LL is trading at $15.42, up $2.19 or 16.55 percent on a volume of 2.24 million shares.
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Federal regulators are closing an investigation of Lumber Liquidators after the company agreed not to resume sales of Chinese-made laminate flooring.
Around the same time, the Centers for Disease Control and Prevention (CDC) reversed its earlier report that Lumber Liquidators’ China-sourced laminate flooring posed a low risk of cancer. While it does remove a significant portion of the legal overhang, some analysts warn that the company still faces risks associated with the sales of its Chinese-made laminate flooring products.
The CPSC announced, however, a “recall to test” program in which those who bought the Chinese-made flooring from 2011 through May 2015 through Lumber Liquidators are encouraged to contact the company for a free testing kit. According to a statement, it will continue to test the homes of customers who had purchased the flooring product. Any future sale, disposal or transfer of the inventory can only take place with CPSC’s approval. Now it has agreed to a government demand to test all of the flooring.
Shares of Lumber Liquidators soared more than 16 percent Friday morning. Instead, they can call Lumber Liquidators to have their air tested.
The retailer’s settlement with the agency comes after a year since it initiated the probe in March 2015.
Whitney Tilson, the short seller running a one-man crusade against the company, also had pitched the accusation impetus to “60 Minutes”. CPSC staff purchased samples of the product and contracted with certified laboratories to test for formaldehyde release from those flooring samples reported by 60 Minutes to have the highest formaldehyde emission. Their investigation revealed workers were using boards with higher levels of formaldehyde to make Lumber Liquidator’s laminate in order to cut costs. Irritation can happen in anyone, but is more likely among children, older adults, and people with respiratory issues, such as asthma or other breathing problems.
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“There is concern that some homes could still have harmful levels of formaldehyde coming from certain products from the company, and the safest course of action is to go ahead, follow the recall to test, get the test kit and we are overseeing how the company does it”, said CPSC Chairman Elliott Kaye. After persistent stock slump much of past year, it may now see a path to recovery as controversy begins to fade away. Importantly, the announcement is not a mandatory product recall.
