Lumber Liquidators Holdings (NYSE:LL) is not yelling “timber” but has bowed to huge pressure in the United States not to sell stock which had hurled it into the spotlight with both regulators and health campaigners.
The firm has agreed not to sell its existing inventory of laminate flooring previously sourced from China which has been languishing in its storehouses for over a year. In return, federal regulators have agreed to close their probe of the company.
But it was hardly just a stand-off. Rather, the US Consumer Product Safety Commission on Thursday wrapped up its year-long probe without issuing any product recalls or uncovering any violations by the company.
The embattled company was vindicated after federal investigators found no unsafe levels of cancer-causing formaldehyde in its flooring, backing up the company’s own tests.
Previously, Lumber Liquidators discontinued sales of the product in question in May 2015, but the regulator said any sale or disposal of remaining inventory is still subject to its approval.
For the past year, the existing stock has been the subject of controversy but now Lumber just wants to draw a line under the episode and write off its losses while repairing the damage done to its share price.
The news came as a huge relief to investors, and the share price jumped 19.2% to $15.78 by the Friday close.
Media reports last year suggested that the company's Chinese-made laminate flooring may contain levels of formaldehyde that are noncompliant with California's health and safety standards.
Following those media reports, the share price slumped from around $68 at the start of 2015 to as little as $11 in mid-May this year when the company reported a quarterly loss of $1.20 per share.
Lumber Liquidators previously said it hadn't sold its Chinese-sourced laminate since May 2015, adding that it has taken "meaningful steps" to boost compliance.
The US Consumer Production Safety Commission said Thursday that Lumber Liquidators tested the air quality in more than 15,000 households and none had formaldehyde above guidelines, according to the Associated Press.