Lumber Liquidators Shares Jump After Clean-Air Probe Endedby
Company ends California's investigation of flooring products
Firm says hasn't sold products from China since May 2015
Lumber Liquidators Holdings Inc. shares jumped after the company agreed to pay $2.5 million to the California Air Resources Board to end an inquiry about its laminate flooring products sourced from China.
The stock rose 16 percent Tuesday after the company announced the settlement. Lumber Liquidators, dogged by allegations that its flooring is unsafe, said in a statement that the agreement "fully resolves" the board’s inquiry. There was "no formal finding of violation" or any admission of wrongdoing by the Toano, Virginia-based company, according to the statement.
Lumber Liquidators has seen its sales plunge since short sellers and the “60 Minutes” news program accused the chain of selling Chinese-made laminate flooring with cancer-causing levels of formaldehyde. The company says it hasn’t sold flooring products sourced from China since May 2015.
The company cut prices, increased discounting and tried to ease health concerns by pulling the Chinese laminate from stores. Yet the deterioration of its business accelerated last quarter, with revenue at established locations plummeting 17 percent.
As part of the accord announced Tuesday, Lumber Liquidators agreed to implement procedures that ensure all of its flooring products meet California’s formaldehyde standards, which are the most stringent in the U.S. The company will also work with the board to develop protocols for testing flooring.
The California Air Resources Board said in a statement that the agency visited Lumber Liquidators stores in California between September 2013 and May 2015, tested boxes of laminate flooring and determined that "some" samples exceeded state limits for formaldehyde.
The agency said the company was notified that the testing showed it had "failed to take reasonable prudent precautions" ensuring that laminate flooring complied with state standards. Lumber Liquidators cooperated with the investigation, the board said.
"Consumer safety is our top priority and, over the past year we have implemented a number of customer-focused initiatives," Chief Executive Officer John Presley said in the statement.