Lumber Liquidators Holdings (LL) Chief Executive Bob Lynch has abruptly resigned, creating even more turmoil at the discount hardwood flooring retailer as it faces a federal probe into the safety of its products and dozens of lawsuits.
The company’s founder Thomas Sullivan will serve as CEO while Lumber Liquidators searches for a permanent replacement, Lumber Liquidators said in a statement Thursday, noting that the resignation had come “unexpectedly.” Lynch’s departure comes as another top executive, Chief Financial Officer Dan Terrell, is set to leave June 1.
Lumber Liquidators has been reeling since a report in March by television news program “60 Minutes” alleged the company sold Chinese-made laminate flooring with higher levels of formaldehyde than permitted under California’s health and safety standards. The U.S. Consumer Product Safety Commission is probing the matter. The controversy has taken a serious toll on Lumber Liquidators’ business: comparable sales fell 6.5% in March, and 7.2% in the first four weeks of April.
Its shares fell 15% on Thursday, adding to losses of 62% so far this year.
Earlier in May, Lumber Liquidators said it was dropping its controversial Chinese laminate flooring, a change in tack after it had previously stood by the flooring and assured customers the product was safe to install. The U.S. Environmental Protection Agency has said that in addition to being a carcinogen, formaldehyde can cause irritation to the skin, eyes, nose and throat.
Adding to the drama swirling around the company, Lumber Liquidators is facing more than 100 class action lawsuits over the product, with allegations ranging from breach warranty to false advertising. What’s more, the Justice Department is considering criminal charges for illegal importation of oak flooring from protected Russian forests home to Siberian tigers. Lumber Liquidators has brought on a consultant firm headed by former FBI Director Louis J Freeh to review its compliance policies.