Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the second quarter and six months ended June 30, 2016.
Second Quarter Results
Net sales in the second quarter of 2016 were $238.1 million, a decrease of 4.0% from the second quarter of 2015. This includes a comparable store net sales decline of 7.2%, reflecting a 0.7% increase in the average sale which was more than fully offset by a 7.9% decrease in the number of customers invoiced. The Company believes the number of customers invoiced was impacted by its change in strategy from a very promotional period in the prior year to a more strategic pricing approach during the current year period. Additionally, the Company believes demand for certain product categories decreased as our assortment of products did not match changes in customer trends. Non-comparable store net sales increased $8.1 million over the comparable prior year period. The Company opened four new stores during the second quarter of 2016.
Gross margin was 29.7% in the second quarter of 2016, compared with 25.1% in the prior year period. The change in gross margin was primarily attributable to the items highlighted in the attached supplemental schedule as well as changes in the Company's promotional strategy and increases in the sales mix of laminates and vinyl, which generally have lower retail price points and above average gross margins.
Selling, general and administrative ("SG&A") expenses in the second quarter of 2016 were $89.9 million, $0.7 million below the prior year quarter. The change is primarily attributable to the items highlighted in the attached supplemental schedule as well as slight reductions in the Company's advertising spend in second quarter of 2016 partially offset by higher payroll related costs in the second quarter of 2015. As a percentage of net sales, SG&A increased to 37.8% from 36.5% during the prior year period, primarily as a result of weaker than expected net sales.
Net loss for the second quarter of 2016 was $12.2 million, or a loss of $0.45 per diluted share, as compared to a net loss of $20.3 million, or $0.75 per diluted share, during the prior year period.
Cash and cash equivalents at June 30, 2016 totaled $12.7 million compared with $26.7 million at December 31, 2015. At June 30, 2016, the Company had $32.0 million outstanding on its revolving credit facility, with remaining availability of $53.7 million. In July 2016, the Company received a $22.1 million refund from the IRS related to the carry back of 2015 net operating losses to prior periods where the Company generated taxable income. This amount was reflected in other current assets on the condensed consolidated balance sheet atJune 30, 2016.
During the quarter, the Company continued to progress in its efforts to resolve outstanding legal and regulatory issues: On June 16, 2016, the court reaffirmed the favorable ruling of the Proposition 65 lawsuit. On June 15, the Company entered into a voluntary agreement with the Office of Compliance and Field Operations of the Consumer Product Safety Commission with respect to its laminate products sourced from China and agreed to, among other things, continue the indoor air quality testing program. On July 6, 2016, the court preliminarily approved a definitive settlement agreement related to a consolidated securities class action matter. On July 18, 2016, the Company signed a definitive settlement agreement related to its derivative litigation matter to settle outstanding claims.
John Presley, Chief Executive Officer, commented, "While our financial results this quarter were below our expectations, we are encouraged by the progress we made in strengthening Lumber Liquidators for growth and profitability in the long term. We resolved several legacy regulatory issues, made good progress on resolving certain other outstanding legal matters, and continued to enhance our compliance program. We have also taken significant steps to improve store performance, ensuring our sites are equipped with the right people and products to serve our customers. In short, we are making steady progress, and will continue to focus on execution within the business in the coming quarters."
About Lumber Liquidators
With more than 375 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 400 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and resilient vinyl. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators' low priced product, much of which is in stock and ready for delivery.
