February 29, 2016 / 11:35 AM / 2 years ago

Lumber Liquidators' sales fall more than feared, shares drop

A Lumber Liquidators retail store is shown in San Diego, California March 2, 2015. REUTERS/Mike Blake

(Reuters) - Lumber Liquidators Holdings Inc (LL.N) reported a bigger-than-expected drop in sales for the third straight quarter as it struggled with falling demand due to fears that some of its hardwood flooring laminates could cause cancer.

The retailer, whose shares fell 10 percent to a seven-year low in early trading on Monday, also said it would not issue a financial forecast for 2016 given the uncertainty around customer demand and the company’s legal and regulatory issues.

Lumber Liquidators’ stock and sales have been hammered since a “60 Minutes” report on CBS last March said the retailer’s laminates from China contained excessive levels of cancer-causing formaldehyde. That led to various cases being filed against the company and investigations into its products.

The company got some relief in early February after U.S. federal tests found a low risk of cancer from the company’s flooring. But that was short lived, as the report was revised to say the risk was three times higher than estimated.

Lumber Liquidators said on Monday there was a decrease in both the number of customers it billed and the average sale value in the fourth quarter ended Dec. 31.

Sales at stores open more than 12 months fell 17.2 percent, steeper than the 12 percent drop expected by analysts.

Net sales fell 13.7 percent to $234.8 million, missing analysts’ estimates of $254.5 million, according to Thomson Reuters I/B/E/S.

The company reported a loss of $19.8 million, or 73 cents per share, in the quarter, compared with a profit of $17.3 million, or 64 cents per share, a year earlier.

Lumber Liquidators incurred nearly $29 million in legal expenses and on a fall in the carrying value of the unsold laminates it had sourced from China.

The retailer agreed in February to pay $13.2 million in fines and forfeitures to resolve a U.S. Department of Justice investigation into the import of flooring products. The probe was unrelated to the issue of its laminates posing a cancer risk.

Lumber Liquidators on Monday also named Dennis Knowles, a former executive at home improvement chain Lowe’s Cos Inc (LOW.N), as its chief operating officer, filling a position that had been vacant since 2012.

The company’s last COO was Robert Lynch, who became chief executive in 2012 but resigned last May following the scandal related to its laminates.

Lumber Liquidators shares fell to a low of $10.01, before easing to trade down 6.6 percent at $10.38.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza

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