Last week, Floor and Decor announced their earnings. It was an across the board beat. Revenue, same store sales, profits and margins, all came in strong. Stronger than almost any body expected. The stock soared 20% higher.
Today, Lumber Liquidators reported “earnings.” It was an across the board failure. Revenue, same store sales, profits (losses) and margins, all came in weak. The stock slumped, 20%.
Floor and Decor, said that there were almost no macroeconomic headwinds. The mentioned how they were cautiously optimistic about lower interest rates fueling a housing rebound. As for tariffs, FND said “by the end of 2019, we expect the percentage of our merchandise sourced from China to decline to the mid-30% range from 50% in 2018. We believe it will continue to decline in 2020 and beyond.”
By contrast, Lumber Liquidators blamed all of their poor performance on macroeconomic events. They said slow sales were due to uncertainty about interest rates and they cut revenue guidance for the back half of the year, due to the economy. As I have mentioned many times, LL has been very slow to migrate imports away from China. Historically, LL has imported about 47% of their product from China. Today, the company forecast that by the end of 2019, it would reduce Chinese imports to the mid 40% range. So, basically, they will maybe reduce Chinese imports by 2 or 3%. That is pathetic execution, compared to FND which will reduce Chinese imports by 15%.
Both FND and LL operate in the same industry and both are subject to the exact same macroeconomic risks. LL is doing a terrible job of navigating those risks. FND is executing flawlessly. LL stock is plunging, now trading at $7 per share. FND stock is soaring, now trading at over $43.
Make no mistake, Dennis Knowles, Charles E. Tyson and Nancy M. Taylor are the root cause of LL’s problems. It’s not the economy or tariffs. It’s terrible management. LL management is lying to investors by blaming the poor economy. And as the stock price plunges, investors are suffering massive losses.