Would Lumber Liquidators floor customers with a new name?
What’s in a name? For a retailer like Lumber Liquidators, the answer is: baggage. That is why analysts are encouraging the chain to dump its familiar moniker in pursuit of a fresh start.
While Lumber Liquidators is already in the midst of a rebranding, a recent stock downgrade and corresponding slide in share price have led analysts to suggest the affordable flooring retailer ditch its name and begin undertaking a more drastic transformation strategy, according to an article on MarketWatch.
Intensified competition from both direct competitors in flooring and adjacent categories like home improvement are part of the reason for the chain’s current woes. Experts, however, argue the bigger problem is that the chain never bounced back from a massive wave of bad press in 2015 surrounding a scandal that branded the company’s product a public health threat.
Consumer skepticism over the chain began with a scathing 2015 expose on “60 Minutes”, which accused Lumber Liquidators of selling Chinese-made laminate flooring that contained formaldehyde in levels that exceeded California’s CARB 2 standard for toxicity by some order of magnitude. In that report, the television show’s reporters went undercover at three Chinese mills that supplied Lumber Liquidators with product. Mill employees admitted openly to mislabeling their product as CARB 2 compliant to keep costs down. The chain stated that the bad press was motivated by profit-driven short-sellers and lawyers. In the wake of the report, U.S. Sen. Bill Nelson (Dem.) of the Senate Committee on Commerce, Science and Transportation called for an investigation into the company from a few federal regulatory bodies.
In March of 2019, Lumber Liquidators was charged with fraud by the Securities and Exchange Commission (SEC) over statements made in response to the “60 Minutes” segment. The chain told the public that it had conducted third-party testing, which demonstrated that its suppliers complied with formaldehyde emissions standards. In fact, the chain knew its largest supplier had failed such third-party tests.
The retailer also experienced a recent cybersecurity incident consisting of a malware attack, resulting in an estimated $6 million to $8 million in damages, according to its third-quarter financial report.
- Lumber Liquidators stock slammed by downgrade as analysts suggest name change – MarketWatch
- Lumber Liquidators deals with its 15 minutes of infamy – RetailWire
- SEC Charges Lumber Liquidators With Fraud – SEC
- Lumber Liquidators Announces Third Quarter 2019 Financial Results – Lumber Liquidators
DISCUSSION QUESTIONS: Given the scope of Lumber Liquidators’ issues, is a name change a realistic solution to the problem? What form of transformation, other than or in addition to a name change, might enable the retailer to begin a turnaround?