Lumber Liquidators 2013 Annual Report Download - page 3

April 10, 2014
Dear Shareholders,
Lumber Liquidators had an incredibly successful year in 2013 as we surpassed the milestone of $1 billion
in net sales and continued to implement our key, multi-year strategic initiatives. We set a new standard for our
showroom design, executed our sourcing strategy to strengthen our direct-to-mill relationships, began investments to
further optimize our supply chain and maintained our commitment to our best people initiative. Our dedicated team
was relentless in driving continuous improvement in all that we do. As a result, the Company again delivered on the
tremendous long-term potential that Lumber Liquidators has to grow in our fragmented market and continue to
expand operating margin.
2013 Financial Highlights
The strong support infrastructure that we have built over the past several years through ongoing investment in
our value proposition of price, selection, quality, availability and the expertise of our people enabled our motivated
sales team to deliver outstanding results. In what we consider a truly special year for Lumber Liquidators, we
delivered:
x Net sales growth of 23.0% to $1.0 billion;
x Comparable store net sales growth of 15.8%;
x Gross margin expansion of 310 basis points to a record 41.1%;
x Operating margin expansion of 300 basis points to a record 12.6%; and
x Net income increase of 64.4% to $77.4 million, or $2.77 per diluted share.
Multi-Year Strategic Initiatives Integrated into Company Foundation
As we look back at the Company’s performance in 2013, it is clear that our key, multi-year strategic initiatives
have become integrated into our business and driven our performance.
x Store of the Future Expansion. We are enhancing the customer shopping experience through the
continued rollout of our store of the future, with its expanded showroom and updated design. At the same
time, our re-engineered real estate strategy is enabling us to target sites in more retail-centric locations for
store openings. The combination of better locations and our new showroom design is generating higher
productivity levels and outperformance of historical sales trends at new stores. Through openings and
remodels, we ended the year with 52 stores – or more than 16% of our store base – in our store of the future
format.
x Greater Introduction of Value Proposition. We continue to broaden the reach and frequency of our
advertising to increase recognition of our value proposition and ultimately the number of customers served.
Our strategy aimed at introducing our value proposition to both our core DIY customer as well as to a more
casual consumer interested in a hard surface flooring purchase helped generate consistent demand
throughout the year.
x Sourcing and Supply Chain Optimization. Sourcing directly from the mill is an integral component of
our value proposition, and we further strengthened these supplier relationships in the past year to ensure we
continue to offer customers the highest quality products and broadest assortment at the lowest prices. In
mid-August, we announced the latest steps to strengthen the long-term structure of our supply chain
through the consolidation and expansion of our distribution facilities. Our new West Coast distribution
center was fully operational as of the first quarter of 2014, providing our Western U.S. customers greater
flexibility in the timing of their flooring projects. The consolidation of our existing East Coast distribution