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Lumber Liquidators Holdings Management Discusses Q2 2012 Results - Earnings Call Transcript

The information contained in the call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later date. Lastly, Lumber Liquidators undertakes no obligation to update any information discussed in this call.

Now, I'm pleased to introduce Mr. Rob Lynch, President and CEO of Lumber Liquidators. Rob?

Robert M. Lynch

Good morning, everyone. I'm here with Dan Terrell, our CFO, and we are pleased to be speaking with you about our second quarter 2012 results. Overall, our team continue to execute on our key strategic initiatives and by doing so, we captured market share, expanded operating margin and delivered record results through the important spring remodeling season. We continue to demonstrate a commitment to continuous improvement in all that we do, and operate it with a unified vision. We believe our coordinated efforts strengthened our industry best value proposition of best price, selection, quality, availability and people. Through this commitment and focus, we have built solid momentum over the last 4 quarters including increasing net sales to comparable stores, expanding gross margin and strengthening control over SG&A expenses. Highlights of our second quarter in comparison to the prior year include: a net sales increase of nearly 20%, comparable store net sales up 12.4%, gross margin increased 330 basis points to 37.3%, operating margin expanded 450 basis points to 9.4% and net income grew 130%.

We have consistently focused on key strategic initiatives, which we first outlined at the start of this year, which help drive our second quarter success and continued our momentum. To reiterate, our 5 key initiatives are: growing revenue, continuing to improve our sourcing, optimizing our supply chain, driving traffic through advertising reach and frequency and developing the best people to serve our customers. In terms of progress made on these initiatives, we drove consistently strong consumer demand during the second quarter through our efforts to expand the reach of frequency of our advertising. Traditionally, our messages more narrowly targeted core DIY customer and as we have previously discussed in the fourth quarter of 2011, we began testing programs to expand our reach to a more casual consumer. Building upon the success of those tests, we launched these programs on a broader scale to drive demand in the spring remodeling season and we increased the frequency of our call-to-action message.

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