Wedbush Maintains Neutral On Lumber Liquidators; Raises Questions About The Company’s Future
In a research note reported yesterday, Wedbush analyst Seth Basham maintained a Neutral rating on Lumber Liquidators (LL) and lowered his price target to $67 (from $85) following the news that LL’s 2Q14 results are much worse than they were expected to be.
Basham noted, “LL attributed a 1300 bps comp miss to missteps in its supply chain, a winter weather-induced stalled selling cycle and the knock-on effects of a housing market slowdown. We believe there is more at play here, including tougher competition from Home Depot. Aggressive quarter-end promotions by LL were not enough to recover comps, with June the weakest month of the quarter. We have highlighted all of these issues before, with the exception of the supply chain missteps. We believe it will take some time for the floor to level and for investors to regain confidence in the longer-term trajectory for LL, knocking the stock off many buy lists for now”.
The analyst continued, “We believe CEO Rob Lynch is transforming LL into a best-in-class vertically-integrated growth retailer, but needs to stabilize the business following supply chain missteps, weather-induced sales weakness, softening housing markets and increased competition. We see continued upside to gross margins over the medium term and believe the sourcing issue overhang will be resolved. However, LL still remains heavily exposed to a decelerating housing market given its big ticket discretionary product focus on hard surface flooring. We believe a housing slowdown reduces the upside potential for LL and leaves us NEUTRAL on shares”.
According to TipRanks.com, which measures analysts and bloggers success rate based on how their calls perform, analyst Seth Basham currently has a one-year average return of 11.8% and a 90% success rate. Basham is ranked #1125 out of 3211 analysts.