Lumber Liquidators Goes Public: IPO held Nov. 9 at the New York Stock Exchange

WELCOME TO WALL STREET: Tom Sullivan (left), chairman and founder of Lumber Liquidators, and Jeffrey Griffiths, CEO of Lumber Liquidators, pose at the New York Stock Exchange on Nov. 9.

NEW YORK —More than 11 years ago, a flooring contractor from Boston named Tom Sullivan opened the first Lumber Liquidators store—a factory direct, hardwood-only retailer catering to contractors and homeowners in the Boston remodeling market.

One hundred eleven stores later, Sullivan stepped onto the floor of the New York Stock Exchange Nov. 9 to buy the first shares of the company he founded in its initial public offering.

Sullivan now serves as chairman of the company, which was conceptualized when he was working as a contractor, he told HCN.

“Back in ‘93, I was building decks in the Boston area,” Sullivan said. “I wanted to buy material direct from the mill rather than the local lumber-yard. So I found a mill that would sell to us, and so I started storing some material at a reload facility for the building industry. I started seeing leftovers—made a deal, then started buying and selling the stuff and having weekend sales.”

Today, Lumber Liquidators has 111 stores in 42 states. The stores are about 6,400 square feet each, and growth that started in metropolitan markets in the Northeast has since spread to suburban and second city markets nationwide. The company is projecting growth of 25 stores in 2007, followed by 30 to 40 new stores per year until 2011.

According to Lumber Liquidators CEO Jeffrey Griffiths, the company now has an approximately 6 percent market share in hardwood flooring. With that projected growth rate, he expects Lumber Liquidators to gain a market share percentage in the mid-teens as the company grows to about 300 stores by 2011.

“This is a highly fragmented retail landscape,” Griffiths told HCN. “About 60 percent of the business is done through independent flooring stores whose primary focus is on carpet; another 20 percent is done through the big-box home centers whose primary focus is in the low-end of the category. We think this mid-teen market share is a highly achievable goal.”

Lumber Liquidators has seen same-store sales growth of 8.5 percent to 9 percent each quarter this year, Griffiths said. According to the company’s S-1 filing with the Securities and Exchange Commission, in 2006 Lumber Liquidators had sales of $332 million, up 35 percent from sales of $245 million in 2005.

For the first nine months of 2007, the company has shown strength—sales for the first nine months were $299.8 million, up 21 percent from $247.2 million in the first nine months of 2006.

Net income was $8.3 million for the first nine months of 2007, down 26 percent from $11.27 million in the first nine months of 2006.

Griffiths said he believes the company is positioned well to deal with some of the issues associated with the housing construction downturn. The retailer’s primary customer base is existing homeowners, he said, and floors for new home construction make up a much smaller percentage of the company’s sales.

“I think if you look at our strong comp-store sales growth, I think that is evidence that we are doing very well in that environment,” Griffith said. “There’s so much growth opportunity in hardwood flooring. And the pre-finished—what we sell—is really gaining in popularity to unfinished. I think we’re in a really good position to support this growth, just by focusing on this category.”

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