Lumber Liquidators Plunges After Higher Legal Costs Widen Loss

(Bloomberg) -- Lumber Liquidators Inc. shares tumbled as much as 15 percent after the legal costs of dealing with a toxic-flooring scandal hampered profitability.

Though sales showed signs of rebounding, the company posted a bigger loss than expected in the third quarter. The net loss widened to $18.4 million, or 68 cents a share, in the period, compared with a deficit of $8.5 million, or 31 cents, a year earlier.

Lumber Liquidators has been reeling since March 2015, when “60 Minutes” accused the company of selling Chinese-made laminate flooring with levels of formaldehyde that could be toxic. The fallout was massive: The stock tumbled, lawsuits mounted, and regulators launched an investigation. Several executives, including the chief executive officer, hit the exits.

The stock had begun to rebound this year as investors wagered that Lumber Liquidators could make a comeback. But Monday's drop erased those gains. The shares dropped as low as $15.80 in New York, the biggest intraday decline since May. Before the tumble, they had risen 6.5 percent in 2016.

Lumber Liquidators has stopped selling the Chinese flooring at issue, and it adopted new safety standards. The U.S. Consumer Product Safety Commission ended its investigation in June without issuing a recall. In an optimistic sign, sales at established stores increased 1 percent last quarter, the first gain since 2013.

Still, there's a class action lawsuit making its way through the courts, and the chain's reputation hasn't fully recovered.

“We are pleased with the direction of our sales performance this quarter,” CEO John Presley, who took the reins last November, said in the statement, “but recognize we have work to do to restore Lumber Liquidators to growth and profitability for the long term.”

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net. To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kevin Orland