Lumber Liquidators (LL) performs well - how?!
Lumber? Doesn't that have to do with housing and construction? And isn't construction in the toilet? But somehow Lumber Liquidators has defied its industry and the broader economy, posting a first quarter gain in sales of 24% with a 93% jump in earnings.
How did they pull that one off in what should be the toughest environment in decades? According to a profile in today's Wall Street Journal [subscription], the company "sells almost solely to consumers, not home builders; it constantly shops the competition . . . it keeps costs low by placing its stores in industrial and other low-rent areas; it buys virtually all of its hardwood directly from mills; and it largely uses commissions to pay employees."
The company has ambitious expansion plans and hey, if it can grow profitably in this environment, it is definitely worth a look. This is one home improvement stock I'll be keeping an eye on.
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Reader Comments (Page 1 of 1)
5-16-2008 @ 10:11AM
Steve said...
We make hardwood flooring (custom, not strip) so I have my own thoughts on LL's success.
1)Their profitability is high because they cut out an entire layer of distribution which saves the consumer and fattens their own margins. I say kudos to them because distribution is supposed to add value and if it does not, they have no reason for being.
2)They're probably making some great buys due to overproduction on the part of many strip flooring mills. Many producers are desperate to move stock in bulk. This is especially true for importers who send containerloads into our ports often on speculation. We've had about 10 years of growth that made it easy to move flooring. Producers have adjusted production fast enough.
3) LL is in the right place at the right time to do well in 2008. I'll speculate that LL's profits will be marginal in 2009 as the fire sales dry up.
Steve
www.atlaslumber.com/current-news.asp