Lumber Liquidators

Part
01
of three
Part
01

Lumber Liquidators - SWOT Analysis

One strength of Lumber Liquidators is their discount pricing, a weakness is a lack of innovation, an opportunity is the ability to further diversify their supply chain, and a threat is the uncertainty surrounding the Chinese tariffs. A complete SWOT analysis of the company is provided below.

Strengths

  • Lumber Liquidators has a broad product line which can bring in customers who need diverse flooring options. Their products include hardwood, laminate, engineered wood, bamboo, cork, vinyl, ceramic tiles, and porcelain tiles.
  • The company has a lean business model, has no frills retail locations, and minimizes overhead which allows them to discount their flooring and offer great prices.
  • Lumber Liquidators has created system redundancies and implemented business continuity plans that pay dividends when there is a business disruption, such as the security incident reported in August of this year. The company was able to deal with the issue while ensuring that customers were not impacted as the day-to-day business operations continued.

Weaknesses

  • In May 2019, it was announced that Lumber Liquidators had settled with the Securities and Exchange Commission to pay $33 million in fines for not being truthful about formaldehyde in their laminate products. This was after the company had already paid over $36 million to customers who had bought the laminate between 2009 and 2015. The lingering impact of this mistep will continue to affect the company's bottom line.
  • As of mid-2019, about 50% of Lumber Liquidators stock is imported from China. The tariff uncertainty is contributing to higher costs and an inability to predict future costs.
  • Floor Covering News published an article that focused on innovators in the flooring space, and even though close to twenty companies were mentioned, Lumber Liquidators was not one of them. This may indicate that the company is falling behind in innovation. However, there is some innovation happening as they recently introduced the Aquaseal flooring line. The line offers laminate, hardwood veneer, and bamboo that can withstand water on the floors for 24 hours or more without any damage.

Opportunities

  • One opportunity the company has is to source less of its product from China. Doing this will lessen the impact of tariffs, and also provide the company the opportunity to continue to move on from the bad publicity received when it was disclosed in 2015 that they were sourcing laminate that was releasing formaldehyde, and then lying about it. Third party testing done in 2019 found that there were no traces of phthalates found in Lumber Liquidators vinyl flooring, which provides them with unbiased proof that they are moving in the right direction in removing potentially harmful chemicals.
  • Lumber Liquidators can look for ways to continue to grow its installation business, which is not impacted by tariffs.
  • In late 2018, the company opened a retail location with expanded services including a design center, larger selection and inventory, and integrated technology. If this new format proves popular with customers, the company can expand the new store format to other locations to increase customer interactions and sales.

Threats

  • Tariffs of 25% on the product Lumber Liquidators imports from China are hitting the company hard and impacting sales. On a positive note, the tariffs are causing the company to diversify their supply chain, which should help reduce the impact of tariffs now and in the future.
  • Many consumers are willing to spend more on premium flooring, and Lumber Liquidators discount model is not a good fit for this. For example, in 2018, Floor & Decor, a more high-end flooring store, did more business than Lumber Liquidators, even though it only has about a quarter of the store locations.
Part
02
of three
Part
02

Lumber Liquidators - Competitors

The top competitors of Lumber Liquidators are Empire Today LLC, Floor & Decor LLC, and Mannington Mills, Inc. Empire Today is a retailer of flooring products. Floor & Decor LLC is a "leading specialty retailer of hard surface flooring" in the United States, while Mannington Mills, Inc. is a manufacturer and marketer of residential and commercial flooring products.

Empire Today LLC

Company Website

The company website can be accessed here.

Company Overview

  • Empire Today is a U.S based company that was founded in 1959.
  • The company retails flooring products such as carpets, hardwoods, laminates, ceramics, vinyl floorings, and window treatment products.
  • Empire Today operates in the United States where it offers its products and services in 70 locations spread across 30 states.
  • The company employs an estimated 2,000 employees.

Floor & Decor LLC

Company Website

  • The company website can be accessed here.

Company Overview

  • Floor & Decor was founded in 2000 and is headquartered in Atlanta, U.S.
  • The company has an estimated revenue of $1.7 billion and a staff strength of over 6,000 employees.
  • The company operates about 100 stores spread across 28 states in the U.S.
  • The company's stores offer tile, wood, laminate, and natural stone flooring products, as well as decorative and installation accessories.

Mannington Mills, Inc.

Company Website

  • The company website can be accessed here.

Company Overview

  • The company was founded in 1915 and is based in Salem, New Jersey.
  • Mannington Mills is a manufacturer and marketer of residential and commercial resilient, laminate, hardwood, sheet vinyl, luxury vinyl, porcelain, among others.[11]
  • In 2018, the company's revenue was estimated to be $800 million.
  • The company staff strength is estimated at 700 employees.

Research Strategy

To address the research request, we commenced our research by scouring Lumber Liquidators company website and profile on profiling databases such as Zoominfo and Crunchbase. Here we identified data on the company services, among other key information such as revenue and size/number of employees. The data identified in the search was used to establish the company's industry, size, and market research so as to identify companies offering similar services which can be considered as direct competitors.

Next, we proceeded to search for precompiled data of companies offering similar products and services as Lumber Liquidators. Here, we identified a report complied by Consumer Affairs that detailed information on the "best flooring companies" of which Lumber Liquidators was listed in the report. Using the report as a guide, we searched each company's website and profile on databases such as Crunchbase and Zoominfo to identify each company's revenue, number of employees, number of stores and offices, products and services offered, among others. Via a direct comparison with Lumber Liquidators data identified in our initial search, we determined which company could be considered as a direct competitor. Through this search, we were able to identify Empire Today LLC as a top competitor of Lumber Liquidators.

Furthermore, we ran a general web scan hoping to uncover the competitors of Lumber Liquidators from press releases, blog posts, Profiling databases, among others. From our search efforts, we identified Lumber Liquidators profile on Zoominfo and Crunchbase. From the data provided on these two databases, we identified several competitors of the company. Based on key metrics such as revenue size, the number of employees among others, we selected Floor & Decor LLC and Mannington Mills, Inc. as direct competitors of Lumber Liquidators.

In conclusion, company revenue, products and services offered, and company number of employees were the key metrics used to identify Empire Today LLC, Floor & Decor LLC, and Mannington Mills, Inc. as top competitors of Lumber Liquidators.
Part
03
of three
Part
03

Lumber Liquidators - Competitive Landscape

Empire Today has estimated revenue of $844.5 million and a brand recognition level of 95% among all consumers. Floor & Decor has $1,710 billion in net sales, and Mannington generates $800 million in revenue.

Empire Today LLC

  • Empire Today LLC (hereafter “Empire”) provides carpet, hardwood, laminate, ceramic, vinyl flooring, and window treatments to residential and business customers.
  • Empire differentiates itself by the scope of its reach (2 million people in over 55 metropolitan areas) and its Empire University curricula.
  • Paid searches are the majority (57.29%) of Empire’s web traffic, and most (61.43%) of its social media traffic originates from Facebook. Empire also uses traditional advertising like television commercials along with website display ads. The company’s promotional tag is “Empire Today.”
  • Empire has an estimated total revenue of $844.5 million.
  • Empire’s brand position is such that the company has a brand recognition level of 95% among all consumers. The company prominently emphasizes its A+ rating with the BBB in over 75 national markets.

Floor & Decor LLC

  • Floor & Decor specializes in hard surface flooring, free design services, porcelain, ceramic, stone, tile, wood, and laminate.
  • Floor & Decor differentiates itself through its product selection, pricing, and fully integrated in-store and online shopping experience.
  • Organic searches constitute the majority (63.62%) of Floor and Décor’s web traffic, and most (55.36%) of its social media traffic originates from Pinterest. Floor & Decor also uses traditional advertising like television commercials along with website display ads. The company’s tagline is “You Have to See It to Believe It.”
  • As of 2018, Floor & Decor has $1,710 billion in net sales.
  • Floor & Decor has positioned its brand on a back-to-basics strategy. The company has positioned itself among its clientele as not only a provider of a mix of products. The company also wants professionals to know it thinks of its customers not only as flooring business professionals but people as well.

Mannington Mills, Inc:

  • Mannington Mills (hereafter “Mannington”) manufactures residential and commercial sheet vinyl, luxury vinyl, laminate, hardwood, commercial carpet, and rubber.
  • Mannington differentiates itself through its focus on workplace safety and educational programs in communities it operates within.
  • Organic searches constitute the majority (98.15%) of Mannington’s web traffic, and most (55.38%) of its social media traffic originates from LinkedIn. Mannington does not engage in either traditional or website display advertising.
  • Mannington generates $800 million in revenue.
  • Mannington has positioned itself as an independent retailer that has on-trend flooring designs despite not being in big box stores.

Research Strategy

We began our investigation with inquiries into company websites and industry databases (e.g., LinkedIn, Bloomberg, Hoovers, CrunchBase, and Forbes). We also made inquiries into marketing and web traffic databases for information on each company's marketing strategy and brand positioning. We were able to locate the majority of the requested information in this fashion.
Sources
Sources

From Part 01
Quotes
  • "Lumber Liquidators is certainly not alone in the pain it feels as a result of tariffs. Companies across sectors are preparing investors for a grimmer 2019 than previously forecast. In its Q1 earnings call, CEO Dennis Knowles attributed a 2% hit to gross margins to the tariff increase."
Quotes
  • "The Company first discovered the incident at approximately 9:15 am on Wednesday, August 21, 2019, when its network and computer systems began to manifest symptoms of malware that ultimately disabled certain corporate and store systems nationwide. The Company took immediate action to contain the incident and, within hours, the information technology team had mobilized to diagnose and begin remediation processes, including securing outside expertise to help ensure the Company could return to normal operations as soon as possible. In addition, employees have worked diligently to implement established business continuity procedures, and stores have remained open and serving customers throughout this incident."
Quotes
  • "Using new handheld devices throughout the store, flooring experts can better help customers envision and select a new floor, while the newly-available extra-large flooring samples help customers find the style that's right for them. The Altamonte Springs store's highly experienced and bilingual associates on staff are well-equipped to meet the needs of the local community."
Quotes
  • "The four organizations behind the testing—Ecology Center, Safer Chemicals Healthy Families, the Environmental Health Strategy Center and Healthy Building Network—today announced that in 2018 they tested 10 vinyl floor tiles from The Home Depot, 13 tiles from Lowe's and three tiles from Lumber Liquidators. Their tests found no traces of the chemicals."
Quotes
  • "And while Lumber Liquidators expects to generate mid-to-upper single digit growth and mid-single digit comp store sales growth in FY 2018, Floor & Decor killed it with 23.5% net sales increase and 9.2% comp sales growth over 2017. Floor & Decor would have ended 2018 with double-digit same-store-sales growth, continuing a 10-year winning streak of double-digit CSS growth, but for the impact of Hurricane Harvey on its Houston market."
From Part 03