Lumber Liquidators: Zacks’ Bear of the Day Play

Lumber Liquidators (LLSnapshot Report) can no longer blame its struggles on the weather, as it did early in 2014. This Zacks Rank #5 (Strong Sell) lowered full year guidance in October as sales continued to be weak.

Lumber Liquidators is the largest retailer of hardwood flooring, with 350 locations featuring 350 flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate, and resilient vinyl.

A Big Earnings Miss on Q3

After struggling in the first half of 2014 due to the polar vortex winter which did, legitimately, hit the retailers hard, Lumber Liquidators still continued to struggle in the third quarter.

On Oct 22, it reported third quarter results which missed on the Zacks Consensus by 13%. Earnings were just $0.58 versus the Zacks Consensus of $0.67.

Sales rose just 4.6% to $266.1 million from $254.3 million with comparable stores sales actually falling 4.9%.

The company tried to spin the quarter by saying that every month in the quarter was stronger than the previous one with August being strongest due to the beginning of the fall flooring season.

Yet gross margin still fell to 39.2% from 41.8% a year ago due to shifts in the sales mix, greater promotions and discounting and greater costs of inventory.

Guidance Lowered

Lumber Liquidators lowered both sales and EPS guidance for the year. Sales were lowered to the range of $1.05 billion to $1.06 billion from $1.05 to $1.1 billion.

Earnings were lowered to the range of $2.38 to $2.52. The analysts reacted by lowering their estimates.

The 2014 Zacks Consensus Estimate fell to $2.43 from $2.72 over the last 90 days.

This is a decline of 12% in earnings from 2013.

Shares At 2-Year Lows

Shares have sunk for awhile but are still trending near 2-year lows.

Still, the stock is far from “cheap” with a forward P/E of 22.3.

If you don’t want to wait for an earnings and sales turnaround, you might want to think about checking out The Home Depot,Inc. (HDAnalyst Report) instead. It’s a Zacks Rank #3 (Hold) but it’s supposed to grow earnings by 19.5% this year.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.


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