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Lumber Liquidators Down to Strong Sell

Zacks Equity Research

On Jun 17, 2014, Zacks Investment Research downgraded Lumber Liquidators Holdings, Inc. (LL) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Lumber Liquidators has witnessed sharp downward estimate revisions over the last 60 days. The primary reason behind this was the company’s lackluster first-quarter 2014 performance, wherein earnings per share of 49 cents missed the Zacks Consensus Estimate by 22.2% and fell 14.0% year over year.

Although net sales rose 6.9% year over year to $246.3 million but fell short of the Zacks Consensus Estimate of $263 million as adverse weather conditions took a toll on the performance of 135 out of 331 outlets. Those impacted by weather reported a decline of 3.8% in sales whereas the remaining stores reported a 14.6% rise in net sales.

Comparable-store net sales decreased 0.6%, comprising a decline of 13.1% in weather-impacted outlets and an increase of 8.5% in the remaining outlets.

Despite soft results, management is confident of turning things around given the implementation of its development strategies and improvement in weather conditions. As a result, the company reiterated its earnings and sales guidance for 2014. The company continues to expect net sales in the range of $1.15–$1.20 billion and earnings in the band of $3.25–$3.60 per share for 2014.

However, these projections were not enough to alleviate the concerns of the analysts who remain skeptical about the stock as reflected from a fall in estimates. The Zacks Consensus Estimate for 2014 and 2015 fell 4% and 4.8% to $3.36 and $4.18 per share respectively, over the last 60 days.

Other Stocks to Consider

Not all retail stocks are performing as disappointingly as Lumber Liquidators. Better-ranked stocks worth mentioning in the retail sector include Herbalife Ltd. (HLF), Build-A-Bear Workshop Inc. (BBW) and Citi Trends, Inc. (CTRN). All these stocks carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CTRN
Read the Full Research Report on HLF
Read the Full Research Report on BBW
Read the Full Research Report on LL

Zacks Investment Research