Specialty retailer of hardwood flooring, Lumber Liquidators Holdings, Inc. (LL) reported third-quarter 2013 earnings per share of 73 cents, outpacing the Zacks Consensus Estimate of 67 cents and rising 58.7% from 46 cents earned in the year-ago quarter. The growth was driven by increasing consumer demand due to upsurge in real estate market.
Total Revenue
Due to higher traffic, net sales rose 24.5% year over year to $254.3 million and handily beat the Zacks Consensus Estimate of $241 million.
Comparable-store net sales increased 17.4% mainly owing to 9.8% rise in customer invoiced and 6.9% growth in average sales. On the other hand, non-comparable store net sales rose to $14.5 million.
Gross profit rose 36.6% to $106.4 million primarily due to a rise in net sales, partly offset by higher cost of sales. Lumber Liquidators’ gross profit margin expanded 370 basis points (bps) to 41.8%.
Lumber Liquidators’ operating income increased about 60.3% to $33.3 million while operating margin as a percentage of net sales expanded 290 bps to 13.1%.
However, selling, general and administrative (SG&A) expenses rose 28% to $73.1 million in the quarter, while SG&A expenses as a percentage of sales increased 80 bps to 28.8% driven by efforts to enhance advertising.
Balance Sheet and Cash Flow
Lumber Liquidators ended the quarter with cash and cash equivalents of $84.2 million compared with $40.1 million at the end of the year-ago quarter. During the nine months ended Sep 30, 2013, Lumber Liquidators generated $36.7 million in cash from operations.
Capital expenditures for nine months ended Sep 30, 2013 were $17.3 million, up from $9.6 million in the prior year. The rise in expenditure was due to procurement of land for the East Coast distribution facility, store expansion along with remodeling and investment for safeguarding of the technology systems.
During the quarter, the company bought back 110,000 shares for about $98 million. Currently, Lumber Liquidators has about $26.9 million worth of shares remaining under its existing share repurchase authorization.
Store Update
Lumber Liquidators declared plans to open 10–12 stores in the fourth quarter and 29–31 stores in 2013. During the quarter, the company opened 7 stores and remodeled 6 existing outlets.
Guidance
Considering the year-to-date results, Lumber Liquidators raised its 2013 net sales to about $985–$995 million, up from the previous forecast of $940–$963 million. The company now projects comparable-store sales to increase between 14.0% and 15.0% during the year, while comps for the fourth quarter are expected in the range of 9.0%–14.0%.
Further, the company raised its 2013 earnings forecast to $2.65–$2.74 per share as compared with the earlier guidance of $2.45–$2.60. The current Zacks Consensus Estimate for 2013 is pegged at $2.71 per share.
Management now expects additional SG&A expenses in the range of $1.4–$1.8 million during the fourth quarter, primarily due to the launch of the West Coast Distribution facility as well as additional legal and professional fees.
Management expects capital expenditure for the full year in the band of $35–$40 million.
Zacks Rank
Lumber Liquidators currently carries a Zacks Rank #2 (Buy). Other home improvement retailers like Lowe's Companies Inc. (LOW), The Home Depot, Inc. (HD) and Builders FirstSource, Inc. (BLDR) are expected to report earnings on Nov 20, Nov 19 and Oct 24, respectively.
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