Lumber Liquidators reports Q3 income down

Toano, Va.-based hardwood flooring retailer Lumber Liquidator posted third-quarter net income of $4.3 million, down 44.8% from $7.8 million as reported for the same quarter last year.

Sales for the quarter ended Sept. 30 were $147.2 million, up 4.7% from $140.5 million reported for the same quarter of 2009.

During the quarter, the company implemented an integrated business solution from SAP, including an enhanced point-of-sale solution, a warehouse management and inventory control system, an integrated merchandising and product allocation system, and related management reporting functionality. According to the company, the new systems impacted the third quarter by reducing productivity, primarily across store and warehouse operations, including less effective conversion of customer demand into invoiced sales, less efficient product allocation and distribution, and the general need for additional resources to operate the business.

"While we are confident that over the longer term the implementation of our new SAP system will significantly benefit the business, our performance in the third quarter reflects declines in productivity both at the store-level and in the flow of product through our warehouse following implementation,” said Jeffrey Griffiths, president and CEO.

“We experienced a significant build in customer deposits on open orders over the course of the quarter which, by the end of the quarter, grew to be almost double the level we recorded at the end of the third quarter last year.”

Griffiths added that the company was less effective in fulfilling customer orders than initially hoped during the transition, and more resources were invested than expected to improve productivity.

Looking forward, the company expects a 10% to 15% increase in the fourth quarter over the same period in 2009 for a range of $151 million to $157 million, with total net sales for 2010 to be $618 million to $624 million. The company also expects to open 11 new stores in the fourth quarter.

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