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Here’s Why Shares of Lumber Liquidators Are Skyrocketing

The sign outside the Lumber Liquidators store in DenverThe sign outside the Lumber Liquidators store in Denver
A sign outside a Lumber Liquidators store in Denver.Photograph by Rick Wilking — Reuters

Lumber Liquidators (LL) has agreed not to sell its existing inventory of laminate flooring previously sourced from China, the U.S. consumer safety regulator said, as the flooring retailer looks to move beyond allegations the products contained excessive levels of cancer-causing formaldehyde.

The news sent shares soaring 17% in early trading Friday.

The U.S. Consumer Products Safety Commission (CPSC) also said that any sale or disposal of the left-over inventory of laminate flooring under scrutiny, which the company discontinued selling in May 2015, will be made only after getting the regulator’s approval.

Lumber Liquidators has been facing heat from regulators, customers and shareholders after CBS’s “60 Minutes” alleged in March last year that the company sold flooring with dangerously high levels of formaldehyde.

Following the report, the company suspended the sale of Chinese-made laminate flooring and said it would not sell about 22 million board feet of the flooring.

In total, over 614,000 consumers across the United States have purchased the laminates between 2011 and 2015, according to the CPSC statement.

 

“Today’s announcement is not intended to cause consumers to pull up Chinese-made laminate flooring installed in their home,” said the CPSC.

The regulator instead asked customers to reach out to the company to participate in their testing program, to get free air-test kits.

The settlement with CPSC removes another big headache for the company and comes a month after it reached a potential settlement to resolve a securities class action lawsuit brought by shareholders.

Lumber Liquidators also spent millions settling with the California Air Resources Board as well as on lawsuits, apart from tightening its compliance policy on product sourcing and ramping up marketing efforts.

Though the CPSC agreement does not involve any monetary settlement, the company has agreed to continue conducting testing programs for affected consumers.