NEW YORK – Lumber Liquidators Holdings Inc., accused by “60 Minutes” of selling laminate flooring with excessive levels of formaldehyde, projected lower first-quarter sales than analysts estimated as its reputation suffers.
Sales will be $253.6 million to $256.6 million in the quarter, the Toano, Virginia-based company said in a statement last week. Analysts predicted $276.3 million, according to data compiled by Bloomberg. Same-store sales may fall as much as 4.4 percent because of a drastic drop since the “60 Minutes” story, Lumber Liquidators said. The company said it’s unable to offer revenue and profit forecasts for the full year.
Lumber Liquidators, which has lost more than half of its market value since late February, is working to regain customers’ confidence. The company said it will offer free, third-party testing to customers and may replace some flooring, aiming to show that its products are safe.
“For those concerned, our number one priority is to reassure you about the safety of our flooring,” Chief Executive Officer Robert Lynch said on a conference call. “We understand how this story caused concern.”
The “60 Minutes” investigation, which aired March 1, used undercover reporters and hidden cameras to show managers at three Chinese factories admitting to falsely labeling products to make them appear to meet regulations. The company also is being investigated by New York and Connecticut over the allegations.
Prior to the “60 Minutes” broadcast, only 4 percent of U.S. households had a negative view of Lumber Liquidators, the company said. Since the report aired, 8 percent of consumers now say they wouldn’t consider buying from the chain.
Sales rose 19 percent in January and February but may sink as much as 19 percent this month after the “60 Minutes” story, the company said.
Lumber Liquidators will offer testing for formaldehyde, and if the customer is still unsatisfied, the company will consider replacing the flooring at a cost of about $4,000 per client. So far, fewer than 1,000 customers who bought laminate flooring from China have requested a test.
Lumber Liquidators has repeatedly stood by the safety of its products. Part of its defense has been raising doubts about the reporting by “60 Minutes,” and it continued that criticism Thursday. The company said the news program used an improper procedure to test its products.
During the broadcast, “60 Minutes” said it tested flooring sold by the company in several states and that 30 of 31 samples had high levels of formaldehyde.
Kevin Tedesco, a spokesman for “60 Minutes,” stood by the accuracy of the program’s report in an emailed statement Thursday.
Lumber Liquidators also continued to point out that short sellers fueled the “60 Minutes” story. Investor Whitney Tilson went public with his shorting of the stock in 2013. He then pitched a story to “60 Minutes” early last year and appeared in the story, which aired on CBS. The report also featured a lawyer and the head of an environmental group who brought lawsuits against Lumber Liquidators after learning of a possible formaldehyde issue from the blog post of another short seller.
“We are incensed that individuals with a financial agenda can orchestrate a campaign against us regarding the safety of our product and cause a portion of our customer base undue concern,” Lynch said.
