Lumber Liquidators 2012 Annual Report Download - page 3

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April 10, 2013
Dear Shareholders,
Lumber Liquidators delivered record revenue, operating margin and earnings per share in 2012 as we
continued implementing our key strategic initiatives. We believe the Company is well-positioned for multi-year
growth both in revenue as we capture available market share and in earnings as we focus on continuous
improvement. We are committed to strengthening and investing in our value proposition of price, selection,
quality, availability and people. Importantly, our leadership team is aligned around a unified vision of Lumber
Liquidators’ long-term potential.
2012 Financial Highlights
In 2012, we built a strong foundation upon which we can generate sustainable growth. For the full year, we
achieved:
• Net sales growth of 19.3% to $813.3 million;
• Comparable store net sales growth of 11.4%;
• Gross margin expansion of 270 basis points to 38.0%;
• Operating margin expansion of 340 basis points to 9.6%; and
• Net income increase of 79% to $47.1 million, or $1.68 per diluted share.
Executing our Multi-Year Growth Strategy
Throughout the year, our team remained committed to executing our multi-year growth strategy, enhancing
our value proposition and implementing our strategic initiatives, including:
•Grow revenue through expanded advertising, a broader product offering and store openings.
During the year, we continued broadening the reach and frequency of our advertising to increase the
recognition of our value proposition and ultimately the number of customers served. Additionally, our
average sale continued to improve, reflecting our customers’ preference for premium products as well
as increased sales of our broader assortment of moldings and accessories. We also opened 25 stores,
leveraging our improved site selection process and utilizing more quantitative metrics to optimize total
share within a market.
•Expand gross margin through continued execution of sourcing initiatives and supply chain
optimization. Our sourcing and supply chain optimization initiatives continued to contribute
significantly to our gross margin expansion in 2012. Ongoing line reviews and product assortment
evaluations remained a focus during the year, and we introduced over 50 new floors. We have been
pleased with not only our ability to reduce product costs, but also the stronger relationships we have
forged with our mills to deliver a broader assortment, enhanced availability and stronger control over
product quality.
•Continuously improve our operations by developing the best people to serve our customers.
Through our best people initiative, we strengthened the retail expertise across the Company through
expanded training, a commitment to excellence and our one-team culture. We believe this focus led to
more efficient and effective performance, allowing us to generate incremental net sales and
contributing to our expanded operating margin. In 2012, we completed four Lumber Liquidators
University (“LLU”) programs across the country through which we were able to provide all of our
store managers with in-depth training on products and enhanced selling techniques. We were so
pleased with the results of the events in 2012 that in early 2013, we held a national LLU during which
we brought our full team together to further reinforce our unified long-term vision and set of objectives
for the Company.