Lumber Liquidators 2007 Annual Report Download - page 13

our existing store is more than an hour’s drive away from what we believe is a critical mass of potential
customers. We also focus on high density markets that we feel can support multiple stores. In the past, the size of
our stores has varied depending on our ability to acquire space opportunistically, but we expect that new stores
will generally be between 5,000 and 8,000 square feet, with approximately 800 square feet dedicated to the
showroom and the remaining space used as a warehouse. Most of our stores are currently located in primary or
secondary metropolitan areas, but we have also succeeded in a number of smaller markets. We believe our
primary and secondary metropolitan markets will benefit from additional store locations, and there are many
small and medium-sized markets where we have no stores at all. In identifying new markets, we intend to target
selected markets that have demographic and other characteristics similar to those where we have been successful
and fill in larger markets with additional stores.
As of December 31, 2007, we operated 116 stores in 43 states, and we plan to open approximately 30 to 40
stores during each of the next several years. In 2007, our stores that had been open for more than twelve months
had average per-store net sales of $4.2 million. Across our markets, our average new store has historically
become profitable within three months of beginning operations and generally returned its initial cash investment
within seven months. We estimate that the cost required to open a typical new store is approximately $240,000,
of which inventory, net of trade payables, represents approximately $190,000. A typical store staff consists of a
manager and two to three associates. We hire additional staff to the extent required by a store’s level of business.
The store manager is responsible both for store operations and for overseeing our customers’ shopping
experience. Many of our store managers have previous retail experience with large retailers in the home
improvement industry, the retail flooring industry or the flooring installation industry. Store manager
compensation consists of a base salary and commissions.
A store’s warehouse is stocked with that store’s most popular hardwood products and high-volume items, but
primarily holds customer-specific merchandise inventory waiting to be picked up or to have delivery arranged. This
allows for central inventory management from our Toano facility. Average store inventory for stores that had been
open for more than twelve months is approximately $365,000 and consists of both in-stock inventory and order-
specific inventory. With the exception of certain high-volume products, we have found that customers typically
request to pick up or arrange delivery of their products approximately one month after placing an order. By
generally requiring a 50% deposit when an order is placed, we reduce store-level working capital requirements.
The table below highlights certain information regarding our stores open during each of the following
periods:
2005 2006 2007
Number of stores at January 1 ................................ 57 76 91
New stores ............................................... 19 16 25
Closed stores(1) ........................................... — 1 —
Number of stores at December 31 ............................. 76 91 116
(1) The 2006 closed location represents a laminate flooring-only store established to operate during the
remaining lease period of a relocated store.
Customer Service and Sales Force
We position ourselves as hardwood flooring experts and believe our high level of customer service reflects
this positioning. Key elements of our service include providing consumers with useful product information and
answering their hardwood flooring questions, ensuring product availability, following through on customer
requests and selling high-quality products at an attractive value. Our store associates are familiar with all aspects
of our store operations and, along with our call center staff, are trained to understand the characteristics and
installation method for the broad range of hardwood flooring that we offer, and to guide customers through the
purchase process. Many of our staff have relevant industry experience, and we are currently developing a formal
standardized training program for all of our store associates.
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