RICHMOND, Va., Dec. 12, 2019 /PRNewswire/ -- Lumber
Liquidators (NYSE: LL), a leading specialty retailer of
hard-surface flooring in North
America, today announced an update to the Company's
financial outlook for full-year 2019.
On November 7, 2019, the U.S.
Trade Representative (USTR) ruled on a request made by a number of
interested parties, including the Company, and retroactively
excluded certain flooring products imported from China from the Section 301 tariffs implemented
at 10 percent beginning in September
2018 and increased to 25 percent in June 2019.
Furthermore, on November 20, 2019,
U.S. Customs and Border Protection issued Chapter 99 exclusions on
each unique article number identified under the November 7 USTR ruling. Flooring products
currently excluded from the 25 percent Chinese tariffs include
certain "click" vinyl and engineered products the Company has sold
and continues to sell. The granted exclusions apply
retroactively from the date the tariffs were originally implemented
on September 24, 2018 through
August 7, 2020.
While U.S. Customs is the ultimate arbiter of any claims, the
Company currently expects to recover the relevant 301 tariff
payments related to more than 100 stock keeping units that are now
exempt under the USTR ruling ("Relevant Products"). As a
result, the Company will recognize approximately $11 million as operating income in the fourth
quarter of 2019 related to recoveries associated with Relevant
Products already sold, net of certain other associated costs.
The Company will also reduce the carrying cost of inventory by
approximately $12 million related to
Relevant Products held for sale. The Company will establish a
receivable from U.S. Customs related to the anticipated recoveries
of approximately $25 million and
expects to receive payment by the end of the second quarter of
2020.
"We are pleased with the USTR's decision to retroactively
exclude certain vinyl and engineered flooring products from Section
301 tariffs," said Chief Executive Officer Dennis Knowles.
"Luxury vinyl tile is one of the fastest growing segments of the
hard-surface flooring market, and we look forward to continuing to
serve consumers with a broad selection of floors that can satisfy
nearly any style."
Beyond the recognition of the recovery related to Relevant
Products already sold, at this time, the Company is unable to
predict how these tariff changes will impact future margins due to
a number of variables, including consumer demand, competitive
pricing, vendor relationships, inventory turn, currency changes and
other factors that could impact the outcome.
2019 Outlook
As a result of the retroactive application of these exclusions,
the Company has updated its adjusted operating margin (a non-GAAP
measure) expectations in its current financial outlook for
full-year 2019 which continues to assume the continuation of the
current 25% tariff applicable to products imported from
China, excluding Relevant Products
identified under the recent exclusion ruling, for the balance of
2019 and is as follows:
|
Current
Outlook
|
Previous
Outlook
(as of November 7,
2019)
|
Total revenue
growth percentage
|
Flat to slightly
positive
|
Flat to slightly
positive
|
Comparable store
sales
|
-2.0% to
flat
|
-2.0% to
flat
|
Adjusted operating
margin (a non-GAAP measure)1
|
2.1% to
2.4%
|
1.0% to
1.4%
|
New store
openings
|
Approximately
11
|
Approximately
11
|
Capital
spending
|
$15 to $17
million
|
$15 to $17
million
|
1 Updated for retroactive application of the
exclusions.
About Lumber Liquidators
Lumber Liquidators is one of North America's leading specialty
retailers of hard-surface flooring with 419 stores as of
September 30, 2019. The Company
features more than 400 varieties of floors in the latest
styles, including solid and engineered hardwood, bamboo, cork,
laminate, waterproof vinyl plank and porcelain tile flooring.
Additionally, Lumber Liquidators provides a wide selection of
flooring enhancements and accessories to complement, install and
maintain new floors. Every location is staffed with flooring
experts who can provide advice, pro services and installation
options for all of Lumber Liquidators' products, much of which is
in stock and ready for delivery.
Learn more about Lumber Liquidators:
- Commitment to compliance, quality and the communities it
serves: https://www.lumberliquidators.com/quality.
- Corporate giving: LayItForward.LumberLiquidators.com.
- Follow on social media: Facebook, Instagram and Twitter.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release includes statements of the Company's
expectations, intentions, plans and beliefs that constitute
"forward-looking statements" within the meanings of the Private
Securities Litigation Reform Act of 1995. These statements, which
may be identified by words such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "thinks,"
"estimates," "seeks," "predicts," "could," "projects," "potential"
and other similar terms and phrases, are based on the beliefs of
the Company's management, as well as assumptions made by, and
information currently available to, the Company's management as of
the date of such statements. These statements are subject to risks
and uncertainties, all of which are difficult to predict and many
of which are beyond the Company's control. These risks include,
without limitation, the impact on us of any of the following:
- the outcomes of legal proceedings, and the related impact on
liquidity;
- reputational harm;
- obligations related to and impacts of new laws and regulations,
including pertaining to tariffs;
- obtaining products from abroad, including the effects of
tariffs, as well as the effects of antidumping and countervailing
duties;
- obligations under various settlement agreements and other
compliance matters;
- disruption due to cybersecurity threats, including any impacts
from a network security incident;
- disruptions related to our corporate headquarters
relocation;
- inability to open new stores, find suitable locations for our
new store concept, and fund other capital expenditures;
- inability to execute on our key initiatives or such key
initiatives do not yield desired results;
- managing growth;
- transportation costs;
- damage to our assets;
- disruption in our ability to distribute our products;
- operating stores in Canada and
an office in China;
- managing third-party installers and product delivery
companies;
- renewing store or warehouse leases;
- having sufficient suppliers;
- our, and our suppliers', compliance with complex and evolving
rules, regulations, and laws at the federal, state, and local
level;
- disruption in our ability to obtain products from our
suppliers;
- product liability claims;
- availability of suitable hardwood, including due to disruptions
from the impacts of severe weather;
- changes in economic conditions, both domestic and abroad;
- sufficient insurance coverage, including cybersecurity
insurance;
- access to and costs of capital;
- the handling of confidential customer information, including
the impacts from the California Consumer Privacy Act;
- management information systems disruptions;
- alternative e-commerce offerings;
- our advertising and overall marketing strategy;
- anticipating consumer trends;
- competition;
- impact of changes in accounting guidance, including the
implementation guidelines and interpretations;
- maintenance of valuation allowances on deferred tax assets and
the impacts thereof;
- internal controls including those over tariffs;
- stock price volatility; and
- anti-takeover provisions.
The Company specifically disclaims any obligation to update
these statements, which speak only as of the dates on which such
statements are made, except as may be required under the federal
securities laws. Information regarding these and other
additional risks and uncertainties is contained in the Company's
other reports filed with the Securities and Exchange Commission,
including the Item 1A, "Risk Factors," section of the Form 10-K for
the year ended December 31, 2018, and
the Item 1A, "Risk Factors," section of the Form 10-Q for the
quarter ended September 30, 2019.
Non-GAAP and Other Information
To supplement the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), the Company
uses Adjusted Operating Margin. This non-GAAP financial
measures should be viewed in addition to, and not in lieu of,
financial measures calculated in accordance with GAAP. This
supplemental measure may vary from, and may not be comparable to,
similarly titled measures by other companies.
The non-GAAP financial measure is presented because management
uses this non-GAAP financial measures to evaluate the Company's
operating performance. Therefore, the Company believes that the
presentation of non-GAAP financial measures provides useful
supplementary information to, and facilitates additional analysis
by, investors. The presented non-GAAP financial measure excludes
items that management does not believe reflect the Company's core
operating performance, which include regulatory and legal
settlements and associated legal and operating costs, changes in
antidumping and countervailing duties, as such items are outside
the control of the Company or are due to their inherent unusual,
non-operating, unpredictable, non-recurring or non-cash nature.
For further information contact:
Lumber Liquidators Investor Relations
ir@lumberliquidators.com
Tel: 757.566.7512
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SOURCE Lumber Liquidators