Before the market open on Monday, the hardwood flooring company reported a loss of 73 cents per share, a wider loss than analysts' forecasts for a loss of 20 cents a share.
Revenue dropped by 13.7% year-over-year to $234.8 million, below Wall Street's estimates for $254.46 million.
Sales have been negatively affected by allegations surrounding the company's laminate flooring made in China, Lumber Liquidators said in a statement today.
Last year, CBS's "60 Minutes" found that the company's laminate flooring made in China contained a potentially unsafe amount of the chemical formaldehyde. Additionally, the Centers for Disease Controlissued a report earlier this month that said exposure to a range of levels of formaldehyde indoors could cause respiratory issues for people with asthma and COPD.
After deciding not to sell the Chinese-sourced laminate flooring products in its stores, the company reduced its inventory of the products by a $22.2 million carrying value during the quarter. This caused Lumber Liquidators' gross margins to drop to 23% during the fourth quarter, compared to gross margins of 39.2% during the year-ago period, the company said.
Lumber Liquidators' PR nightmare goes beyond issues with laminate flooring, Real Money's Timothy Collins wrote in an article last week. The company also faces five years of probation due to illegal imports, Collins said.
"Why be involved?" he wrote. "Sure, there may be a bounce play here, but if I were a shareholder, I would be praying for a buyout at the moment. The practices of the company in the past here seem unscrupulous. If buyers do any research on the company beyond price, I think it will be a hard sale."
Two-thirds of respondents to a Real Money poll last week say that the stock is "too toxic" to own.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings rates this stock as a "sell" with a ratings score of D+. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: LL