Lumber Liquidators axing Chinese flooring products

Gary Strauss | USA TODAY

Lumber Liquidators (LL), stung by lower sales and a slumping stock price over allegations that its laminate flooring made in China contains toxic levels of formaldehyde, is suspending sales of the product.

Shares - up as much as 7% in early trading - closed off 0.6% to $27.07 Thursday after the company said it will suspend sales until it completes a sourcing compliance program. The move is a shift for North America's largest specialty flooring retailer company, which continued to sell Chinese laminate flooring for two months after a March 60 Minutes report that said the products contained formaldehyde, a carcinogen, at levels that exceeded California state guidelines.

Lumber Liquidators' March same-store sales fell nearly 18% after the 60 Minutes report, which has prompted more than 100 class-action suits against the company as well as a Consumer Product Safety Commission probe. Just last week, the company said the Justice Department is seeking criminal charges under the Lacey Act for alleged illegal importation of oak flooring from protected Russian forests.

Lumber Liquidators shares have slumped more than 60% since late February, when it alerted investors of the looming 60 Minutes report.

Since then, the company has shipped thousands of air testing kits to customers. It says nearly all showed formaldehyde air concentrations that fell within World Health Organization guidelines.

"Despite the initial positive air-quality testing results we have received, we believe it is the right decision to suspend the sale of these products," said CEO Robert Lynch. "We will work diligently to meet the needs of our customers and to ensure their satisfaction."

Freeh Group International Solutions, a consultant headed by former FBI Director Louis Freeh, has also been been hired as an independent compliance adviser.

Carl Tobias, a University of Richmond Law School professor, said the company's decision to suspend Chinese laminates should have been done sooner. "The other measures were stopgaps,'' he says.

Tobias applauded the move of hiring Freeh's firm but says litigation and settlement costs could be expensive.

"They aren't out of the woods yet,'' Tobias said.









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