The following is from an email which Whitney Tilson of Kase Capital sent to ValueWalk after LL reported earnings which disappointed many investors. Tilson is short Lumber Liquidators Holdings Inc (NYSE:LL) as we have previously reported.
Tilson on Lumber Liquidators Holdings Inc (NYSE:LL)
1) Another day, another retailer bites the dust. Lumber Liquidators Holdings Inc (NYSE:LL), one of my largest short positions, just issued a big earnings warning (see below), with Q2 revenues missing estimates by 13% (with horrific -7.1% comps) and EPS of 59-61c vs. consensus expectations of 90c thanks to a contraction in gross and operating margins (which was the core of my short thesis – see attached).
Not surprisingly, Lumber Liquidators Holdings Inc (NYSE:LL), which fell 8% during regular trading when the company announced a special earnings update conference call, is down another 20% after hours.
But, like TCS, it’s still nowhere close to cheap. At ~$56 after hours, it’s trading at ~20x the mid-point of this year’s revised EPS guidance (which I doubt the company will meet in light of current trends).
I thought this was the most interesting line in the press release: “Certain mills experienced production delays in meeting our open orders as we continued to enhance our quality assurance requirements.” I suspect this has to do with the company trying to clean up its sourcing – another key pillar of my short thesis. And the company’s claim that, in doing so, there will be “no material impact to our product costs” is laughable. The whole point of looking the other way when sourcing – for example, buying illegally harvested wood – is to cut costs (I estimate by 10-20%)!
Attached are: a) My presentation last November at the Robin Hood Investors Conference, when the stock was at $115.36; and b) My article in Seeking Alpha in December, when the stock was at $103.80. I don’t wish to comment any further, other than to say I think it’s likely that you haven’t heard the last from me about Lumber Liquidators Holdings Inc (NYSE:LL)…
2) I wasn’t short Let’s Gowex, alas, but a huge hat tip is due to Daniel Yu of Gotham City Research (http://gothamcityresearch.com), who released a report on this hot Spanish wifi hotspot company on Tuesday, saying “Over 90% of Gowex’s reported revenues do not exist” and setting a price target of zero – and he’s already been proven 100% correct, as the CEO confessed, the company filed for bankruptcy, and the stock went to zero – in one week!
Editor’s note: See VW’s exclusive article on Gotham from earlier today here.
Below is the Robin Hood presentation from Whitney Tilson on his Lumber Liquidators Holdings Inc (NYSE:LL) short.
My Analysis of Lumber Liquidators’ Updated Guidance-12-10-13
