Lumber Liquidators reported a loss in its first quarter on Tuesday after its sales dropped by 10.2 percent. The company has been struggling to shake customers fears that some of its products could cause cancer.
The business which has been aggressively spending to put a stop to allegations that its Chinese-sourced flooring had excessive levels of carcinogens said that its net sales fell from $260 million in the same quarter last year to £233.5 million. Its net loss came in worse than expected at $32.4 million, from $7.8 million in the last quarter. Analysts were expecting Lumber Liquidators to report a loss of 24 cents a share on $237 million in revenue, in comparison to $1.20 per share.
The quarter is the fourth straight decline in sales following the “60 Minutes” news program reporting that the chainb was selling Chinese-mad laminate flooring with cancer-causing levels of formaldehyde in March 2015. After denying the allegations the business stopped selling the Chinese floors.
Since the news hit in March 2015 the businesses shares have dropped by 70% as short sellers such as Whitney Tilson added fuel to the fire. In a presentation at the Harbor Investment Conference presented under the title “Why I’m Again Short Lumber Liquidators In a Word: Cancer,” hedge fund manager Whitney Tilson claimed he had “new information” which he said made the likelyhood of the stock falling more likely.
Shares dropped quickly after the “60 Minutes” report in 2015 as stores saw sales go from a small 1.8% decline to 17% in the final three months of the year.
After a probe from the U.S. Consumer Product Safety Commission in February it was found that the flooring in question had only very minimal health risks. However it then came back to say that they had made a basic mathematical mistake and that the risk was three times higher bringing another round of negative news to the company.
In addition to consumer concern they now face litigation from consumers and shareholders however one case was judged in their favour in April.