LL Flooring Reports Third Quarter 2021 Financial Results
Lumber Liquidators (“LL Flooring” or “Company”), a leading specialty retailer of hard-surface flooring in the U.S., announced financial results for the third quarter ended September 30, 2021.
President and Chief Executive Officer Charles Tyson said, “During the third quarter, our associates continued to do an outstanding job exceeding our customers’ needs in the face of an increasingly challenging supply chain and inflationary environment. We were pleased to report strong double-digit growth in sales to Pro customers and installation sales versus the third quarter of last year. As anticipated, our sales to DIY customers were down versus last year, reflecting a shift in consumer spending to other product and service categories, as well as tough comparisons to the nesting spending that we saw in the third quarter of 2020.”
Tyson continued, “Our strong net sales and profitability growth on a two-year basis underscore the continued traction we are gaining on our strategic initiatives. These are truly unprecedented times from a global supply chain perspective. Notwithstanding the volatile operating environment, we are focused on furthering our competitive advantages and positioning LL Flooring as customers’ first choice in hard-surface flooring. With more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs, we offer our customers quality choices and provide high-touch service and advice to help them achieve their flooring project needs. Our team’s agility in launching new innovative products sourced from expanded locations across our vast network of global sourcing partners further strengthens our unique competitive position.”
Tyson added, “As we see the opportunity to expand the LL Flooring brand and drive our accelerated growth, we are increasing our investment in our long-term strategies, initially in two key areas: We plan to increase the number of new stores we open each year to improve our omnichannel convenience, and to expand investments in our multi-pronged strategy to grow sales to Pro customers. The capabilities we are building and the investments we are making in these multi-year strategies will position LL Flooring to grow faster and gain market share.”
Third Quarter Financial Highlights
-Net sales of $282.2 million decreased 4.6% compared to the same period last year, as double-digit growth in Pro and services sales partially offset a decrease in DIY sales; and increased 6.9% compared to the third quarter of 2019, driven primarily by strong growth in Pro customer and services sales.
-Total comparable store sales decreased 4.5% versus the same period last year, but increased 6.4% on a two-year stack basis (which does not reflect the impact of store closures and openings between periods).
-Gross margin of 37.3% decreased 210 basis points as a percentage of sales compared to the same period last year and increased 110 basis points compared to the third quarter of 2019; Adjusted gross margin1 of 37.3% decreased 240 basis points as a percentage of sales compared to the same period last year, primarily reflecting significantly higher transportation and material costs, and higher tariffs (collectively up more than 700 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies; and increased 80 basis points compared to the third quarter of 2019, primarily reflecting the Company’s pricing, promotion and alternative country/vendor sourcing strategies that more than mitigated higher material and transportation costs.
-SG&A as a percentage of sales of 33.0% increased 140 basis points compared to the third quarter of last year and decreased 240 basis points compared to the third quarter of 2019; Adjusted SG&A1 as a percentage of sales of 33.1% increased 320 basis points compared to the third quarter of last year, primarily due to increased investment in the field and to support growth initiatives, last year’s $2.5 million favorable business interruption insurance settlement and lower net sales compared to the third quarter of 2020; and decreased 210 basis points on higher net sales compared to the third quarter of 2019.
-Operating margin of 4.3% decreased 350 basis points compared to the third quarter of last year and increased 350 basis points compared to the third quarter of 2019; Adjusted operating margin1 of 4.1% decreased 560 basis points compared to the third quarter of last year, and increased 280 basis points compared to the third quarter of 2019.
-Diluted EPS of $0.30 decreased $0.23 compared to the third quarter of last year and increased $0.26 compared to the third quarter of 2019; Adjusted Earnings Per Diluted Share1 of $0.29 decreased $0.38 compared to the third quarter of last year and increased $0.22 compared to the third quarter of 2019.
-During the third quarter, the Company opened six new stores, bringing total stores to 422 as of September 30, 2021.
Cash Flow & Liquidity
As of September 30, 2021, the Company had liquidity of $232.2 million, consisting of excess availability under its Credit Agreement of $128.0 million, and cash and cash equivalents of $104.2 million.
During the first nine months of 2021, the Company generated $50.3 million of cash flows from operating activities, primarily driven by $31.4 million of net income and positive working capital changes.
The Company continues to navigate uncertainty in the macroeconomic environment related to global supply chain disruptions, consumer spending, inflation and a challenging labor market. As a result, the Company is not providing financial guidance at this time.
The Company is pleased with the traction it is gaining on its transformation initiatives and the momentum in its Pro customer and services sales; however, the Company currently expects challenging DIY customer comparisons to continue in the fourth quarter of 2021.
The Company also expects higher material and transportation costs will be a headwind to gross margins in the fourth quarter of 2021 and into 2022 as the goods sell through. The Company will continue to look to offset these higher costs through pricing and promotion strategies but will monitor the market to inform and guide its decisions.
The Company expects the increased investments in its field organization to result in higher SG&A as a percentage of sales in the fourth quarter of 2021 compared to the third quarter of 2021. In addition, the Company expects its increased investments in its growth strategies will increase its SG&A and capital spending in 2022 versus 2021.
The Company now expects capital expenditures in the range of approximately $19 million to $23 million in 2021.
“We believe the increased investments in our strategies to grow Pro customer sales and open a greater number of new stores each year as well as the investments we are making to attract and retain a talented workforce will fuel our accelerated growth over the next several years beginning in the second half of 2022,” said Tyson.
For the complete press release, click here.
About Lumber Liquidators
LL Flooring is one of North America’s leading specialty retailers of hard-surface flooring with 416 stores as of June 30, 2021. The Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. LL Flooring’s online tools also help empower customers to find the right solution for the space they’ve envisioned. LL Flooring’s extensive selection includes vinyl plank, solid and engineered hardwood, laminate, bamboo, porcelain tile, and cork, with a wide range of flooring enhancements and accessories to complement. Our stores are staffed with flooring experts who provide advice, pro partnership services and installation options for all of LL Flooring’s products, the majority of which is in stock and ready for delivery.
Julie MacMedan – Head of Investor Relations – firstname.lastname@example.org – (804) 420-9801
Source: Lumber Liquidators Holdings, Inc.