Lumber Liquidators 2010 Annual Report Download - page 3

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April 6, 2011
Dear Shareholders,
As we look back at 2010, we experienced solid momentum in our business through the mid-point of 2010
and achieved the highest quarterly sales and net income in the Company’s history in the second quarter. In the
back half of 2010, as we initiated our SAP implementation, we encountered short-term challenges that
significantly impacted our full year performance.
That being said, the fundamental assets of Lumber Liquidators remain in place. Our unique value
proposition of price, selection, quality and availability continued to resonate with consumers and drove strong
foot traffic throughout the year. We also maintained our commitment to key long-term growth initiatives during
the year as we continued to enhance our value proposition through expansion of our product assortment and
increased commitment to in-stocks, made additional progress in our China supply chain initiative, successfully
extended our footprint and gained further share in the wood flooring market.
2010 Financial Highlights
In 2010, as consumers continued to face weak economic conditions, customers continued to seek value,
including a lower retail price point. We tailored our marketing programs throughout the year and were pleased to
serve a greater number of these customers in our comparable stores during the year. Our low-cost store model in
which new stores quickly become profitable allowed us to achieve our expansion goals for the year, as we
opened 37 new stores. Specifically, we achieved:
• Net sales growth of 13.9% to $620.3 million;
• Comparable store net sales increase of 2.1%;
• Increase in our calculation of the number of customers invoiced at our comparable stores of 4.5%;
• Gross margin of 34.8%;
• Operating margin of 6.8%; and
• Fully-diluted earnings per share of $0.93.
Strengthened Operating Foundation
Throughout 2010, we took steps to further strengthen Lumber Liquidators’ foundation and continue to
position the Company for growth going forward. We continued to invest in our marketing, infrastructure and
store growth. We enhanced our value proposition, improved customer satisfaction and strengthened our
competitive position through the following:
•Integrated Technology Investment. In the back half of 2010, we implemented SAP and, while the
implementation itself was successful, we encountered temporary productivity issues which had a short-
term negative impact across our operations. We have since improved our execution and expect to start
experiencing benefits from this system in 2011. We believe that this system puts the Company in an
even stronger position for the next phase of its growth. Specifically, the new system provides a stable
and supportable IT platform that can grow and evolve as our supply chain network changes. Its vast
network of compatible technology and application tools will help to support our future needs including
international expansion, which is currently underway. Additionally, the system will help us to drive
consistency in procedures and improve our inventory visibility.