Lumber Liquidators Holdings, Inc.’s (LL) reported lower-than-expected fourth-quarter 2014 results. Alongside, the company’s CEO stated that the company is likely to receive bad press at a news show ‘60 minutes’ pertaining to sourcing and product quality especially laminates. Massive sell off was witnessed yesterday with shares going down over 26% in the day’s trading.
Coming to results, fourth-quarter 2014 earnings per share of 64 cents not only plunged 13.5% year over year but also came way below the Zacks Consensus Estimate of 76 cents. Though net sales climbed 5.2% year over year to $272 million, it fell short of the Zacks Consensus Estimate of $280 million.
Comparable-store net sales (comps) decreased 4.2%, along with a 1.1% reduction in number of customers invoiced and 5.3% fall in average sales.
Gross profit grew 0.9% to $106.5 million, while gross profit margin contracted 160 basis points (bps) to 39.2% due to unfavorable sales mix and marketing changes.
Selling, general and administrative (SG&A) expenses rose 9.2% to $77.8 million in the quarter while SG&A expenses as a percentage of sales increased 100 bps to 28.6%, owing to higher advertising, occupancy and payroll expenses.
Following a fall in gross margin and a rise in SG&A, Lumber Liquidators’ operating income plunged 16.3% to $28.7 million, while operating margin contracted 280 bps to 10.5%.
Balance Sheet and Cash Flow
Lumber Liquidators, which competes with Lowe's Companies Inc. (LOW), The Home Depot Inc. (HD) and Builders FirstSource, Inc. (BLDR), ended the quarter with cash and cash equivalents of $20.3 million and total shareholders’ equity of $332.1 million. During the year, Lumber Liquidators generated $57.1 million in cash from operations.
Also, during the same period, capital expenditures were roughly $71 million, allocated to spending related to property and equipment for new distribution centers as well as expansion and remodeling of stores.
Guidance
Lumber Liquidators initiated its 2015 outlook. For 2015, sales are expected to be in the range of $1.14–$1.21 billion, compared with $1.05 billion earned in 2014. Comparable-store sales for the year are expected to increase in single digits. Gross margin is expected to grow in the range of 39%-40%.
Consequently, the company envisions earnings per share for the year in the range of $2.50 to $3.00 against $2.31 earned in 2014. The current Zacks Consensus Estimate for the same is pegged at $2.86 per share.
Moreover, Lumber Liquidators plans to introduce 30-35 new stores and remodel another 15-20 existing outlets. Further, capital expenditures for the year are expected to be around $20 to $30 million.
Currently, Lumber Liquidators has a Zacks Rank #3 (Hold).
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