Lumber Liquidators Holdings, Inc. (NYSE: LL)’s stock fell from $51.81 to $41.25 over the weekend, a 20% drop, on the news that its laminate flooring products are not up to California’s health and safety standards.
The flooring was manufactured in Lumber Liquidator’s Chinese factories and contains at least six or seven times the amount of formaldehyde allowed by the California Air Resources Board (CARB) standard. In some cases, the amount is up to 20 times the level that’s legal to sell in California.
At unsafe levels, formaldehyde is known to cause cancer as well as several types of lung diseases.
By using higher levels of formaldehyde, the laminate flooring can be anywhere from 10% to 15% cheaper, resulting in significantly larger profit margins for Lumber Liquidators.
The flooring in question is likely present in hundreds of thousands of homes throughout the United States, as more than 100 million square feet of the company’s cheap laminate flooring is installed in American homes every year.
LL’s stock has been in decline for nearly a year. It saw a price of $109.04 on March 5th of last year and its current price is around $41.
Lumber Liquidators has 352 stores in the U.S. and Canada and its revenue has until recently numbered over $1 billion per year.