TOANO, Va. -- Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the third quarter and nine months ended September 30, 2013, and raised its outlook for 2013.
Third Quarter Results
Net sales increased $50.0 million, or 24.5%, to $254.3 million in the third quarter of 2013 from $204.3 million in the third quarter of 2012. Comparable store net sales increased 17.4% for the quarter, driven by a 9.8% increase in the number of customers invoiced and a 6.9% increase in the average sale. Non-comparable store net sales increased $14.5 million. During the third quarter, the Company opened seven new stores and remodeled six existing stores.
Gross margin was 41.8% in the third quarter of 2013 compared to 38.1% in the third quarter of 2012. The increase in gross margin reflects generally lower costs, increased attachment of moldings and accessories and certain operational efficiencies across the organization.
Selling, general and administrative ("SG&A") expenses increased as a percentage of net sales to 28.8% for the third quarter of 2013 compared to 28.0% for the third quarter of 2012 as the Company continued to aggressively broaden the reach and frequency of its advertising.
Operating margin increased 290 basis points to 13.1% in the third quarter of 2013, from 10.2% in the third quarter of 2012.
Net income increased 58.4% to $20.4 million, or $0.73 per diluted share, in the third quarter of 2013 from $12.9 million, or $0.46 per diluted share, in the third quarter of the prior year.
Cash and cash equivalents at September 30, 2013 totaled $84.2 million compared with $40.1 million at September 30, 2012 and $64.2 million at December 31, 2012.
Robert M. Lynch, President and Chief Executive Officer, commented, "We experienced consistently strong demand across the third quarter as our superior value proposition continues to resonate with a growing customer base. We continue to gain share in a highly-fragmented market through our outstanding team of hardwood flooring experts, delivery of a wide assortment of high-quality products and by maintaining our position as the low-price leader. We are pleased to have driven additional operating margin expansion through our focus on continuous improvement and the resulting cumulative benefits of our key strategic initiatives."
First Nine Months Results
Net sales increased 23.1% to $741.8 million in the first nine months of 2013 from $602.7 million in the first nine months of 2012. Comparable store net sales increased 15.8% for the first nine months of 2013, compared to 10.7% for the first nine months of the prior year. Non-comparable store net sales increased $43.8 million over the prior year. During the first nine months of 2013, the Company opened 19 new stores and remodeled 14 existing stores, all of which were in the Company's new "store of the future" expanded showroom format. As of September 30, 2013, the Company operated 307 stores in 46 states and Canada.
Gross margin increased to 41.2% for the first nine months of 2013 from 37.6% in the same period of 2012. SG&A expenses increased to 28.8% of net sales for the first nine months of 2013, compared to 28.6% of net sales for the first nine months of 2012.
Operating margin increased 350 basis points to 12.4% in the first nine months of 2013, from 8.9% in the first nine months of 2012.
Net income increased 70.2% to $56.6 million, or $2.03 per diluted share, in the first nine months of 2013 compared to $33.3 million, or $1.18 per diluted share, in the first nine months of the prior year.
Based on year-to-date results and current trends, the Company now expects to achieve the following for the full year:
Net sales for the full year in the range of $985 million to $995 million, from a previous range of $940 million to $963 million.
Comparable store net sales increasing 14% to 15%, with the fourth quarter ranging from 9% to 14%.
The opening of a total of 10 to 12 new store locations in the fourth quarter of the year, for a total of 29 to 31 new store locations in 2013.
Incremental SG&A expenses in the fourth quarter of approximately $1.4 million to $1.8 million, primarily related to the start-up of the West Coast distribution center and certain incremental legal and professional fees.
Capital expenditures between $35 million and $40 million, including $19 million to $21 million related to the supply chain optimization.
Earnings per diluted share in the range of approximately $2.65 to $2.74, based on a diluted share count of approximately 27.9 million shares, which is exclusive of any future impact of the stock repurchase program, up from a previous range of $2.45 to $2.60.
Mr. Lynch concluded, "Our team remains unified in its vision and motivated to continue taking market share through our powerful value proposition and uniquely profitable store model. We continue to reinvest a portion of our success in our people, store model and support structures to enhance our value proposition and deliver cumulative, multi-year benefits. We were excited to take the next steps in optimizing our supply chain during the third quarter, and we expect that the investment in new distribution facilities will enable us to deliver even better service to our customers and support the tremendous growth of our business. Including our performance in the third quarter, we have achieved record results to date in 2013, but we are more excited than ever by the long-term opportunities that lie ahead. We continue to expect multi-year operating margin expansion as we focus on delivering the best value proposition in flooring to our customers and rewarding our shareholders."
About Lumber Liquidators
With over 305 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 340 first 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 quality 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.
For more information, please visit www.lumberliquidators.com
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