Stifel Offers Insights on Lumber Liquidators' Q4 2016 Performance

St. Louis, MO, February 22, 2017—Analyst Stifel offers the following analysis of Lumber Liquidator’s (LL) fourth quarter 2016 earnings report, which was released yesterday.

“LL carried some amount of momentum into 2017, with two straight quarters of positive comp growth (though we admit the back half of 2016 faced the easiest comparisons) and a stabilization in gross margins,” the analyst reports. “We believe, the business is on a much more stable footing than six months ago with permanent management in place, better staffing and morale in the stores, and many of the merchandise changes implemented. While LL is clearly still losing money even after adjusting unusual items out, the visibility to profits and positive cash flow is slightly better based on the past six month’s performance. The path to profitability is likely going to be built on sales growth to leverage the SGA spend and gradual improvement in the gross margin. Having said this, we are not forecasting a return to profits this year.”

Stifel continues, “4Q comp sales were up 2.8%, although that was driven entirely by the ramp up of the installation business. The merchandise aspect of same store sales was down 40 bps. Installation sales were about 5.5% of sales in 2016, but the fourth quarter was much higher at 11.3%. Installation will continue to ramp in 2017 as the remaining 1/3 of stores roll out the service. This helps revenue but has a lower margin associated with it. LL is trying to increase its DIFM business and not simply chase price and cater largely to the DIY crowd.”

Regarding product offerings, Stifel comments, “On the plus side, LL enters 2017 with an improved assortment with a stronger position in vinyl (LVT) and engineered and solid hardwood. The second half of the quarter experienced better margins as these products were in better inventory positions.”