TOANO, VA - Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today provided a business update for the first quarter ended March 31, 2015.

Net sales in the first quarter of 2015 were $260.0 million, an increase of 5.6% from the first quarter of 2014 and a compound annual growth rate of 6.2% over the first quarter of 2013. Net sales in the month of March were $89.4 million, a decrease of 12.8% in comparison to March 2014. Consistent with Company's expectations as discussed in its March 12, 2015 Business Update, net sales in March 2015 were significantly weaker than trends in January and February, as net sales were negatively impacted by unfavorable allegations surrounding the product quality of the Company's laminates sourced from China. The Company opened four new stores during the first quarter of 2015 and was operating 356 locations at March 31, 2015.

In comparable stores, net sales for the quarter decreased 1.8% in comparison to the first quarter of 2014, due to a 6.2% decrease in the average sale, partially offset by a 4.4% increase in the number of customers invoiced. In the month of March 2015, net sales at comparable stores decreased 17.8% due to a 6.5% decrease in the average sale and an 11.3% decrease in the number of customers invoiced.

Open orders were $46.4 million at March 31, 2015, an increase of 13.5% over the total at March 31, 2014, up from $44.3 million at December 31, 2014 and down from $46.8 million at February 28, 2015. The open order balance is increased each day by gross new orders and decreased by invoiced sales and "net adjustments, including returns." "Net adjustments, including returns" as a percentage of gross new orders were 10% through February 2015 and 17% in March 2015. In March, the Company experienced an increase in net adjustments to approximately 27% of gross new orders in the first ten days of March, which moderated to approximately 13% of gross new orders in the last two weeks of March.

The Company's sales mix shifted when comparing the month of March to the first two months of 2015. Total laminate net sales, which were 21.2% of net sales through February 2015, fell 480 basis points to 16.4% in the month of March 2015, primarily due to a decrease in the sales mix of laminates sourced from China. Additionally, in comparing March 2015 to the first two months of the quarter, the sales mix of bamboo, vinyl plank and cork fell 120 basis points while the sales mix of solid and engineered hardwoods rose 470 basis points.

Gross margin is now expected to be in the range of 35.5% to 36.5% in the first quarter of 2015, including approximately $1.5 million in incremental transportation costs related to the East Coast distribution center transition and consolidation. Gross margin in the first quarter of 2014 was 41.1%. We believe the decline in gross margin is primarily due to adverse net shifts in sales mix, lower retail prices across product categories particularly in March, and certain planned changes in the marketing of the Company's value proposition.

Cash and cash equivalents at March 31, 2015 are expected to range from $41.5 million to $43.5 million, including $20.0 million in borrowings on the Company's revolving credit facility. The Company expects to end the first quarter with approximately $273 million of inventory available for sale, or approximately $766,000 per store.

Customer care has been the Company's primary focus in March 2015. To reassure its customers, the Company implemented an air quality testing program at no cost to the customer. As part of that program, through the end of the first quarter of 2015, approximately 10,000 of the Company's customers have requested in-home air quality test kits. The test kit is sent directly to the customer by an independent testing organization. After receiving the test kit, the customer is in control of the process. Clear instructions are provided on how to conduct the test and to mail the completed kit directly to a third-party lab accredited by AIHA-LAP (a leading accreditation for industrial hygiene labs) for analysis. Though the timeframe will vary by customer, once a test kit is received by the lab, the customer is expected to be informed of the results within approximately seven to ten days. Consequently, the entire process from request to results may take several weeks or more.

Lumber Liquidators Holdings, Inc.

Supporting Schedules

(dollars in thousands)

(unaudited)

Three Months Ended March 31,

2015

2014

Net sales

$       259,961

$       246,291

     Percentage increase

5.6%

6.9%

Number of stores open at end of period

356

331

Number of stores opened in period

4

13

percentage increase (decrease)

Average sale1

(6.2)%

2.6%

Average retail price per unit sold2

(6.8)%

1.4%

Comparable stores3:

      Net sales

(1.8)%

(0.6)%

      Customers invoiced4

4.4%

(3.2)%

      Net sales of stores operating for 13 to 36 months

3.7%

1.6%

      Net sales of stores operating for more than 36 months

(2.6)%

(0.9)%

Net sales in markets with all stores comparable (no cannibalization)

1.4%

3.2%

Net sales in cannibalized markets5

19.4%

17.2%

___________________

1 Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer, measured on a monthly basis and excluding transactions of less than $250 (which are generally sample orders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractor orders).

2 Average retail price per unit sold is calculated on a total company basis and excludes non-merchandise revenue.

3 A store is generally considered comparable on the first day of the thirteenth full calendar month after opening.

4 Change in number of customers invoiced is calculated by applying the average sale to total net sales at comparable stores.

5 A cannibalized market has at least one comparable store and one non-comparable store.

 

 

Two Months Ended February 28, 2015

 

One Month Ended March 31, 2015

 

Three Months Ended March 31, 2015

 

Net sales

$       170,575

$            89,386

$         259,961

percentage increase (decrease) from comparable period in 2014

     Percentage change

18.7%

(12.8)%

5.6%

     Two-year compound annual growth rate

12.0%

(2.7)%

6.2%

Average sale

(6.1)%

(6.5)%

(6.2)%

Average retail price per unit sold

(7.4)%

(6.2)%

(6.8)%

Comparable stores:

      Net sales

9.6%

(17.8)%

(1.8)%

      Customers invoiced

15.7%

(11.3)%

4.4%

 

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Source: Lumber Liquidators

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