Lumber Liquidators 2007 Annual Report Download - page 10

•Quality.We believe that we have achieved a reputation for quality, and that our proprietary brands are
recognized for excellence by our customers. We work directly with our supplier mills and brokers to
source and produce flooring that will meet our high quality standards and we also currently finish
approximately 70% of our premium Bellawood products at our state-of-the-art Toano facility. We
maintain an in-house inspection and quality control function and enforce strict certification
requirements for Bellawood supplier mills.
•Availability.Since our founding, we have made it a priority to build long-term relationships with our
key supplier mills and brokers. As we have grown, we believe our relationships with our suppliers have
strengthened, which we believe helps us ensure our continued access to a broad selection of domestic
and exotic hardwood products at attractive prices. We believe that these direct supplier relationships
are relatively unique in our industry. In addition, we believe our supply chain and centralized inventory
at our Toano facility allow us to meet the delivery needs of our customers better than our competitors.
Our Strategy
We intend to continue to increase revenues and profitability by strengthening our position as a leading
provider of hardwood flooring. Specific elements of our strategy for continued growth include the following:
•Expand Our Store Base. The hardwood flooring market is highly fragmented, and we believe there is a
significant opportunity to expand our store base. Because of the low capital investment to open our new
stores and the attractive returns on investment that our stores generate, we intend to continue to expand
our store base. We opened 25 new stores in 2007 and plan to open between 30 and 40 new stores
during each of the next several years.
•Improve Existing Store Net Sales Growth. We seek to drive productivity through strong comparable
store net sales performance and by improving operational efficiencies. We expect net sales growth will
be driven by our investment in our proprietary brands, targeted marketing campaigns and more
efficient net sales and inventory planning and forecasting, as well as favorable long-term industry
trends. In addition, we continue to build on what we believe is our strong track record of consistent
store-level execution.
•Expand Operating Margins. We attribute our success to our focus on and our ability to deliver on our
value proposition to the customer, which results from leveraging our strength as a vertically-integrated,
low-cost operator. As we continue to increase our revenues by opening new stores and marketing our
proprietary brands, we also plan to decrease marginal costs by taking advantage of improving
economies of scale in purchasing, leveraging our existing infrastructure and other fixed expenses and
optimizing our finishing, distribution and supply chain management.
•Leverage Brand Marketing Across Multiple Channels. We use our advertising and marketing
activities and our multiple sales channels to help educate potential customers about hardwood flooring.
As customers learn more about hardwood flooring and how best to shop for it, they also learn more
about our products and value proposition, which we believe drives customer store visits and purchases
of our products. We believe that as we continue to leverage our multi-channel strategy, we will drive
repeat customer traffic. We have also made a significant advertising and marketing investment to link
our brands to quality and value, as well as to establish ourselves as the hardwood flooring experts. As
we continue to grow and open more stores, we believe that our marketing and branding activities will
become more efficient and targeted. We also believe that our customer acquisition costs will decline on
both a per-customer and per-store basis.
Our Brands
We offer a large selection of hardwood flooring year-round at everyday low prices, ranging in quality from
our premium Bellawood brand to our more economical brands. We believe both Lumber Liquidators and
Bellawood are well-known national brands. We have positioned Lumber Liquidators to represent an attractive
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