LL - LL Flooring stock slides on wider than expected loss

2023-05-08 08:30:13 ET

LL Flooring Holdings ( NYSE: LL ) shares were led lower in premarket action on Monday after doubling the anticipated quarterly loss alongside a steeper than expected revenue decline.

For the first quarter, the lumber and flooring company notched a $0.31 per share loss, more than doubling the consensus of a $0.15 per share loss. Meanwhile, a 13.7% drop in revenue year over year to $240.69M missed analyst expectations by $17.71M. Total comparable store sales decreased 15.4% year over year while operating margins contracted 620 basis points compared to the first quarter of last year.

“As expected, the first quarter was very challenging and our performance reflected the impact the difficult macro backdrop had on discretionary home improvement spending. In addition, we continue to experience pressure from brand awareness and operational challenges that impacted first quarter results,” CEO Charles Tyson commented. “Despite the headwinds that we are facing, we remain confident in our ability to deliver the high-touch service of an independent flooring retailer combined with the value, assortment and convenience of a national brand.”

He added that growing sales to Pro customers encourages optimism on the path ahead, as does the rollout of a new category pilot in carpet projected to occupy 24 locations by the close of the year. Actions to optimize the supply chain network are also expected to pay dividends.

“As we look to the remainder of 2023, we expect the macro backdrop to remain challenging as elevated inflation and higher interest rates drive a more cautious consumer and pressure higher ticket discretionary purchases,” Tyson concluded. “We have also been impacted by the enforcement of the Uyghur Forced Labor Prevention Act as it relates to the importation of polyvinyl chloride (PVC) which is resulting in delays in receipt of certain vinyl flooring products. We are diligently working to provide the additional documentation that has been requested by U.S. Customs. During Q1, we experienced continued delays, incremental expenses and lost sales as a result of detention notices within the vinyl product category. Together these factors have limited our sales visibility for the balance of the year.”

The company did not provide guidance for the full year, but did project about $15M to $20M in expenditures for the year. Adjusted gross margins are expected to improve while full year revenues are due “to be challenged due to macro uncertainty further exacerbated by the customs delays related to the UFLPA.”

Shares of LL Flooring Holdings ( LL ) slid 2.3% shortly after the earnings release .

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