TOANO, VA --Lumber Liquidators, the largest specialty retailer of hardwood flooring in the U.S., today announced financial results for the first quarter ended March 31, 2010, and provided updates to its outlook for 2010.
First Quarter Results
Net sales increased $27.3 million, or 22.1%, to $151.2 million in the first quarter of 2010 from $123.9 million in the first quarter of 2009. Comparable store net sales for the first quarter of 2010 increased 8.0%, as strong consumer demand drove sales volume. In the first quarter of 2009, comparable store net sales had decreased 5.8%. Non-comparable store net sales increased $17.4 million in the first quarter of 2010 over the prior year period. The Company opened 11 new stores during the first quarter of 2010.
Gross margin was 35.4% for the first quarter of 2010, a decrease from 36.0% in the first quarter of 2009. Gross margin was adversely impacted by certain shifts in sales mix, increased product costs, including domestic transportation and finishing costs, and selected promotional pricing designed to generate incremental consumer traffic.
Selling, general and administrative (SG&A) expenses were $42.2 million, or 27.9% of net sales, for the first quarter of 2010 compared to $36.3 million, or 29.3% of net sales, for the first quarter of 2009. The decrease in SG&A expenses as a percentage of net sales for the first quarter of 2010 primarily reflect leverage in advertising, as well as reductions in legal, professional and other expenses, partially offset by the costs of store base expansion and infrastructure investments.
Net income increased 36.8% to $7.0 million, or $0.25 per diluted share, in the first quarter of 2010 compared to $5.1 million, or $0.19 per diluted share, in the first quarter of 2009. The effective tax rate was 38.8% in the first quarter of 2010 compared to 39.3% in the first quarter of 2009.
Jeffrey W. Griffiths, President and Chief Executive Officer, commented, "We experienced a strong start to 2010, delivering record quarterly sales, traffic and store openings in the first quarter. Customers continued to respond to our value proposition of price, selection, quality and availability, which helped to drive traffic and net sales growth throughout the quarter. Additionally, we believe that our "never-out-of-stock" inventory program and continued focus on improving inventory management helped drive our sales during the first quarter. We are pleased with our ability to significantly expand operating margin. Although gross margin contracted due to some of our efforts to drive top line growth, our net sales gains produced additional SG&A leverage, and we increased our operating margin to 7.5% of net sales from 6.7% in the first quarter of last year. Further, we continued to gain share in the highly fragmented hardwood flooring market as we expanded into six new markets in the first quarter. Overall, we are pleased with the positive momentum that we have built to date in 2010 and expect to continue driving growth throughout the remainder of the year."
Company Outlook
Based on first quarter results and current trends, the Company increased its net sales guidance for the full year to a range of $630 million to $650 million, from the previous range of $620 million to $645 million. The Company continues to expect comparable store net sales for the year to increase in the low to mid-single digits.
The Company also announced its plans to enter Canada in the fourth quarter of 2010. The expansion into Canada is included in the Company's anticipated 36 to 40 total new store openings for 2010. The Canadian expansion is expected to increase 2010 capital expenditures by approximately $2.0 million to $3.0 million, bringing total 2010 capital expenditures to a range of $17 million to $21 million. The Company expects to be free cash flow positive for the year.
The Company now anticipates full year 2010 earnings per diluted share in the range of $1.13 to $1.23, including a loss of approximately $0.02 per diluted share related to the Canadian expansion. The Company had previously expected a range of $1.10 to $1.20 per diluted share. The earnings per diluted share range continues to be based on a diluted share count of approximately 28.4 million shares and an effective tax rate in the range of 38.5% to 38.8%.
Mr. Griffiths concluded, "As we look forward, we believe that we can continue to enhance our value proposition and grow our market share. Importantly, the flexibility of our business model enables us to continue to expand operating margin while making strategic investments in our business. We are very excited to be extending our footprint beyond the U.S. into Canada. We think this is a natural next step in our expansion strategy and that our value proposition will resonate strongly with Canadian consumers. Finally, we continue to expect to see steadily improving macro economic trends, with consumer demand beginning to strengthen, and we believe that these trends will continue to have a positive impact on our business."
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast on April 28, 2010, at 10:00 a.m. Eastern Time. The conference may be accessed by dialing (877) 407-9039 or (201) 689-8470. A replay will be available approximately one hour after the call through May 12, 2010 and may be accessed by dialing (877) 660-6853 or (201) 612-7415 and entering account number 3055 and conference ID number 349222. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website.
About Lumber Liquidators
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States. With more than 195 stores and 340 varieties of flooring, including solid and engineered hardwood, bamboo, cork and laminate, and featuring premier brands such as Bellawood (which features a 50-year warranty), Dream Home, Schon, Virginia Mill Works, and Morning Star, Lumber Liquidators has one of the most extensive selections of prefinished and unfinished hardwood flooring in the industry. Its hardwood line is made up of more than 25 domestic and exotic wood species in both prefinished and unfinished brands of various lengths and widths. Flooring experts in every store provide consumers with useful product information and answers to all of their flooring questions.
While keeping costs down is part of the Company's philosophy, Lumber Liquidators is also committed to offering high-quality, name-brand products that it stands behind with confidence.
Forward-Looking Statements
This press release and accompanying financial tables may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act. These statements are based on currently available information as of the date of such statements and are subject to risks and uncertainties that may cause actual results to differ. The Company specifically disclaims any obligation to update these statements, which speak only as of their respective dates, except as may be required under the federal securities laws. Information regarding these additional risks and uncertainties is contained in the Company's most recent periodic filings with the Securities and Exchange Commission.
Source: Lumber Liquidators, www.lumberliquidators.com
First Quarter Results
Net sales increased $27.3 million, or 22.1%, to $151.2 million in the first quarter of 2010 from $123.9 million in the first quarter of 2009. Comparable store net sales for the first quarter of 2010 increased 8.0%, as strong consumer demand drove sales volume. In the first quarter of 2009, comparable store net sales had decreased 5.8%. Non-comparable store net sales increased $17.4 million in the first quarter of 2010 over the prior year period. The Company opened 11 new stores during the first quarter of 2010.
Gross margin was 35.4% for the first quarter of 2010, a decrease from 36.0% in the first quarter of 2009. Gross margin was adversely impacted by certain shifts in sales mix, increased product costs, including domestic transportation and finishing costs, and selected promotional pricing designed to generate incremental consumer traffic.
Selling, general and administrative (SG&A) expenses were $42.2 million, or 27.9% of net sales, for the first quarter of 2010 compared to $36.3 million, or 29.3% of net sales, for the first quarter of 2009. The decrease in SG&A expenses as a percentage of net sales for the first quarter of 2010 primarily reflect leverage in advertising, as well as reductions in legal, professional and other expenses, partially offset by the costs of store base expansion and infrastructure investments.
Net income increased 36.8% to $7.0 million, or $0.25 per diluted share, in the first quarter of 2010 compared to $5.1 million, or $0.19 per diluted share, in the first quarter of 2009. The effective tax rate was 38.8% in the first quarter of 2010 compared to 39.3% in the first quarter of 2009.
Jeffrey W. Griffiths, President and Chief Executive Officer, commented, "We experienced a strong start to 2010, delivering record quarterly sales, traffic and store openings in the first quarter. Customers continued to respond to our value proposition of price, selection, quality and availability, which helped to drive traffic and net sales growth throughout the quarter. Additionally, we believe that our "never-out-of-stock" inventory program and continued focus on improving inventory management helped drive our sales during the first quarter. We are pleased with our ability to significantly expand operating margin. Although gross margin contracted due to some of our efforts to drive top line growth, our net sales gains produced additional SG&A leverage, and we increased our operating margin to 7.5% of net sales from 6.7% in the first quarter of last year. Further, we continued to gain share in the highly fragmented hardwood flooring market as we expanded into six new markets in the first quarter. Overall, we are pleased with the positive momentum that we have built to date in 2010 and expect to continue driving growth throughout the remainder of the year."
Company Outlook
Based on first quarter results and current trends, the Company increased its net sales guidance for the full year to a range of $630 million to $650 million, from the previous range of $620 million to $645 million. The Company continues to expect comparable store net sales for the year to increase in the low to mid-single digits.
The Company also announced its plans to enter Canada in the fourth quarter of 2010. The expansion into Canada is included in the Company's anticipated 36 to 40 total new store openings for 2010. The Canadian expansion is expected to increase 2010 capital expenditures by approximately $2.0 million to $3.0 million, bringing total 2010 capital expenditures to a range of $17 million to $21 million. The Company expects to be free cash flow positive for the year.
The Company now anticipates full year 2010 earnings per diluted share in the range of $1.13 to $1.23, including a loss of approximately $0.02 per diluted share related to the Canadian expansion. The Company had previously expected a range of $1.10 to $1.20 per diluted share. The earnings per diluted share range continues to be based on a diluted share count of approximately 28.4 million shares and an effective tax rate in the range of 38.5% to 38.8%.
Mr. Griffiths concluded, "As we look forward, we believe that we can continue to enhance our value proposition and grow our market share. Importantly, the flexibility of our business model enables us to continue to expand operating margin while making strategic investments in our business. We are very excited to be extending our footprint beyond the U.S. into Canada. We think this is a natural next step in our expansion strategy and that our value proposition will resonate strongly with Canadian consumers. Finally, we continue to expect to see steadily improving macro economic trends, with consumer demand beginning to strengthen, and we believe that these trends will continue to have a positive impact on our business."
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast on April 28, 2010, at 10:00 a.m. Eastern Time. The conference may be accessed by dialing (877) 407-9039 or (201) 689-8470. A replay will be available approximately one hour after the call through May 12, 2010 and may be accessed by dialing (877) 660-6853 or (201) 612-7415 and entering account number 3055 and conference ID number 349222. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website.
About Lumber Liquidators
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States. With more than 195 stores and 340 varieties of flooring, including solid and engineered hardwood, bamboo, cork and laminate, and featuring premier brands such as Bellawood (which features a 50-year warranty), Dream Home, Schon, Virginia Mill Works, and Morning Star, Lumber Liquidators has one of the most extensive selections of prefinished and unfinished hardwood flooring in the industry. Its hardwood line is made up of more than 25 domestic and exotic wood species in both prefinished and unfinished brands of various lengths and widths. Flooring experts in every store provide consumers with useful product information and answers to all of their flooring questions.
While keeping costs down is part of the Company's philosophy, Lumber Liquidators is also committed to offering high-quality, name-brand products that it stands behind with confidence.
Forward-Looking Statements
This press release and accompanying financial tables may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act. These statements are based on currently available information as of the date of such statements and are subject to risks and uncertainties that may cause actual results to differ. The Company specifically disclaims any obligation to update these statements, which speak only as of their respective dates, except as may be required under the federal securities laws. Information regarding these additional risks and uncertainties is contained in the Company's most recent periodic filings with the Securities and Exchange Commission.
Source: Lumber Liquidators, www.lumberliquidators.com
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