Lumber Liquidators, Lowe’s halt sales of Chinese laminate

HomeInside FCNewsLumber Liquidators, Lowe’s halt sales of Chinese laminate

May 11/18, 2015; Volume 29/Number 3 

By Ken Ryan

Two months after a damning report of its Chinese laminate flooring products, Lumber Liquidators announced it is pulling all of its Chinese-made laminate flooring, effectively immediately. In a related announcement, it has brought on former FBI director Louis Freeh to help review its sourcing procedures amid widespread concern over the safety of its products.

The Lumber Liquidators decision on May 7 was followed by Lowe’s announcement six days later that it was halting sales of some of its Chinese-made laminate flooring “out of an abundance of caution” after a financial blogger said that it may have the same issues with formaldehyde that have been plaguing Lumber Liquidators. The company plans to source all of its laminate products from the U.S. starting in January.

Lowe’s said it would conduct independent testing on the products in question. In a recent post on the Seeking Alpha blog, Xuhua Zhou, who acknowledges he is a short seller of Lowe’s stock, cited testing performed by an anonymous industry source that allegedly shows high levels of formaldehyde in a sample of laminate flooring purchased from Lowe’s.

In an interview with FCNews, Zhou said it was “very encouraging” to see how fast Lowe’s acted. “It was easy—almost a no brainer—for them once it reached the decision makers,” Zhou said. “[My] story was more about adding a piece to the puzzle and raising some issues that seem to be generally neglected by the media due to all the attention on Lumber Liquidators.”

Lumber Liquidators is pulling all Chinese laminate from its 356 stores.In addition to its laminate woes, the company is facing possible criminal charges from the U.S. Department of Justice related to some hardwood flooring products it imported from Russia.

The company is also bringing on Freeh Group International Solutions LLC, founded by Louis Freeh, the former FBI director and federal judge, to help in reviewing its sourcing and compliance policies.

Lumber Liquidators has historically sourced most of its laminate flooring from Chinese suppliers, though it has been scaling back in recent years. Since the “60 Minutes” segment aired, sales of laminate flooring, particularly those from China, have fallen amid customer concerns.

In 2014, Chinese-sourced laminate made up 13.1% of Lumber Liquidators’ overall sales. That figure fell to 12.5% during the first three months of the year and to 10.4% during April, according to company reports.

Flooring makes up just 6% of Lowe’s sales, and less than 10% of its laminate product is manufactured outside the U.S., according to the company.

Armstrong sells a small amount of laminate flooring at Lowe’s, under both the Armstrong and Bruce brand names. “None of the potentially non-compliant laminate products identified have been an Armstrong or Bruce product, which is consistent with our proven track record of safety, reliability and trust as a U.S. company that has done business for more than 150 years,” said Joe Bondi, vice president and general manager at Armstrong World Industries. “We’re committed to providing the best quality, safest products for our customers every day. We are confident that our laminate products meet or exceed all applicable standards, just as they always have. We source laminate flooring for both Bruce and Armstrong brands, made to our specifications, from a select group of approved suppliers.”

A check of the Lowe’s Garden City, N.Y., store on May 9 found no cartons of Armstrong laminate, and a very small amount of Bruce. Pergo made up the bulk of the assortment, along with private label brands.

The dual moves by Lumber Liquidators and Lowe’s is seen as potentially helping U.S.-based flooring manufacturers who comply with CARB standards, as well independent flooring dealers who can further differentiate their offerings.

Carpet Wise Flooring America, in Longmont, Colo., sits just 250 feet away from a Lumber Liquidators. Since the March 1 airing of the “60 Minutes” report, owner Sam Chesher said his business has flourished. “Flooring America was smart. As soon as the story broke, they came by with Made in the USA flags to put out. I don’t get into their game of $1.09 laminate, 79-cent laminate. We stand on our principals of quality, Made in the USA. In a way, I love having them next to me. I’ve had probably the strongest quarter ever in my 20 years here on the hard surface side.”

The North American Laminate Flooring Association (NALFA) was quick to assure retailers that laminate flooring products carrying the NALFA Certification Seal of approval have passed rigorous ANSI performance tests for quality and are also CARB 2 compliant. “Ultimately, we want consumers to have peace of mind that the products they place in their homes are safe,” said Bill Dearing, president of NALFA. “When retailers place NALFA certified products on their shelves that goal is achieved and both retailers and their customers can rest assured that a good decision has been made.”

Zhou told FCNews he does not believe there is anything inherently wrong with Chinese-made laminate flooring. “I don’t think the source of laminate is the issue here, it’s more about if the finished products are compliant with regulations and safe for use,” he said. “Aside from the California standard, the regulatory framework on formaldehyde is still a work in progress.”

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