A scathing report Sunday night on the television investigative show ’60 Minutes’ has caused shares of Lumber Liquidators stock to plunge over 20% in trading Monday. The segment aired on the show putting some of the products and manufacturing techniques at Chinese factories into question.
The show focused on the flooring products sold by the company and the levels of formaldehyde in them which are strictly regulated. According to the CBS show’s reporting, it found that one out of 31 samples was in compliance with the formaldehyde limits set for California standards. Tests found that some of the products had up to 13 times the expected level of formaldehyde which shocked viewers. Formaldehyde is known as a cancer causing chemical with dangerous effects on humans.
Lumber Liquidators is down about 42 percent over the last week in trading as of Monday.
Responding to the airing of the show on Sunday evening, the company said in a prepared statement, “These attacks are driven by a small group of short-selling investors who are working together for the sole purpose of making money by lowering our stock price.”
CEO Robert Lynch warned investors in an earnings call last week about the upcoming segment on the show and said that the company will be portrayed in an “unfavorable light with regard to sourcing and product quality, specifically related to laminates.” Lynch continued, “We will vigorously challenge any false allegations or incorrect presentations,” Lynch said on an earnings call with analysts last week.
The company also directly responded to the tests performed by 60 Minutes and disputed the findings mentioning that all products were CARB-2 compliant. The company insisted their products are safe to use but many consumers have inquired on how to return their products purchased or have their floors tested to see if the levels of formaldehyde are above limits set.