Analyst Sees Stronger Second Half for Lumber Liquidators

New York, NY, Sept. 8, 2014 -- Flooring industry analyst Stifel Nicolaus said he expects a stronger second half of the year for Lumber Liquidators but believes the firm will have a difficult time meeting its projected margins.

Stifel noted that the company has not changed its sales guidance ($1.05-$1.10 billion based on same store sales of plus or minus low-single digits) and is anticipating an operating margin of 11.8% for the year.

"We point out that based on the Q3 gross margin guidance, in order to reach the 11.8% operating margin for the year, Q4 will need to be a very, very strong quarter," Stifel said in a report.

"Our Q3 sales estimate moves up to be in line with the guidance, however our gross margin estimate does move down sharply. The sales guidance is several million below where the Street had modeled but actually slightly ahead of our estimate previously.

"While we expect a much stronger fourth quarter, it is hard to see how the top end of the annual guidance can be met in light of the margin pressures in Q3. We would not be surprised to see the higher end of the annual guidance range lowered before the year is out."