Lumber Liquidators (LL) Posts Q1 Loss of 29c/Share; Terminates CFO Terrell

Lumber Liquidators (NYSE: LL) reported Q1 EPS of ($0.29), $0.45 worse than the analyst estimate of $0.16. Revenue for the quarter came in at $260 million versus the consensus estimate of $258.01 million.

In comparable stores, net sales for the quarter decreased 1.8% in comparison to the first quarter of 2014, due to a 6.2% decrease in the average sale, partially offset by a 4.4% increase in the number of customers invoiced. In the month of March 2015, net sales at comparable stores decreased 17.8% due to a 6.5% decrease in the average sale and an 11.3% decrease in the number of customers invoiced.

Company Outlook

Thus far in the second quarter of 2015, net sales through April 27, 2015 decreased 1.9%, resulting in a two-year compound annual growth rate of 1.3% in comparison to the same period in 2013. Net sales at comparable stores decreased 7.2% as a result of a 5.9% decrease in the number of customers invoiced and a 1.3% decrease in the average sale.

Open orders were $52.6 million at April 27, 2015, a decrease of 8.2% over the total at April 27, 2014. The open order balance is increased each day by gross new orders and decreased by invoiced sales and "net adjustments, including returns." As a percentage of gross new orders, "net adjustments, including returns" were 11% of gross new orders for the period from April 1, 2015 through April 27, 2015.

April gross margin has historically been adversely impacted by the Company's annual "Big Sale", and as a result, is generally lower than the gross margin for the second quarter. Given the trends through April 27, 2015, April gross margin is currently expected to range from 31.0% to 32.0%. Gross margin in April 2014 was 38.7% and gross margin for the second quarter of 2014 was 40.4%. Gross margin in April 2015 continues to be adversely impacted by certain planned changes in the marketing of the Company's value proposition, changes in the sales mix of flooring and greater promotional pricing to drive customer traffic.

At this time, the Company cannot estimate a full year outlook, but does expect the following for the full year 2015:

• The opening of a total of 25 to 35 new store locations in the expanded showroom format.
• The remodeling of a total of 10 to 20 existing stores in the expanded showroom format.
• Capital expenditures between $20 million and $30 million.

Transition in Senior Management

The Company also announced that the Company and Daniel E. Terrell have agreed that Mr. Terrell's role as the Company's Chief Financial Officer will terminate effective June 1, 2015. Mr. Terrell has been the Company's Chief Financial Officer since October 2006 and prior to assuming that position, he served as Controller from November 2004.

Mr. Lynch commented, "For more than ten years, Dan has provided invaluable leadership and service to the Company. He played a critical role in our initial public offering and has been key to our growth over the years. The Company is grateful for Dan's contributions and commitment and appreciates his agreement to provide consulting services and transition assistance for a period after June 1."

In connection with Mr. Terrell's departure, the Company has appointed Gregory A. Whirley, Jr. as Senior Vice President, Finance and he will serve as interim Chief Financial Officer beginning on June 1, 2015. Mr. Whirley has spent the last thirteen years at Ernst & Young LLP (EY) where he most recently served as Senior Manager – National Professional Practice, where he worked on a team that was responsible for quality matters and EY's relationship with the Public Company Accounting Oversight Board. While at EY, he provided clients in various industries, including retail and consumer products, manufacturing, and healthcare, with a broad range of audit and financial services. Experienced in both public and private company financial reporting and accounting, he served on the team that supported the Company when it went public in 2007 and has worked on the Company's account at various points in the past.

Mr. Lynch continued, "We are extremely pleased to have Greg join our Lumber Liquidators' team. We believe his previous involvement with the Company, including with respect to our IPO, will enable him to make immediate contributions to our business and operations. Further, we welcome the insight and perspective that he will bring to the Company through his experience with a wide range of companies and industries."

For earnings history and earnings-related data on Lumber Liquidators (LL) click here.

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