Why Lumber Liquidators Holdings Inc (NYSE:LL) Shares Were Up 20% on Friday

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Lumber Liquidators Holdings Inc (NYSE:LL) is a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories. It offers an assortment of exotic and domestic hardwood species, engineered hardwood, laminate and resilient vinyl flooring direct to the consumer and  features the renewable flooring products, bamboo and cork, and provides a selection of flooring enhancements and accessories, including moldings, noise-reducing underlay, adhesives and flooring tools.

Lumber Liquidators Holdings agreed with the US Consumer Product Safety Commission (CPSC) not to resume sales of laminate wood flooring previously imported from China. It has also agreed to continue conducting a comprehensive testing program as part of a recall program that affects consumers who purchased Chinese-made laminate flooring from Lumber Liquidators during a three-year period. To top it off, the company will provide any required remediation in any homes where the Chinese-made laminate flooring is found to emit elevated levels of formaldehyde.

In line with this, Lumber Liquidators Holdings has  tested the air quality in more than 17,000 households and has retained third-party certified laboratories to conduct formaldehyde emissions tests for about 1,300 of those consumers’ floors. So far, none of those households have tested above the remediation guidelines.

From 2011 to May 2015, around 614,000 consumers nationwide purchased Chinese-made laminate flooring through Lumber Liquidators Holdings. The company has suspended sales in May 2015 and any future sale, disposal or transfer of the inventory can only take place with the approval of the CPSC. Consumers are warned not to pull up the floorings themselves as it would further expose them to formaldehyde so the tests are to be conducted by Lumber Liquidators under the watch of CPSC.

Even so, Lumber Liquidators shares have recovered as the agreement has allowed the company to avoid a total product recall and perhaps a likely bankruptcy. Although the company’s stock is still 86% down from its highs, the deal is considered favorable and might allow share prices to recoup a considerable part of its losses.

 

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.

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