Lumber Liquidators 2015 Annual Report Download - page 12

Download and view the complete annual report

Please find page 12 of the 2015 Lumber Liquidators annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

PART I
Item 1. Business.
Overview
Lumber Liquidators is the largest specialty retailer of hardwood flooring in North America, offering a
complete purchasing solution across an extensive assortment of exotic and domestic hardwood species,
engineered hardwood, laminate, resilient vinyl, bamboo and cork. We operate as a single operating segment,
with our call center, website and customer service network supporting retail store operations.
We believe we have achieved a reputation for offering great value, superior service and a broad selection
of high-quality hardwood flooring products. With a balance of price, selection, quality, availability and service,
we believe our value proposition is the most complete within a highly-fragmented hardwood flooring market.
The foundation for our value proposition is strengthened by our unique store model, the industry expertise of
our people, our singular focus on hard-surface flooring and our expansion of our advertising reach and
frequency.
Lumber Liquidators is a Delaware corporation with headquarters in Toano, Virginia. We were founded in
1994 and our initial public offering was in November 2007. Our common stock trades on the New York Stock
Exchange under the symbol ‘‘LL.’’ We operate in a holding company structure with Lumber Liquidators
Holdings, Inc. serving as our parent company and certain direct and indirect subsidiaries, including Lumber
Liquidators, Inc., Lumber Liquidators Services, LLC, Lumber Liquidators Production, LLC, and Lumber
Liquidators Canada Inc., conducting our operations.
Our Business
Market
According to the July 2015 Issue of Floor Covering Weekly, U.S. installed floor covering product sales in
2014 were $35.6 billion, excluding installation. Within this market, U.S. hardwood and laminate flooring sales
accounted for 19.1% of the total. Flooring sales are driven by a number of factors including discretionary
income and the housing market. Including installation, the overall flooring industry has grown at a compound
annual growth rate of 5.1% from 2009 through 2014. Over the same period, hardwood and laminate flooring
sales, including the cost of installation grew at a compound annual growth rate of 5.5%. We believe
improvements in the quality and construction of certain products, ease of installation, and a broad range of
retail price points, will drive continued hard surface flooring share gain versus soft surface flooring in the
future.
Competition
We compete for customers in a highly fragmented marketplace, where we believe no one retailer has
captured more than a 15% share of the market for hardwood flooring. Although the market includes the
national home improvement warehouse chains, warehouse clubs and online retailers, we believe the majority
of the industry consists of local one-store flooring retailers, small chains of stores that may specialize in one
or two flooring categories and a limited number of regional chains. Catalina Research, Inc., a company
providing market research on various flooring types, estimates there are approximately 9,000 specialty floor
coverings stores in the U.S.
Customers
We target several distinct customer groups who each have varied needs with respect to their flooring
purchase, including do-it-yourself (‘‘DIY’’) customers, do-it-for-me (‘‘DIFM’’) customers, and commercial
customers. Each of the customer groups we serve are passionate about their flooring purchase and value our
wide assortment of flooring products, availability, and the quality of those products. Each of these customer
groups require a unique customer service approach based on the ability of our associates to share detailed
product knowledge and preferred installation methods. We offer DIFM customers installation services, while
our DIY and commercial customers receive additional support throughout their purchase, including dedicated
call center resources. All customer groups are offered delivery services.
2