Stifel Issues Update on the State of Lumber Liquidators

St. Louis, MO, August 31, 2016—The Stifel team recently met with Lumber Liquidators’ management—John Presley, CEO; Dennis Knowles, COO; and Greg Whirley, CFO—and issued the following report on the embattled company’s current state of affairs:

“We feel better about Lumber Liquidators as 2016 rolls on although there remain a number of outstanding issues confronting the company. The latest positive development (8/17/16) is the new $150 million line of credit which greatly enhances the company’s liquidity position. There remain some outstanding legal challenges and elevated professional and legal fees that likely won’t get resolved near term but we are increasingly comfortable that liquidity is not a primary issue.”

“Financial results will likely lag improvements at the store level and on the sourcing side. Lumber Liquidators is still working through higher cost inventory and faces tough comparable sales comparisons near term due to the liquidation activity taking place last year.”

“We think the company is getting better management attention and slowly working its way to offense versus defense. Our sense is that the sales are bottoming (2Q was the best total sales quarter over the most recent four quarters) and that employee morale and retention are stabilizing. While there remains much work to be done, the lack of on-going negative media attention should be a subtle tailwind to the business moving forward. It is worth noting that the CPSC and CARB have both ‘settled’ with Lumber Liquidators without any substantiation of the cancer causing claims made by many due to excess formaldehyde levels. It is also worth noting that the company has not replaced one floor due to excess formaldehyde levels.”

Stifel also specifically addressed challenging areas for the company—employee turnover, merchandising and advertising, comparable store sales and liquidity—and spoke directly to each.