Analyst Downgrades Lumber Liquidators

New York, NY, April 3, 2012 -- Analyst Stifel-Nicolaus has downgraded shares of Lumber Liquidators to a "hold" based on the stock valuation.

The stock has risen 59.5% since mid December and has gone through the firm's previous price target of $22 per share (closed Monday at $24.84).

Stifel said it believes shares have risen because of improved prospects for housing and consumer confidence, as well as management changes.

"Although we are bullish over the next five years for a material recovery in consumer remodeling activity (Lumber Liquidators does very little in the homebuilder trade), we are concerned that investors have gotten overly excited near term as flooring sales in the first quarter, while better, are only marginally so," Stifel said.

"We are much more constructive on the management changes and believe that optimism is deserved for improved performance going forward."

Stifel said its channel checks in flooring reveal a mixed picture for the first quarter.

"When we ask the question, 'has business improved?', the responses seemingly indicate that in the past several weeks, yes. As regards January and February, despite terrific weather, we understand sales growth in residential flooring was tepid at best. Price promotions remain aggressive in general and mix is still being pressured. We have also heard that the home center channels continue to report better flooring sales volumes than do the independent retailers. This should bode well for Lumber Liquidators to some degree as we believe the current price sensitivity of consumers is driving traffic to the “perceived value” providers like Home Depot and Lumber Liquidators."