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Why Lumber Liquidators Holdings Inc. Stock Fell Tuesday

Daniel Sparks, The Motley Fool

What happened

Shares of flooring retailer Lumber Liquidators (NYSE: LL) took a hit on Tuesday, falling as much as 18.3% after the company reported its fourth-quarter results. The stock is down 16.3% at the time of this writing.

The stock's slide likely reflects Lumber Liquidators' worse-than-expected fourth-quarter revenue. Net sales for the period were $260 million. Though sales were up 6.1% year over year, analysts were expecting revenue of about $264 million. 

In addition, Lumber Liquidators warned in its earnings call that promotions toward the end of last year weren't as effective as they were in the year-ago period. This could negatively impact first-quarter year-over-year sales comparisons, management said.

A chalkboard sketch showing a downward trending chart.

Image source: Getty Images.

So what

Despite its lower-than-expected revenue and a warning about first-quarter sales, there were some positive achievements during the period. Comparable store net sales, for instance, were up 4.5% year over year. This was driven by a 3.4% increase in average sales and a 1.1% increase in customers invoiced. Further, unlike its revenue, Lumber Liquidators' earnings per share of $0.10 (up from a loss per share of $0.20 in the year-ago quarter) was ahead of a consensus analyst estimate for $0.09.

Lumber Liquidators CEO Dennis Knowles called 2017 "an important year." During the period, Lumber Liquidators "saw continued growth in sales, comp store growth, and gross margin expansion as well as improvement in operating results on an adjusted basis," Knowles said.

Now what

In 2018, management said it wants to continue building on the momentum it gained in 2017, including continuing to focus on "operational excellence, enhancing the customer experience, expanding the business, and improving profitability."

For 2018, management expects revenue to increase in the mid-to-upper single digit percentage points on a year-over-year basis. It expects comparable store sales growth to rise in the mid-single digits.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool recommends Lumber Liquidators. The Motley Fool has a disclosure policy.