LL Flooring Reports Second Quarter 2022 Financial Results

RICHMOND, Va.–(BUSINESS WIRE)–LL Flooring Holdings, Inc. (NYSE: LL), a leading specialty retailer of hard-surface flooring in North America, today announced financial results for the second quarter ended June 30, 2022. 

President and Chief Executive Officer Charles Tyson said, “During the second quarter, our teams delivered our fifth consecutive quarter of double-digit year-over-year growth in sales to Pro customers, opened six new stores and rebuilt our inventory levels.

“We reported second quarter 2022 comparable store sales down 3.1%, representing sequential improvement from the first quarter of 2022 and a 6.9% increase on a three-year stack basis. The year-over-year decrease in comparable store sales reflected continued lower spending by consumers versus last year, which we believe reflected pressure from inflation and higher interest rates, and their preference to spend more on travel and entertainment. We reported operating margin of 1.6% and adjusted operating margin of 2.0%, as we continued to invest in our long-term growth strategies and navigate gross margin headwinds.”

Tyson continued, “While we are cautious about the near-term consumer spending environment, we feel good about the strength in home remodel trends as well as the demand for hard-surface flooring over the medium to long term. We remain committed to investing in our six strategic pillars that will position us for long-term growth. Our balance sheet is strong. We had total liquidity of $187 million at the end of the second quarter. During the second quarter, we repurchased $7 million under the share repurchase authorization approved by the Board earlier this year, underscoring our confidence in our long-term net sales and profitability growth.”

Second Quarter Financial Highlights

  • Net sales of $299.0 million decreased $2.4 million, or 0.8%, from the second quarter of 2021. The Company reported record sales to Pro customers, which partially offset a decrease in sales to consumers and a 1.1% decrease in net services sales
  • Comparable store sales decreased 3.1% from the second quarter of 2021, but increased 28.2% on a two-year stack basis and 6.9% on a three-year stack basis. The year-over-year decrease in comparable store sales primarily reflected the same drivers as the change in net sales
  • Gross margin of 35.7% decreased 170 basis points as a percentage of sales compared to the same period last year; adjusted gross margin1 of 36.1% decreased 130 basis points as a percentage of sales compared to the same period last year, primarily reflecting significantly higher material and transportation costs (collectively up more than 1,000 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies
  • SG&A as a percentage of net sales of 34.1% increased 220 basis points compared to the second quarter of last year; adjusted SG&A1 as a percentage of net sales of 34.1% increased 230 basis points compared to the second quarter of last year, primarily driven by investments to support the Company’s long-term growth, higher advertising expense due to the timing of promotions, and continued investment in customer facing and distribution center personnel
  • Operating margin of 1.6% decreased 390 basis points compared to the second quarter of last year; adjusted operating margin1 of 2.0% decreased 360 basis points compared to the second quarter of last year, primarily reflecting increased SG&A as a percent of net sales and lower gross margin
  • Diluted EPS of $0.09 decreased $0.32 compared to the second quarter of last year; adjusted earnings per diluted share1 of $0.13 decreased $0.28 compared to the second quarter of last year
  • During the second quarter of 2022, the Company opened six new stores, bringing total store count to 437 as of June 30, 2022
  • During the second quarter of 2022, the Company reduced the percent of merchandise receipts subject to Section 301 tariffs to 12% from 22% during the second quarter of 2021

1Please refer to the “Non-GAAP and Other Information” section and the GAAP to non-GAAP reconciliation tables below for more information.

Cash Flow & Liquidity

As of June 30, 2022, the Company had liquidity of $186.9 million, consisting of excess availability under its Credit Agreement of $181.9 million, and cash and cash equivalents of $5.0 million. This represents a decrease in liquidity of $40.3 million from December 31, 2021.

Merchandise inventories at June 30, 2022 increased $104.4 million from December 31, 2021, primarily due to increased purchases to replenish inventory, as well as, to a lesser extent, inflation.

For the first six months of 2022, the Company used $76.0 million of cash flows for its operating activities primarily due to replenishing its inventory, partially offset by increased accounts payable and net income. During the first six months of 2021, the Company generated $53.3 million of cash flows from operating activities, primarily due to positive changes in working capital, reflecting inventory supply constraints, as well as $22.6 million of net income.

During the second quarter, the Company made cash payments of $7.0 million to repurchase 571,332 shares at an average cost of $12.25 per share.

2022 Business Outlook

The Company continues to navigate uncertainty in the macroeconomic environment related to inflation, consumer spending, global supply chain disruptions, COVID-19, and a challenging labor market. As a result, the Company is not providing financial guidance at this time.

The Company is, however, providing commentary as follows:

  • Given near-term consumer spending headwinds, the Company is more cautious on its outlook for the second half of 2022 and may not be able to deliver positive comparable store sales on a full-year basis
  • The Company continues to expect higher transportation and material costs will be a headwind to gross margins in 2022. The Company expects to continue to partially offset these higher costs through pricing, promotion and sourcing strategies but will monitor the market to inform and guide its decisions
  • Consistent with its previously stated investment year in 2022 to support long-term growth, the Company expects SG&A dollar spend and spend as a percent of sales to increase in 2022 compared to 2021
  • The Company expects capital expenditures in the range of approximately $23 million to $25 million, primarily to support growth strategies such as new stores
  • The Company expects to open 20 to 22 new stores in 2022

Learn More about LL Flooring

About LL Flooring

LL Flooring is one of the leading specialty retailers of hard-surface flooring in the U.S. with 437 stores. The Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. LL Flooring’s online tools also help empower customers to find the right solution for the space they’ve envisioned. LL Flooring’s extensive selection includes waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, porcelain tile, and cork, with a wide range of flooring enhancements and accessories to complement. Our stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all of LL Flooring’s products, the majority of which is in stock and ready for delivery.