Lumber Liquidator (LL) Stock Plummeting as CEO ‘Unexpectedly’ Steps Down

NEW YORK (TheStreet) -- Shares of Lumber Liquidators (LL) are falling by 16.50% to $21.10 at the start of trading on Thursday morning, after the hardwood flooring retailer announced that CEO Robert Lynch has "unexpectedly" stepped down from his post at the helm of the troubled company.

Lumber Liquidators says it will conduct a national search for Lynch's replacement and until one is found company founder Thomas Sullivan will step in as acting CEO.

"I am really proud of the LL Team and I look forward to working with them and providing our customers with the best hardwood floors at the best prices as we have since I founded the company over 20 years ago," Sullivan said in a statement.

Lumber Liquidators has been struggling since an early March report by CBS' "60 Minutes" claimed that the hardwood flooring materials the company receives out of China has a higher than legally allowed amount of the toxic chemical formaldehyde.

Following the report Lumber Liquidators stood behind the safety of its products, however earlier this month the company said it was immediately stopping all sales of its China-made laminate flooring.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says, "I have said to stay away and I reiterate the same view I have had for 30 points now." 

Separately, TheStreet Ratings team rates LUMBER LIQUIDATORS HLDGS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUMBER LIQUIDATORS HLDGS INC (LL) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LL's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.31 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $13.16 million or 40.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: LL Ratings Report

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