U.S. Markets closed

Hefty legal bills push Lumber Liquidators into loss, shares sink

(Adds details on legal costs, outlook; updates shares)

July 31 (Reuters) - Lumber Liquidators Holdings Inc shares slumped 18 percent on Tuesday, after the hardwood flooring retailer said a spike in legal bills resulted in a surprise second-quarter loss.

Shares of the company fell to $19.66 in premarket trading on Tuesday, just off their 52-week low of $19.42, making the stock the top loser among NYSE-listed stocks.

The company paid $9.5 million in legal bills in the quarter to settle several lawsuits that followed a CBS report in 2015 that alleged that some of the company's flooring products had high levels of formaldehyde, a known carcinogen.

This led to a quarterly net loss of $1.5 million, or 5 cents per share, in the second quarter ended June 30, compared with a profit of $4.5 million, or 16 cents per share, a year earlier.

Excluding items, the company posted a loss of 5 cents per share, compared with a 25-cent profit forecast by analysts.

On a conference call with analysts, Chief Financial Officer Martin Agard said he expects legal costs to continue be at similar levels through the year and into 2019, as U.S. regulators continue their investigations into the company.

Selling, general and administrative expenses rose nearly 11 percent due to legal costs, while gross margins fell to 35.7 percent from 37 percent, due to higher costs related to transportation and increased promotions.

Comparable store sales, however, rose 4.7 percent, beating Wall Street estimates of 3.1 percent, according to Thomson Reuters I/B/E/S.

Net sales of $283.47 million also beat analysts' average estimate of $280.7 million. (Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; Editing by Bernard Orr and Saumyadeb Chakrabarty)