The Lumber Liquidators Holdings company, said Thursday that its sales have slid 7.5% since a “60 Minutes” segment earlier this month alleged the company’s Chinese-made laminate flooring doesn’t meet California’s emissions standards for levels of formaldehyde, a known carcinogen.
The company also gave a weaker-than-expected sales forecast for its current quarter and said it couldn’t offer full-year guidance, citing the uncertainty of its current situation. The comments come ahead of a planned conference call on Thursday.
The “60 Minutes” report, which dragged down the company’s stock price, accused Lumber Liquidators of increasing profit margins through the use of cheaper—and allegedly unsafe—materials manufactured in China. Lumber Liquidators’ operating margins increased significantly over two years before contracting in its 2014 fiscal year.
Lumber Liquidators has defended its sourcing practices, saying it has documentation to support each step of its production process. The company has said it complies with “applicable regulations” set by the California regulators.
Thursday, Lumber Liquidators said it would offer free air-quality testing for qualifying customers and that it believes its cash flow will be sufficient for the rest of the year.
In the nine days after the “60 Minutes” segment ran, Lumber Liquidators said its same-store sales fell 12.7% compared with a year ago. Since the segment ran, Lumber Liquidators said negative sentiment toward the company has doubled, with about 8% of consumers now saying they wouldn’t buy from the company.
For the first quarter, the company expects its same-store sales to fall between the range of negative 4.4% and a gain of 0.5%, adding that its 9.6% same-store sales increase in January and February will help offset the up to 24.1% decline this month.
For the current quarter, Lumber Liquidators sees sales between $253.6 million and $265.6 million, while analysts had forecast $276 million, according to Thomson Reuters. A year ago, the company reported $246.3 million in first-quarter sales,
Shares, which have fallen about 37% this month, gained 2.5% in premarket trading.
The report has attracted government interest. Last week, Sen. Bill Nelson (D., Fla.) sent a letter to the heads of the Consumer Product Safety Commission, the Centers for Disease Control and Prevention and the Federal Trade Commission, calling for an investigation into Lumber Laminates’ laminate flooring.
Still, Lumber Liquidators has found defenders in recent weeks. In a note to clients in the days after the segment ran, Janney Montgomery said that fears were overblown and that “60 Minutes did not provide a complete picture of the issue,” relying on anonymous Chinese factory workers and not including feedback from regulators.
And Robert Chapman, who runs the fund Chapman Capital, outlined his bull case for the stock on CNBC Wednesday afternoon, helping send Lumber Liquidators’ stock up nearly 11%.