LUMBER LIQUIDATORS AS A “SELL”AT THE CFA SOCIETY OF VIRGINIA LOCAL FINALS
University of Virginia1
OVERVIEW OF LL’S BUSINESS
University of Virginia2
A NEGATIVE FUNDAMENTAL OUTLOOK OFFERS ADVERSE RISK/REWARD
University of Virginia3
STORE COUNT GROWTH WILL CONTINUE…
University of Virginia4
… AND SALES PER STORE WILL INCREASE…
University of Virginia5
… YIELDING IMPRESSIVE TOP-LINE GROWTH
University of Virginia6
HISTORICALLY, LL HAS SUCCESSFULLY EXPANDED GROSS MARGINS…
University of Virginia7
… BUT FAVORABLE SHIFTS IN LL’S PRODUCT MIX ARE UNSUSTAINABLE, …
University of Virginia8
… AND LL’S SUPPLY SIDE COST ADVANTAGE IS EPHEMERAL…
University of Virginia9
… AS SUPPLIERS SEEK TO DIVERSIFY THEIR CUSTOMER BASE…
University of Virginia10
… AND COMPETITORS REPLICATE LL’S SOURCING STRATEGY, …
University of Virginia11
University of Virginia12
… HENCE LL’S GROSS MARGINS WILL COMPRESS
FURTHERMORE, LL’S LEASING EXPENSES WILL INCREASE
University of Virginia13
CUSTOMERS ARE UNIMPRESSED BY LL’S PRICES…
University of Virginia14
… SINCE LL ONLY PARTIALLY DIFFERENTIATES ON PRICE
University of Virginia15
LL PRODUCTS ARE OF QUESTIONABLE QUALITY…
University of Virginia16
… AND COMPLAINT LEVELS INDICATE CUSTOMER DISCONTENTMENT
University of Virginia17
VALUATION MODELS INDICATE 18.4% DOWNSIDE
University of Virginia18
FINANCIAL PROJECTIONS FORM BASIS FOR DCF ANALYSIS
University of Virginia19
DCF ANALYSIS IMPLIES 10.4% DOWNSIDE
University of Virginia20
DCF EXIT MULTIPLES CONVEY 8.5% DOWNSIDE
University of Virginia21
LL IS OVERVALUED RELATIVE TO ITS PEERS
University of Virginia22
LL IS OVERVALUED RELATIVE TO ITS HISTORICAL MULTIPLES
University of Virginia23
CUMULATIVE VALUATION INDICATES 18.4% DOWNSIDE
University of Virginia24
PRICE PROJECTION PRESENTS DOWNSIDE FOR LL SHARES
University of Virginia25
SIGNPOSTS WHEN CONSIDERING A CHANGE IN RECOMMENDATION
University of Virginia26
RECOMMEND “SELL” RATING
University of Virginia27
APPENDIX
University of Virginia28
APPENDIX: LL HISTORICAL FINANCIAL METRICS (Q4FY2010 – Q2FY2012)
University of Virginia29
APPENDIX: LL HISTORICAL FINANCIAL METRICS (Q3FY2012 – Q4FY2013)
University of Virginia30
APPENDIX: LL HISTORICAL FINANCIAL METRICS (Q4FY2010 – Q2FY2012)
University of Virginia31
APPENDIX: LL HISTORICAL FINANCIAL METRICS (Q3FY2012 – Q4FY2013)
University of Virginia32
APPENDIX: LL HISTORICAL GROSS MARGIN DRIVERS
University of Virginia33
APPENDIX: LL PRODUCT MIX AND GROSS MARGINS
University of Virginia34
APPENDIX: LL HISTORICAL ADVERTISING EXPENSE
University of Virginia35
APPENDIX: LL STORE COUNT GROWTH BY REGION
University of Virginia36
APPENDIX: LL INSIDER HOLDINGS AND TRANSACTIONS
University of Virginia37
APPENDIX: LL’S EXTANT LEGAL TROUBLES
University of Virginia38
University of Virginia39
APPENDIX: LL COMPLAINT LEVELS EXCEED RETAILERS OF ALL SIZES
APPENDIX: MACROECONOMIC CONSIDERATIONS
University of Virginia40
APPENDIX: CORRELATION OF VARIABLES WITH LL’S REVENUE
University of Virginia41
APPENDIX: LUMBER PRICE CHART
University of Virginia42
APPENDIX: HISTORICAL AND PEER ANALYSIS SUGGEST LL’S WACC IS 10.5%
University of Virginia43
APPENDIX: PRICE COMPARISON IN OTHER PRODUCT CATEGORIES
University of Virginia44
APPENDIX: COMPETITIVE PEER GROUP FINANCIAL ANALYSIS
University of Virginia45
APPENDIX: PEER GROUP COMPARABLES CALCULATION
University of Virginia46
University of Virginia47
APPENDIX: PEER GROUP COMPARABLES NOTES
APPENDIX: DCF LINE ITEMS (Q4FY2010 – Q3FY2012)
University of Virginia48
APPENDIX: DCF LINE ITEMS (Q4FY2012 – Q3FY2014)
University of Virginia49
APPENDIX: DCF LINE ITEMS (Q4FY2014 – Q3FY2016)
University of Virginia50
APPENDIX: DCF LINE ITEMS (Q4FY2016 – Q4FY2018)
University of Virginia51
APPENDIX: DCF ASSUMPTIONS
University of Virginia52
