ANALYST: The '60 Minutes' report on Lumber Liquidators was way worse than we thought it would be (LL)
On Sunday night, "60 Minutes" aired a damning report on Lumber Liquidators and what appeared to be intentional mislabeling of certain laminate flooring products made at a factory in China.
And in a note to clients, Piper Jaffray analysts wrote that the report was worse than the firm had prepared for.
Piper said the report was worse than expected based on these three points:
- How specific the story was.
- The evidence provided by "60 Minutes."
- A poor on-camera interview by the company's founder Tom Sullivan who conceded that the video evidence called into question the company's oversight of its suppliers.
The "60 Minutes" report outlined apparent violations by the company relating to the amount of formaldehyde contained in some laminate flooring products sold in California.
Specifically, "60 Minutes" went to factories in China that produce laminate flooring for Lumber Liquidators that the company says is "CARB 2" compliant, meaning it complies with California standards. The news program's undercover team spoke with factory managers who acknowledged that inventory being produced for Lumber Liquidators was labeled "CARB 2" compliant when it was not.
Early Monday following the "60 Minutes" piece, shares of Lumber Liquidators were down as much as 20%.
Piper added that:
While the validity of 60 Minutes evidence and claims will likely be vigorously disputed by the company — and we are still in no position to determine if there has been any wrongdoing — the piece portrayed LL in a negative light and will likely leave the company guilty in the court of public opinion for the foreseeable future.
Piper also noted that the social media reaction to the "60 Minutes" piece was "overwhelmingly negative," noting that, "Individuals noted they will be returning recently purchased product, asking how their floors could be tested, and commenting on the poor performance by LL's founder."