Lumber Liquidators Begins Its Reputation Renovation

How do you rebuild your reputation after an investigative news report has dismantled it? Lumber Liquidators picked up the PR toolbox and started hammering away yesterday morning in a conference call — a move that helped its stock to “soar” 14% after it had been “pummeled” since “the company said ‘60 Minutes’ would portray it in an ‘unfavorable light with regard to sourcing and product quality,” CNBC’s Everett Rosenfeld reports.

The “60 Minutes” report by Anderson Cooper, which aired on March 1, asserted that more that “much” of the 100 million square feet of Lumber Liquidators’ cheaper laminate flooring installed in the U.S. every year “may fail to meet health and safety standards, because it contains high levels of formaldehyde, a known cancer-causing chemical.”



Tests of 150 boxes of Chinese-made laminate flooring at Lumber Liquidators stores around California ordered up by Denny Larson, executive director of Global Community Monitor, and Richard Drury, an environmental attorney, found it to be “over six to seven times above the state standard for formaldehyde,” Drury told Cooper. “And we found some that were close to 20 times above the level that's allowed to be sold.”

The company said yesterday that “consumers can request free indoor air quality test kits that will be analyzed by accredited laboratories,” Rachel Abrams reports in the New York Times. “Results will be emailed within a week to 10 days.” 

So far, about 1,000 customers have requested the test. If results are high and additional testing confirms excessive levels of formaldehyde, the company said it may pay to install new flooring.

“‘We are confident that all of our products are safe, and none of our products pose significant health or safety issues,’ CEO Rob Lynch said during the call yesterday, adding the company would ‘never knowingly’ risk customer safety,” writes CNBC’s Everett Rosenfeld. A Seeking Alpha transcript of the entire call is here.

“Customers are understandably concerned because “sensationalized reports provide little context,” the company said in a regulatory filing ahead of” the call yesterday, reports the AP’s Michael Felberbaum.

The NYT’s Abrams points out that “Lumber Liquidators did not provide a plan for consumers to test specifically whether the flooring itself violated safety standards,” writing that “many items like furniture and disinfectants can leak formaldehyde, and consumers might not be able to determine how much of it was coming from Lumber Liquidators’ flooring …”

Lumber Liquidators, which was launched in the back of a trucking yard in Stoughton, Mass., in 1993, now has 352 stores in 46 states and revenues of more than a billion dollars a year. Tom Sullivan, its founder and chairman whose email address is featured on the company’s home page, will be live on CNBC's “Fast Money Halftime Report” at noon today. 

Sullivan told Cooper on “60 Minutes” that the test results from California were “not a real world test of the laminate — it's not the way it's used.” He also pointed out “this is a group of lawyers who are suing us, selling short on our stock.”

He repeats that assertion in a letter on the company’s website, writing: “As recently as late 2014, testing by independent third parties confirmed that 100% of the randomly selected cores used in the laminates from the three factories that ‘60 Minutes’ investigated came back as fully safe and compliant with California standards. We are committed to transparency when it comes to our products.”

Sullivan’s appearance on CNBC today will be the first time he’s spoken publicly about the issue since the report aired. 

Whitney Tilson, the managing partner of Kase Capital Management who reached out to ‘60 Minutes’ after receiving a tip that Lumber Liquidators was selling tainted laminate flooring, said after the company’s presentation that he remains convinced that it is doing so,” Felberbaum reports. “It’s telling that, on its conference call, management simply read a prepared statement and didn’t take any questions...,” Tilson said in an email to the AP.

“He also characterized the call as “a continuation of the company's campaign of distraction and deception,” Reuters’ Jennifer Ablan reports.

“Despite the PR offensive, Lumber Liquidators isn't out of the woods yet,” writesUSA Today’s Gary Strauss. “Sen. Bill Nelson, D-Fla., has asked the Consumer Product Safety Commission and other federal agencies to investigate whether the company's flooring poses a health risk. And prior to the ‘60 Minutes’ segment, management warned that the company faced criminal federal charges over imported bamboo harvested illegally from protected animal habitats.”

2 comments about "Lumber Liquidators Begins Its Reputation Renovation".
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  1. Bill Kretzel from kretzel, March 13, 2015 at 10:08 a.m.

    Of course, the main problem was Mr. Lynch's approach in the Cooper interview that ran with the 60 Minutes story: his dismissive and in-denial stance spoke volumes - and was an absolutely textbook example of how not to handle potentially negative media exposure, in particular on such a high-profile outlet as 60 Minutes. Lululemon went down on much less damning issues that this!

  2. Paula Lynn from Who Else Unlimited, March 13, 2015 at 10:30 a.m.

    Remember the dry wall from China that was molding ? Now lumber is another carcinogenic. What will cost you more ? Better quality from somewhere else or dying early with hefty medical bills ? We never learn.

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