call and Webcast Information
The Company plans to release its full second quarter results on Wednesday, July 30, 2014. The Company plans to host a conference call and audio webcast at 10:00 a.m. Eastern Time on that date. The conference call may be accessed by dialing (877) 407-9039 or (201) 689-8470. A replay will be available approximately two hours after the call through August 6, 2014 and may be accessed by dialing (877) 870-5176 or (858) 384-5517 and entering conference ID number 13585249. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website, www.lumberliquidators.com.
About Lumber Liquidators
In its 20th year and with more than 340 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. Lumber Liquidators features more than 350 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and resilient vinyl. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators' low priced product, much of which is in-stock and ready for delivery.
With premier brands including Bellawood Prefinished Hardwood and Morning Star Bamboo, Lumber Liquidators' flooring is often featured on popular television shows such as HGTV's Dream Home and This Old House.
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