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Wednesday, March 4, 2015

Strategic CSR - Lumber Liquidators

For those of you who have not yet seen Sunday's CBS 60 Minutes report on the flooring company Lumber Liquidators, it is worth a look:
As reported in the article in the url below, the 60 Minutes report identifies a number of transgressions in Lumber Liquidators' supply chain that contravene California's strict emissions laws – particularly in relation to formaldehyde:
"Shares of Lumber Liquidators Holdings Inc. fell sharply Monday, after a '60 Minutes' report alleged the U.S. retailer of hardwood flooring has installed Chinese-made laminate flooring in many American homes that contains far higher-than-accepted levels of formaldehyde, a chemical known to cause cancer."
Not only was formaldehyde identified in the firm's products (in contravention of state laws), but the company's suppliers were also accused of falsely labelling those products as compliant with industry minimum standards:
"… all laminate flooring carried by Lumber Liquidators bears a label indicating that it is CARB Phase 2–compliant, referring to the California Air Resources Board, which sets standards for formaldehyde emissions in wood flooring. Those standards were adopted by Congress in 2010 in a law that is set to take effect across the U.S. this year."
60 Minutes obtained much of its footage for the piece by posing as potential buyers at the Chinese companies that supply Lumber Liquidators. Employees at these companies openly admitted they were using cheap and illegal materials to save Lumber Liquidators money, while also misrepresenting the products as fully compliant with all U.S. legislation:
"Employees of three Chinese mills said they were using core boards with higher levels of formaldehyde to save the company up to 15% on price. All three mills also admitted falsely labeling products as CARB 2–compliant."
For its part, Lumber Liquidators has denied the accuracy of the report, claiming instead that the rumors were driven by short-sellers of its company's stock. Either way, this has been a tough week for Lumber Liquidators. In total, over the three days of trading at the end of last week, shares in the company dropped from just under $69 to just under $52. After the report aired Sunday, the stock dropped another 20% in pre-market trading on Monday, after which trading was halted by the New York Stock Exchange. By the time trading resumed later on Monday, the firm's share price was listed around $40, where it remains so far today.
Take care
David Chandler & Bill Werther
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Lumber Liquidators stock slammed by '60 Minutes' report
By Ciara Linnane
March 2, 2015