Lumber Liquidators Holdings, Inc. (LL)

Got to vent a little on today's 52 wk low - and still falling. Given, stock has fallen on a weak retail report and prospect of rising rates. That said, where is the upside catalyst for this stock? What has management said or done that is compelling? More important is what management has NOT said: solution for inventory shortages since last year? - something they can't blame on predecessor(s); still no willingness (or ability?) to offer guidance; still no plan, willingness (or ability?) to control costs, let alone CUT COSTS which is desperately needed.

All that said, nothing changes materially until the complacent, self-interested BoD does something about it. Or maybe the market cap gets so low, the bottom fishers can no longer resist...? Who besides shorts can prosper here?

I didn't check the website yesterday, but as of this morning, Sunday, our web site leads off by announcing all stores are closed for Covid. --

"To support our store team members during Covid-19, all LL Flooring retail locations will be closed today. We apologize for any inconvenience. Please see below for an exclusive discount available online
or by phone at 1-800-227-4036."

No discussion of reopening, when or how. The scrolling windows at the top of the page now include one promising "Today only. Online Only. Save $100 INSTANTLY on every $1000 you spend on top of our already low prices! Discount automatically applied in cart"

A quick check of Lowes, Home Depot, and Floor & Decor's sites shows nothing similar.

I wonder what kind of open we'll see Tuesday.

I know I'm prone to cynicism, and paranoid conspiracy theories. That said, wouldn't a week long Covid shutdown be the perfect "zig" to set up a good news "zag" should Richmond deign to release an update on whatever settlement they got in Wisconsin? But more likely, it's the first of three zigs each worse than before, to hit single digits, before moving a ton of options to vacuum up every cent of gain from $10 back to Thursday's close of $16.92. (Which itself was probably front-running the news of our Covid shutdown.)

Have you guys seen enough? Are you ready to vote no at the annual meeting? You do know, right, that there's only one vote where individual shareholders can't be steamrolled by the institutional shares held by funds and hedgies? That's the say on pay proposal. If you haven't had a gut full of this team's sabotage and self-enrichment yet, then you aren't paying attention.

And I guess that's what the big short is counting on, isn't it?

Being a good muppet, I am somewhat cheered by this morning's after hours quote of $17.45, a 3.01% increase. And thanks to Yahoo, not just for that update but the ever so precise calculation of the percent increase to two decimals.

But, with some sadness I have to report that the reported volumes behind that exciting print, are somewhat smaller than mom and pop doofi investors like me would like. From the nazdak's page --

After Hours Time (ET) After Hours Price After Hours Share Volume
19:31:10 $17.45 1
19:19:49 $17.00 1
16:01:59 $16.94 542
16:01:20 $16.94 1,600
16:00:13 $16.94 100
16:00:13 $16.94 666
16:00:13 $16.94 491
16:00:13 $16.94 2
16:00:12 $16.94 3,234

So, after moving 6,635 shares at the market close of 16.94, two shares (as in one, plus another one) traded at $17 and $17.45. That means a grand total of $0.57 (as in two quarters, a nickel, and two pennies) was the profit made by the seller, or the premium paid by the buyer of these two shares.

Hey, if that's all you have to spend to put a big green number up on the board overnight, go for it.

If only our management team were so concerned about creating an appearance of increasing valuation. But they don't concern themselves with paltry concerns about how wild of a roller coaster their long term investors have to ride. Management gets their stock purchased for them gradually, over time, to be sold at their leisure years from now. And they are guaranteed a fat payoff if they ever lose their job due to someone trying to run the company for shareholders' benefit. So the lower it goes the more they make. Thanks, Nancy Taylor! You built that!

In my daily check for signs of life in our website, I decided to click on the "floor of the year" claim for one of the Duravanas. I'd dismissed it for a week or so, figuring it was no great shakes to win (or buy) some award from one of the industry magazines or associations. But even against those low expectations, Richmond somehow manages to disappoint. Here's the explanation of our "major award". (Ala' A Christmas Story)

"About Floor of the Year
We closely follow home décor trends of all kinds to find the hottest new styles, from
textures and colors, to nature and architecture. Each year, we seek input from designers
and home-industry professionals to help us curate a selection of our most on-trend floors.
From these finalists, our style experts select the Floor of the Year."

I don't know which is more phony - calling a few friends to ask which of your floors they like before declaring the one you most need to sell is your favorite, or spelling decor with an apostrophe.

I also note that we are flogging our low prices on the website, and thereby discounting to the few people there almost ready to buy. And at the same time, we are careful never to advertise our low prices to the millions of people sitting in their homes who aren't searching for floors because they think it would be too expensive. I suppose someone in Richmond thinks it's better to let Empire tell people how much a floor costs to get them to call.

I noted a commercial last night for Little Caesar's. I'd heard news pundits commenting on how inflation had forced even Little Caesar's to break its $5 price point. But I was impressed by the ad because they chose to raise the price by only 11% to $5.55 and because they so directly called out their price increase.

Little Caesar's is a company that understands who it is, where they came from, and how their assets make money. They don't navel-gaze about gluten-free choices, or worry whether their cheese supplier is responsibly sourcing his artisan organic feta. They own the low price point in pizza as surely as they control the lowest cost store network. Maybe they'll survive and maybe they'll go down swinging, but one thing's for sure. They will come out of their corner like a fly-weight buzz-saw, selling all they can buy and making it a lot harder for anyone trying to push them around. They won't run around the ring in pink polka-dot trunks, screaming like a little girl with a spider on her dress.

What Little Caesar's did not do was change their name and all their signs to LC Pizza. They didn't start sit-down restaurants and online only locations simultaneously, or sue their founder for selling pizza at his Lasagna-In-A-Cup food trucks. Little Caesars decided a time of inflation was a good time to sell more pizza, rather than raise prices and cut promotion. They didn't decide to compete with Door-dash and Grubhub by hiring in-house deliverers. They didn't start a foundation to train the next generation of delivery drivers to work for their competitors.

Is there any money to be made by Little Caesar's strategy of trying to cut costs and maintain sales and share in the face of inflation? I guess it all depends on your perspective. If you search on "sears catalog 1977" you can look at the price of blue jeans that year. On Page 524, it turns out that you could buy their store-brand jeans, straight or regular cut, for $10.99, and for $1.49 more, you could get them pre-washed. Now I can just hear the typical marketing student I used to work with, leaping from the facts that they pay $65 for their jeans, to how Sears has now failed, and how stodgy they were, to how it was obviously discounting that killed them.

And yet. As it happens I bought a pair of jeans this week from Wal-mart. Forty five years after 1977, I paid $11.97 for their Rustler store brand, prewashed. And so now I can also imagine the social-justice crowd my enlightened HR department used to hire going off on the demise of unions, the destruction of mom-and-pops, the self-sabotage of the deplorables for not voting their wallets, etc. To whom I would not waste my breath trying to explain either the prosperity of a bourgeoning global middle class or the success of Walmart and their investors. Tomato - tomahto, as they say.

There is nothing so mystifying as the truths you accept that are in fact false. Richmond accepts this is a failed brand and a failed business model in desperate need of the kind of marketing reinvention and reimagination about which HBR articles are written and the WSJ will engraves portraits. And so they flounder -- trying to force the rabbit to swim and the duck to hop (as someone characterized the typical corporate performance review process).

If you can afford to, sell all you have. These losers aren't going anywhere, or making any changes. If you're still holding at the annual meeting, vote No on every proposal.

A day late and a dollar short, it does appear LL's "five year mission" (which stretched to seven) through America's courts is finally at an end. Four items from the court's website yesterday ...

Date Event Court official Court reporter Amount
01-05-2022 Settlement/Stipulation to Dismiss - Before Trial Lanford, Rhonda L.
01-05-2022 Order for dismissal Lanford, Rhonda L. ... with prejudice
01-05-2022 Prop. order for dismissal
01-05-2022 Stipulation ... of Dismissal of Amended Complaint as to St. Paul

You heard it here first, which is no great accomplishment as our own investor relations site never comments preferring to keep muppet investors in the dark until subsequent earnings calls. Savvy observers will note that this in no way updates the other ongoing legal entanglements like the SEC deferred prosecution agreement that encumbers any potential merger or acquisition. Management has to meet certain milestones to remove those encumberments and may or may not be filing the required paperwork with the SEC to do so. But you can bet that they won't share that with shareholders, unless forced somehow. Maybe by a questioner in the annual meeting?

https://wcca.wicourts.gov/caseDetail.html?caseNo=2015CV001089&countyNo=13&index=0#records

Although not as fascinating and fabulous as someone's reported windfall from shorting, there were three documented news events Tuesday and yesterday.

First, two new West Coast stores were announced. The wording was ambiguous as to whether these are stores with product to sell, or the new virtual storefronts with just sales people inside. Because after all, any customers who think they need to see the product with their own eyes aren't worth having since they probably are afraid to buy online as well. Our investment in stores without inventory is obviously to train customers to trust their screens. Because that's what hip post-modern marketers do -- transform marketing, even if it lowers sales. Right?

Second, another of the defendants in the insurer suit has stipulated out and been dismissed. Now St. Paul Fire and Marine is the cheese standing alone -- in the land 'o cheese, where the big cheese herself, with large-curd cottage cheese cellulite covering every square meter of her ...

And third, an SEC filing yesterday has the Senior VP of Merchandising and Supply Chain, Douglas Clark, (or is it Clark Douglas?) stating his initial beneficial ownership of five years worth of stock options. Since the investor relations page no longer lists any management beyond the seven dwarfs of Tyson, Walsh, Argano, Bohaty, Givens, Mulvaney and Thomsen (who has left), I can't determine when or whether Clark was promoted beyond supply chain to include Merchandising. But he made supply chain VP back in November of '18, and it seems a little weird to be doing his initial statement only now. Whatever...

So. As the old saying goes, "Figures don't lie. But liars sure do some figurin'."

And so when I check SEC filings from Friday (before the close? After?) it seems that our meaningless announcement, "LLFlooring To Complete Corporate Name Change" (not even "Completes" or "Completed" but "To Complete") was a smokescreen to hide changes to management's compensation and the apparently sudden and unexpected departure of Chris Thomsen, the Chief Information Officer.

I don't view him as a great loss, but it does represent another opportunity for Richmond to screw up a potentially major part of our marketing strategy. His leaving probably represents some growing frustration, but not realization, that "Digital Penetration" alone cannot effectively reach out to the vast majority of DIY floor buyers who haven't bought a floor in years, if at all. It can only carve out a slice of the people searching for a floor, by which time we are fighting it out with all the other retailers buying paid search. This business was built on advertising floors to people yet to decide to buy a floor, like Empire does. And on keeping prices low and making sure everyone knows it, like everyone does. And especially running and announcing sales.

But that's all old hat now, even if it works for all our competitors. And so Richmond will cast about for six months for someone either stupid or crooked enough to promise the impossible dream of reaching people ready to but not yet not looking for floors with search algorithms based on looking for floors. And all while doing nothing new with our marketing so that the new guy will have a free hand.

And meanwhile, the CEO gets 24 months pay and benefits and everyone else 12 months unless fired for cause. I haven't found the previous compensation agreement and parsed through what changes were made, and I may not even bother when it's so obvious the direction this management and board is taking things.

Some kind of intervention is needed. And you can bet that the bureaucracy that was so quick to take down LL six years ago isn't going to lift a finger to remove the management team that's held it down for all this time. So it'll take either Tom Sullivan or someone similar or a whistleblower somewhere to shine a light on the cockroaches that feed on the comatose carcass of this once-fine company.