Lumber Liquidators 2007 Annual Report Download - page 9

PART I
Item 1. Business.
Overview
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States, based on
industry sources and our experience. We believe we have achieved a reputation for offering great value, superior
service and a broad selection of high-quality hardwood flooring products. We offer an extensive selection of
premium hardwood flooring products under multiple proprietary brands at everyday low prices designed to
appeal to a diverse customer base. We believe that our vertically integrated business model enables us to offer a
broad assortment of high-quality products to our customers at a lower cost than our competitors. As of
December 31, 2007, we sold our products through 116 Lumber Liquidators stores in 43 states, a call center, our
website and a catalog.
Our company was founded in 1994 by Tom Sullivan, the current chairman of our board of directors, and in
1996, he opened the first Lumber Liquidators store near Boston, Massachusetts. Tom believed that traditional
home improvement and flooring retailers underserved the homeowner in terms of selection, quality, price and
product availability, presenting an opportunity to sell hardwood flooring at “liquidator” prices. Tom established
relationships directly with vendors and mills to provide customers with broad, high-quality assortments at
everyday low prices. He also identified the opportunity to better serve customers by employing knowledgeable
sales staff to educate the customer about the product and provide advice on self-installation or working with
contractors. In August 1996, Tom opened the second Lumber Liquidators store in Hartford, Connecticut, starting
our company’s national expansion. In 2000, we relocated to Colonial Heights, Virginia and in 2004, we moved
into our current location in Toano, Virginia. The Toano facility includes our call center, corporate offices, and
distribution and finishing facility, where we currently finish approximately 70% of our Bellawood products. In
August 2007, we reincorporated from Massachusetts to Delaware. On November 9, 2007, we completed our
initial public offering and our common stock now trades on the New York Stock Exchange under the symbol
“LL”.
We expect to remain committed to our value proposition as we grow through new stores and increased
comparable store net sales. We have invested significant resources developing our national brands, including our
name and proprietary products, which include our flagship Bellawood brand. We believe Lumber Liquidators is
now recognized across the United States as a destination for high-quality hardwood flooring at everyday low
prices, while our Bellawood brand is known as a premium flooring brand within the industry. We expect to
continue to invest resources in our advertising and marketing at a percentage of net sales greater than our
competitors. We drive net sales growth through new store openings and increases in comparable store net sales,
and we drive profitability through our store model and corporate cost controls. We have substantially completed
a significant investment in our store support infrastructure, primarily our senior management team, and we
believe this investment should support our continuing growth.
Our Value Proposition
Our value proposition to the customer is a key driver of our business. Important components include:
•Price.A fundamental part of our founding philosophy is to provide quality hardwood flooring brands
at everyday low prices. We are able to maintain these prices across our product range because we
purchase flooring directly from mills and brokers. In addition, we operate a low-cost store model with a
“no frills” showroom, limited in-store inventory and locations in industrial or commercial areas that
carry lower rent expense than many retail stores.
•Selection.We have developed a broad product assortment of domestic and exotic hardwoods sold
under proprietary brands that help us to differentiate our products from those of our competitors. We
offer products across a range of price points and quality levels that allow us both to target discrete
market segments and to appeal to diverse groups of customers.
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