Lumber Liquidators' CEO Presents At Goldman Sachs 2012 Global Retailing Conference (Transcript)

Lumber Liquidators, Inc. (LL)

Goldman Sachs 2012 Global Retailing Conference Call

September 6, 2012 10:45 a.m. ET

Executives

Robert Lynch - President and Chief Executive Officer

Daniel Terrell - Chief Financial Officer

Analysts

Matt Fassler - Goldman Sachs

Presentation

Matt Fassler - Goldman Sachs

Good morning, everyone. I am Matt Fassler from Goldman Sachs and I have the pleasure this morning of introducing the senior management team of Lumber Liquidators and also moderating our conversation today. As I introduce Rob, I am thinking about the past year for this company. I am not sure if this should be an introduction or a coronation. Obviously, this has been a terrific year for this company. Lumber Liquidators has from its outset as a public company and were privileged to be involved in the IPO five years ago. Been one of the more interesting growth stories in retailing. It was the only company really in my career, one of the few with the audacity to become public in home improvement sector. Competing against Home Depot and Lowe’s in a fairly established oligopoly. It did so in 2007 as we are about to make our way into housing collapse if you will, and we didn’t know that at that time other than certainly as what transpired. And the stock from that moment has been, I think roughly tripled, or a little bit better than that which I think speaks to the power of the operating model and I think more recently the way this business has been run, and the way the opportunity has been monetized.

Rob, since you joined the company, we will speak quite a bit about this. I think he has made substantial changes in management structure and management personal, in sourcing. Starting to make some changes on the revenue generation side too. And the potential has always been there for many years, it worked quite well. There was a bit of a break in the action as you know but the recovery has been very very powerful. And this has been a terrific stock as you know over the period of time.

Dan Terrell has been with Lumber Liquidators since 2004, he has been the CFO for almost six years. Rob joined the company only in January of 2011, so nearly two years ago. He has been the CEO since January of this year. He came to this role from Orchard Supply Hardware where he was President and Chief Executive Officer, and prior to that among other places he worked at Home Depot and Wal-Mart. So with that I will turn it over to Rob.

Robert Lynch

Thanks, Matt. I hate to admit the Home Depot experience. Thank you very much and good morning everyone. We are excited and honored to be here with you this morning. And in terms of a little background, Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States. And our industry best value proposition of best price, best selection, best quality, best availability of product and best people is the key driver of our business and really differentiates us from all of our competitors.

Additionally, recently our strong store model and our recent investments in infrastructure have allowed us to increase net sales and profitability as Matt mentioned, by increasing market share in a very highly fragmented, still highly fragmented wood flooring market. In 2012 we have focused on five key initiatives that the team is driving on growing revenue, continuing to improve our sourcing, optimizing our supply chain, driving traffic through increased advertising reach frequency and urgency, and developing the best people to serve our customers.

We also are relentlessly committed to driving continuous improvement in all that we do and are working together as a team with a unified vision and strategy, and initiatives. And this goes from all of our store managers and every associate in our stores, all the way up to the senior team. So really with that, Matt, I would like to just turn it back to you for any questions.

Question-and-Answer Session

Matt Fassler - Goldman Sachs

Great. We have a nice full room, I am sure we will have many from the audience. I am going to start with a question about your assortments. So you have historically been a hard wood flooring business, very focused mandate. You recently introduced some tools into the assortment. You are called Lumber Liquidators, you could sell many things presumably, if you chose to. How the tools look so far and how do you think about potential product extensions for the business?

Robert Lynch

Yeah, I think it’s very exciting. You mentioned some of the changes we made to the team. We brought a new chief merchant into the company last year, a couple of months after I joined Lumber, by the name of Bill Schlegel. And he has, in the last 12 months has significantly upgraded and turned over our merchant staff. We currently have -- you know I have been in retail a while. I started at Wal-Mart, I was at Home Depot. For a company of our size, we have probably one of the best high class merchant teams I have ever seen in my career. And they are really doing a phenomenal job. I am very proud of them.

So, yeah, I think Matt that we have significant opportunity across all of our categories. In fact I have got a catalog in front of me. If I don’t mind sharing, we have some for everybody out there. We are introducing a new catalog right now with 51 new items. 51 new floors. So to your point about tools, Matt, now we are bringing in all the items that you need to complete your project tools, but we are also looking at -- and as we do our line reviews, we are looking strategically in terms of revenue generation. Is our assortment optimized? What can we expand within our core flooring categories? We have expanded to other flooring categories. We have added vinyl. In here we have added some new vinyl floors. We are expanding our laminate category. And then across accessories and moldings we are definitely looking there as well on [new mason] tools which, that’s been a very good test. It’s something that we started with 30 or 40 sale items a few months ago. Based on that performance it’s doing well and we are actually increasing it and we are going to up that probably 2x or 3x in terms of the tool assortment as we go forward.

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