A recap for all LL shareholders.
Lumber Liquidators actually has 2 Investor Relations teams. This is not a normal occurrence. But the company feels that in order to properly “connect” with shareholders, they need an “in-house” team and an external IR group.
- In-house team, led by the new VP of IR and FP&A, Mr, Paul Taaffe. Oddly, Paul has not even updated his LinkedIn page to reflect his new employment with LL. (https://www.linkedin.com/in/paultaaffe1/)
- External IR, led by Danielle O’Brien, from Edelman
With such talent at the helm of the double IR department, we have a couple of questions.
Why has LL been completely silent as the stock drops to a near 52 week low, losing almost 20% in the last few trading days?
What are we paying these 2 IR teams to do?
Investors have double the reason to be enraged.
The Train Wreck Continues
This last week, many investors have remarked that the stock has been plummeting for no reason. Is that really the truth? Let’s recap some “reasons” for the stock drop.
Lumber Liquidators also still does not have a full time CFO. After Martin Agard jumped ship in March 2019, the company still has not been able to find a replacement. Maybe a company without a CFO should be trading near a 52 week low… I know I would not invest in a company that did not even have a CFO.
Lumber Liquidators management still has not purchased any LL stock in the open market. We demanded that executives purchase stock months ago (http://rebuildll.rizzicapital.com/2019/06/03/llvc-demands-that-ll-executives-and-board-purchase-shares-in-open-market/) But other than a paltry purchase by Charles Tyson, no other executive has followed. Lumber Liquidators IR has told me that they want to host an Investor/Analyst Day later this year, to really tell the investing community why they should be excited about LL. A question which begs asking is, “why should investors be excited about owning LL stock, if management isn’t even excited enough to buy it themselves?”
On June 19, 2019, LLVC officially nominated industry expert David Hartman to join the LL Board of Directors. There is still no update from the LL board concerning this nomination. In fact, last we heard, LL Investor Relations was still busy vetting the LLVC membership, rather than actually vetting David Hartman. Instead of seeing the merit of having a flooring industry expert on the board, the board has chosen to stall and to investigate LLVC members. Doesn’t the board have a fiduciary duty to act in the best interest of the company?
The Lumber Liquidators Board of Directors is listed here: http://investors.lumberliquidators.com/management-and-directors?cat=1
Not a single member of the board, other than the CEO, Dennis Knowles, has any experience in flooring. Not a single one of the directors has ever worked in a hardware or flooring store, or has any experience in retailing of building materials. How can a company like Lumber Liquidators claim to be a leader in the flooring industry, when not a single person on the board has any knowledge of the flooring industry? Not only that, but the Chairwoman of LL, Nancy M. Taylor, is also paid the highest compensation of ANY chairperson or lead director in LL’s self-selected peer group. http://rebuildll.rizzicapital.com/2019/04/20/lumber-liquidators-overpaying-for-under-performance/
We pay these people tons of money, and not only do we not see any results, but these directors also have no relevant experience.
Other fun facts about LL
The board recently diluted the share count by 1.75 million shares in order to pay out more stock options and reserved shares to management. http://rebuildll.rizzicapital.com/2019/04/25/investor-group-recommends-lumber-liquidators-shareholders-reject-proposals-to-increase-executive-pay-and-dilute-shares/
The board doubled the executive Bonus payout rate for the lowest level of performance (threshold level), thereby further rewarding and incentivizing mediocre performance. Meaning that even though LL is having a terrible year and forecasting growth and margins to fall, executives will likely earn an even higher bonus than last year for their “performance. ” http://rebuildll.rizzicapital.com/2019/04/25/investor-group-recommends-lumber-liquidators-shareholders-reject-proposals-to-increase-executive-pay-and-dilute-shares/
The Board of Directors at Lumber Liquidators was able to pass these ridiculous proposals because they hired a proxy advisory firm in an effort to contact and influence shareholders. The Board effectively used company money to help pass proposals which harm shareholders.
The CEO of Lumber Liquidators has been slashing advertising spending for the last few years. This coincides perfectly with falling growth at the company. Is this a coincidence? Can you really cut your way to growth and profitability? Judging by the results for the last 3 years, the answer is clearly NO. Just another one of many mistakes. http://rebuildll.rizzicapital.com/2019/05/31/dennis-knowles-slashing-advertising-and-stalled-sales/
CEO, Dennis Knowles and most of the executive management team at LL recently met with Whitney Tilson, the short seller who not only publicized the Chinese laminate story which sunk LL stock 90%, but who also profited by shorting the shares (betting that they would fall). Why did the management team meet with this unsavory individual, at LL headquarters, for almost 2 hours? Note also that LLVC members owns 4.5% of LL shares, yet, neither Dennis Knowles nor the board will engage with us, either by phone or in person. Whitney Tilson, on the other hand, owns exactly ZERO shares and gets the red carpet treatment. http://rebuildll.rizzicapital.com/2019/05/31/knowles-meets-with-tilson-shareholders-should-be-enraged/
The company will soon announce “earnings” and management will likely be quick to point the finger at tariffs, as the main excuse for their under-performance. That’s a very convenient and easy scapegoat. As we have seen (look above), 90% of the problems at the company are company-specific and have been create by and continue to be perpetuated by the board and management.