Lumber Liquidators announced financial results for the third quarter and nine months ended September 30, 2015. Net sales were $236.1 million, a decrease of 11.3% from Q3 2014.
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That includes a comparable store net sales decline of 14.6% due to a 13.0% decrease in the number of customers invoiced and a 1.6% decrease in the average sale.
The company believes net sales were negatively impacted by unfavorable allegations surrounding the product quality of its laminates sourced from China which weakened demand for all merchandise categories, with laminates and bamboo impacted the most.
The company also believes the decrease in net sales was due, in part, to our suspension of sales of all laminate flooring sourced from China and the disruption of supply during the replacement of certain engineered hardwood vendors, as well as a stronger competitive environment.
Non-comparable store net sales increased $8.9 million over the comparable prior year period. The company opened seven new stores during the third quarter of 2015.
Gross margin was 30.1% in the third quarter of 2015. Gross margin continued to be adversely impacted by certain reductions in retail prices implemented in late 2014, promotional pricing, efforts to simplify the company's product assortment and reduce clearance inventory, and changes in sales mix.
Gross margin was also affected by approximately $2.4 million (100 basis points) in costs related to the company's indoor air quality testing program. Gross margin in the third quarter of 2014 was 39.2%.
Selling, general and administrative (SG&A) expenses in the third quarter of 2015 increased $10.0 million, or 12.7%, from the third quarter of 2014 to $88.3 million.
This rise was primarily due to an $8.7 million increase in legal and professional fees, $3.0 million in fixed asset impairment charges related to the company's decision to discontinue certain non-core investments, and employee retention incentives of approximately $2.7 million.
Lower advertising costs in the third quarter of 2015 partially offset these increases. SG&A expenses were 37.4% of net sales in the third quarter of 2015, compared to 29.5% of net sales in the third quarter of 2014.
Net loss was $8.5 million, or a loss of $0.31 per diluted share, in the third quarter of 2015 as compared to net income of $15.7 million, or $0.58 per diluted share, in the third quarter of 2014.
Cash and cash equivalents at September 30, 2015 totaled $53.8 million compared with $10.8 million at September 30, 2014 and $20.3 million at December 31, 2014. At September 30, 2015, the company had $20.0 million outstanding on its revolving credit facility. ■