Lumber Liquidators 2011 Annual Report Download - page 3

April 5, 2012
Dear Shareholders,
We are pleased to have steadily regained momentum throughout 2011, ending the year on a strong note and achieving
our best year-over-year net sales and earnings performance in the fourth quarter. Similar to 2010, our results were a tale of
two halves, and as the year progressed, we focused intently on executing our strategic initiatives and improving performance
across all areas of our business. We believe we strengthened our unique value proposition of price, selection, quality,
availability and people, and we established a strong platform for multi-year growth.
2011 Financial Highlights
During 2011, our strategic initiatives, including those in sourcing, drove an expansion in our second half operating
margin. While the macroeconomic environment remained challenging with consumers continuing to be cautious and price
sensitive with regard to large-ticket discretionary purchases, we drove positive traffic throughout the year, and in the fourth
quarter of 2011, traffic was positive at comparable stores. Further, we continued to gain market share in our highly
fragmented wood flooring market, primarily through new store openings. Specifically, for the full year we reported:
• Net sales growth of 9.9% to $681.6 million;
• Gross margin expansion of 50 basis points to 35.3%;
• Operating margin of 6.2%; and
• Fully diluted earnings per share of $0.93.
Positioning Lumber Liquidators for the Future
2011 was a year of transformation for Lumber Liquidators, as we continued to make investments in leadership,
infrastructure and store growth with the goal of further strengthening our position in the marketplace. We also took steps to
further enhance our value proposition and improve our connection to consumers.
•Further Strengthened Management Team. Our ability to grow effectively is directly related to our strong
management team. During the year, Bill Schlegel and Carl Daniels joined the Company as Chief Merchandising
Officer and Senior Vice President of Supply Chain, respectively. Both individuals bring invaluable experience to
our organization, and have aided us in improving our execution in merchandising, sourcing and supply chain
management. We made additional investments in both our merchandising team and a seasoned product allocation
team, supported by enhanced visibility into our operations as a result of our integrated information technology
solution. We will continue to make investments in the development of a world-class team, which is a critical
component of our value proposition.
•Improved Sourcing Capabilities. We further laid the foundation for the Company’s long-term success by
implementing various sourcing initiatives to improve our vendor relationships. We also completed the acquisition
of certain assets of Sequoia Floorings, strengthening our direct relationships with mills in China and allowing us to
more efficiently and effectively control the quality and costs of products sourced in this region. Our sourcing
initiatives enabled us to strengthen our value proposition and provided us with greater flexibility in our marketing
programs, helping us to attract value conscious consumers, while at the same time allowing us to expand gross
margin. We will continue to execute the strategy we have pursued over the last year – conducting line reviews and
expanding our product assortment – and we expect to further leverage our China office.