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Lumber Liquidators shares are crashing after a damning '60 Minutes' report
Business Insider ^ | 03/02/2015 | Myles Udland

Posted on 03/02/2015 9:34:30 AM PST by SeekAndFind

Lumber Liquidators shares are getting smoked after a report aired on "60 Minutes" Sunday night that showed major issues at some of the company's factories in China.

Near 11:15 a.m. ET on Monday, shares of the company were down more than 22%.

In premarket trade Monday, shares of Lumber Liquidators — North America's largest specialty retailer of hardwood floor — were down as much as 24%.

At the opening bell on Monday, shares of the company were halted, news pending.

Just after 11:00 a.m. ET, the company released a statement regarding the "60 Minutes" report, saying the newsmagazine used an improper testing method.

The "60 Minutes" report showed a factory in China making laminate flooring for Lumber Liquidators that was deliberately mislabeled to show that it complied with California regulations when it did not.

The report centered on elevated levels of formaldehyde, a known carcinogen, in Lumber Liquidators laminate flooring products sold in California.

(Excerpt) Read more at businessinsider.com ...


TOPICS: Business/Economy
KEYWORDS: 60minutes; formaldehyde; hardwoodfloors; laminateflooring; lumberliquidators; stockmarket
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To: Westbrook

I think the problem was probably with the cheap Bamboo Laminate flooring. The crap they sell for $1.99/square foot.

Bellawood with their 50 year Aluminum Oxide finishes are the high end flooring they sell. Most real Teak comes from Indonesia, Malaysia, Burma, and other South Pacific and Indian Ocean environments. Brazilian Teak is really Cumaru. It is similar to them calling Jatoba, Brazilian Cherry or IPE Brazilian Walnut.

FYI, Cumaru is the second hardest/densest species of wood, commercially manufactured on the planet. IPE is the highest on the Janka scale. Its nickname is Iron Wood. IPE and Cumaru are both used extensively for exterior decking. Nice choice in flooring. My personal favorite is Koa.


41 posted on 03/02/2015 10:35:29 AM PST by woodbutcher1963
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To: gwgn02

Looks like LL is now pointing to short sellers as conspiring to get this story out - and thus had success. See http://www.reuters.com/article/2015/03/02/lumberliquidators-brief-idUSWNAB0661T20150302

We purchased flooring from them over 10 years ago - great deal and great floor (though not a laminate).

That being said, we should all be suspicious of quality from Chinese manufacturers - I have an uncle who visits China several times a year to ensure some food production facilities aren’t cutting corners.


42 posted on 03/02/2015 10:38:57 AM PST by LibertyOh
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To: woodbutcher1963
IPE Brazilian Walnut.

I bought some of that crap online and made a small cigar box out of it. That "iron wood" dulled every blade, chisel and bit in my shop. That stuff is incredibly hard.

43 posted on 03/02/2015 10:39:31 AM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: central_va
Bull crap. Apple would still be making billions if all of it's manufacturing were performed in the USA. The amount of labor per phone is about 16 dollars. if made in the USA it would be 4x times that or 64 dollars. That is 64 dollars on a 800 dollar phone.

Apple gets an average selling price of around $600 for Iphones. This leaves some margin for retailers. The $48 per phone you cited results in a net margin drop of around 8%. That's a massive hit to margins. And that's assuming that stateside assembly workers would be content with minimum wage jobs (Chinese workers were making $1.78/hr in 2013). My suspicion is that Apple assembly lines stateside would be unionized and cost $16 per labor hour, without even factoring in the generous benefits that Foxconn, Apple's Taiwanese subcontractor, doesn't pay to its Chinese workers. That would mean a net margin reduction of 18%. What manufacturer would give up 18% of margin to manufacture stateside? What happens when its hot product turns ice-cold? Apple products would have 18% less net margin with which to fight a price war with its competitors.

But, going back to the original poster's point, which was that outsourcing to China was suicidal, I can't say that's clear from the historical record. All of Lumber Liquidators' competitors source from China. They just do a better job of either choosing or auditing their suppliers.

The thing with Chinese suppliers is that they sell to the world. Less-developed countries have fewer regulatory requirements. We stopped allowing lead paint on toys starting in the 1970's. Plenty of countries around the world have no problem with lead paint on toys. We sent a man to the moon in the late 60's, despite have lead paint on toys while NASA researchers were growing up during the interwar era. Since then, we've had two Space Shuttle explosions, and the shuttering of the manned space program. Maybe we need to put lead paint back on those toys.

44 posted on 03/02/2015 10:41:06 AM PST by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: Zhang Fei

Karl Marx was a big fan of ‘Free trade” too.


45 posted on 03/02/2015 10:43:06 AM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: Veggie Todd

“They put it in your body after you’re dead, so it can’t be too dangerous.”

Haha, funniest comment I’ve read all day.


46 posted on 03/02/2015 10:43:26 AM PST by Texan Tory
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To: central_va
....That is 64 dollars on a 800 dollar phone.....

probably sell as an $848 phone.
47 posted on 03/02/2015 10:43:43 AM PST by stylin19a (obama = Eddie Mush)
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To: central_va

iron wood.

It sinks in water?

Knife makers use it for handles.


48 posted on 03/02/2015 10:43:57 AM PST by Scrambler Bob (Bo: capitalized is the dog.)
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To: LibertyOh
That being said, we should all be suspicious of quality from Chinese manufacturers - I have an uncle who visits China several times a year to ensure some food production facilities aren’t cutting corners.

Would your uncle not inspect the facilities if they were based stateside? I don't understand people who outsource abroad and just assume that things will go swimmingly without needing management attention.

49 posted on 03/02/2015 10:45:06 AM PST by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: stylin19a

Idiots line up in the rain to buy the latest Apple phone. Do you think an extra 48 bucks for US labor is going to stop them?


50 posted on 03/02/2015 10:45:07 AM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: litehaus

COMCAST——... THE WORST COMPANY EVER!

Okay...they are equally horrid! Agreed.


51 posted on 03/02/2015 10:50:25 AM PST by DefeatCorruption
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To: SeekAndFind
laminate flooring

The key word here is "laminate", also know as cheap crap in most wood applications.

52 posted on 03/02/2015 10:51:20 AM PST by The Cajun (Ted Cruz, Sarah Palin, Mark Levin, Mike Lee, Louie Gohmert....Nuff said.)
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To: litehaus

COMCAST——... THE WORST COMPANY EVER!

Okay...they are equally horrid! Agreed.


53 posted on 03/02/2015 10:52:41 AM PST by DefeatCorruption
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To: central_va
Karl Marx was a big fan of ‘Free trade” too.

I have no idea what Karl Marx thought, but Milton Friedman and JM Keynes, the leading capitalist economists of the last 100 years, were both fans of free trade. And actual Marxists are staunch opponents of free trade, ranging from the Warsaw Pact countries of the Cold War era to any number of African kleptocracies. In fact, the poorest countries in the world tend to have the biggest restraints on foreign trade.

54 posted on 03/02/2015 10:53:11 AM PST by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: central_va

nope...


55 posted on 03/02/2015 10:54:52 AM PST by stylin19a (obama = Eddie Mush)
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To: Zhang Fei
And actual Marxists are staunch opponents of free trade,

Bull crap.

But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.

-- Karl Marx 1848

56 posted on 03/02/2015 10:58:02 AM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: SeekAndFind
Regarding compliance with California regulations, I recently bought some new wood furniture and it included a statement in a drawer that said "This product contains wood dust, a known carcinogen in the State of California." Yeah, wood dust.

It's pretty much impossible to comply with all their crazy rules out there so you do the best you can (or you cheat). The problem is, since their market is so large manufacturers are forcing everyone else in sane states to pay for all the extra stuff and labeling that they need to do for California. I cannot wait for the day when they all start saying "to heck with it, I'm not selling there" and cutting back on all the crap.

But of course then the feds will come in on a commerce clause ruling and demand that they comply with California rules whether they sell there or not, in the name of fairness. A sort of anti dog-eat-dog rule.

57 posted on 03/02/2015 10:58:48 AM PST by pepsi_junkie (Who is John Galt?)
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To: central_va
"...on a 800 dollar phone."

I hadn't realized [electronic] pacifiers had gotten so expensive.

58 posted on 03/02/2015 11:03:37 AM PST by SZonian (Throwing our allegiances to political parties in the long run gave away our liberty.)
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To: central_va
Bull crap.

When I say actual Marxists, I mean actual communist regimes. Name me an actual communist regime that has free trade. And when I say communist regime, I don't mean a country like China, which has a stock market, private property and private corporations that make products and hire people. I mean a regime where the state is the ultimate maker of goods and the ultimate employer of labor, where decisions on purchasing, production and hiring are made by party cadres. Does Cuba have free trade? Does North Korea?

59 posted on 03/02/2015 11:04:54 AM PST by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: Zhang Fei

Wow you are really aren’t trying are you? Free trade tears down the social order so communists can take over. Once the Commies take over then free trade ends, their goal achieved.


60 posted on 03/02/2015 11:07:12 AM PST by central_va (I won't be reconstructed and I do not give a damn.)
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