LL Flooring Holdings Stock

LL Flooring Holdings, Inc. (LL Flooring) operates as a specialty retailer of hard-surface flooring in North America.

The company seeks to offer the customer experience online via LLFlooring.com and in stores, with more than 500 varieties of hard-surface floors featuring a range of styles and on-trend designs. The company’s online tools, such as its Picture It! Floor Visualizer also help empower customers to find the right solution for the space they’ve envisioned. Its extensive selection includes waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, tile, and cork, with a wide range of flooring enhancements and accessories to complement. The company also provides in-home delivery and installation services to its customers.

The company primarily sells to consumers or to flooring focused pros, such as flooring installers, remodelers, and small to medium home builders (Pros) on behalf of consumers through a network of store locations in metropolitan areas. The company’s stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all its products, the majority of which is in stock and ready for delivery. The company offers the accessible flooring expertise and high-touch service of a local store, combined with the value, omni-channel convenience, and product availability of a national chain.

Products and Services

Product Selection

The company offers an extensive assortment of hard-surface flooring under multiple proprietary brand names, led by its flagships, Bellawood, Coreluxe, and more recently, its Duravana hybrid resilient flooring, which combines the best characteristics of traditional flooring and the latest technology for waterproofing. Duravana is eco-friendly, 100% polyvinyl chloride (PVC) free and the MDF core is manufactured from responsibly managed forests as certified by the Forest Stewardship Council. The company has invested significant resources developing these national brand names. The company’s hard-surface flooring products feature a range of quality styles and on-trend designs and are generally differentiated in terms of quality and price based on wood versus manufactured materials, the wood species, grade, and durability of finish. Prefinished floors are the dominant choice for residential customers over unfinished wood planks that have a finish applied after installation. It also offers an assortment of installation services and accessories, including moldings, underlayment, adhesives and tools.

Direct Sourcing

The company source directly from flooring and other vendors, which enables it to offer a broad assortment of high-quality proprietary products to its customers. The company seeks to establish strong, long-term relationships with its vendors around the world. In doing so, the company looks for vendors that have demonstrated an ability to meet its demanding specifications, its rigorous compliance standards and the capability to provide sustainable and growing supplies of high-quality, innovative, trend-right products. The company’s source from both domestic and international vendors, and in 2022, approximately 44% of its products was sourced in North America, 39% was sourced from Asia, 12% was sourced from Europe, and 5% was sourced from South America.

Supply Chain

The company’s supply chain is wholly focused on delivering a complete assortment of products to its customers. The company owns a one million square foot distribution center on approximately 100 acres of land in Henrico County, Virginia, which serves the stores located in the easternmost two-thirds of the United States. It operates a 500,000 square foot leased distribution center in Pomona, California as the primary distribution center for the stores located in the westernmost one-third of the United States. A number of the company’s vendors maintain certain inventory levels for shipment directly to its stores or its customers. The company’s product is generally transported boxed and palletized, and the weight of its product is a key driver of its supply chain costs.

Compliance and Quality Control

The company’s compliance programs are designed to ensure the products it sells are safe and responsibly sourced, and meet all regulatory and statutory requirements, including, without limitation, requirements associated with the Lacey Act, United States Environment Protection Agency (EPA) and the California Air Resources Board (CARB).

The company’s vendor code of conduct, which maintains standards that must be followed by all vendors, sub-tier suppliers, subcontractors and their agents, prohibits vendors from engaging in child labor, forced labor or other human rights issues. The company’s Compliance and Regulatory Affairs Committee of the Board of Directors provides oversight of its compliance programs.

The company utilizes a variety of due diligence processes and controls, including supplier audits, periodic on-site visits, and product testing to ensure such compliance. It utilizes a risk-based approach to implement and operate the various aspects of its compliance program. The company’s compliance program considers, among other things, product risk, the level of vertical integration at its suppliers’ mills, legality concerns noted by both private and government parties, and the results of on-site audits that it performs. The company’s evaluation of sourcing risk is a key component in its allocation of resources to ensure it meets its standards for product compliance and safety. Compliance and Quality Control teams located in the United States and in China are supplemented with independent third-party resources that provide independent audits and inspections, which are incorporated into its review processes and monitor its sourcing efforts across all areas from which it sources product. Compliance programs and functions are continually under review, updated and enhanced as appropriate to stay with industry, statutory and regulatory requirements. The company’s Compliance and Regulatory Affairs Committee of the Board of Directors provides oversight of its compliance programs.

Additionally, the company maintains and operates a 1,500 square foot lab within its distribution center on the east coast. This lab, along with the company’s third-party providers, supports its process to ensure compliance with CARB and EPA requirements. It also maintains a lab in Shanghai.

Installation

Approximately 12% of the company’s total net revenue in 2022 was from installation services sales. The company’s customers purchase professional installation services through it to measure and install its flooring. The company offers these services at all its stores. As of December 31, 2022, the company utilizes a network of associates to perform certain customer-facing, consultative services and coordinate the installation of its flooring products by third-party professional independent contractors. Service revenue for installation transactions that the company controls along with freight is included in net services sales.

Store Model

The operates retail stores. It opened new stores and did not close any stores in 2022. The company’s stores are typically 6,500 to 7,500 square feet. The company entered into short leases, generally for a base term of five to seven years with renewal options, to maximize its real estate flexibility.

Sales Approach

The company strives to have an integrated omni-channel sales model that enables its stores, customer contact center, digital platform, and catalogs to work together in a coordinated manner.

LLFlooring.com is the company’s digital platform. This mobile-friendly site features inspirational content, showcases its flooring in digital room scenes, highlights its digital tools like the Picture It! Floor Visualizer and Floor Finder and promotes its services, such as the ability to order a free installation estimate and flooring samples. The company’s digital platform contains a broad range of information on its products and services, including a comprehensive knowledge base on all aspects of flooring. Customers can also shop from home with a live sales associate in one of the company’s stores through its virtual shopping experience. The company also offers extensive product reviews, before and after photos from previous customer projects, style and design trends via the LL Style blog and how-to installation videos. A customer can also chat live with a flooring expert, either online or over the phone, regarding questions about a flooring purchase or installation. The company continues to develop new features and functionality to assist customers, and to ensure they have robust tools at their disposal that are effective at helping them make the ideal flooring choice as they move between other channels. The company also offers an e-commerce experience for its Pro customers, including online ordering with exclusive Pro pricing and delivery rates on its selection of over 500 floors.

The company offers its residential customers a financing alternative through a proprietary credit card, the LL Flooring credit card, underwritten by a third-party financial institution, generally with no recourse to it. The company also offers its Pro customers a financing alternative, which is underwritten by a third-party financial institution, generally with no recourse to it.

Customers

The company targets several distinct customer groups who each have varied needs with respect to their flooring purchases, including consumers or Pros on behalf of consumers. It offers customers installation services and also provides dedicated call center resources through its customer contact center for consumers and Pros. All customer groups are offered delivery services.

Seasonality

The company’s net sales fluctuate slightly as a result of seasonal factors, and it adjusts merchandise inventories in anticipation of those factors, causing variations in its buildup of merchandise inventories. Generally, the company experiences higher-than-average net sales in the spring and fall, when more home remodeling activities typically are taking place, and lower-than-average net sales in the colder winter months and during the hottest summer months. In 2022 and in 2023, the company continues to navigate uncertainty in the macroeconomic environment due to consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales.

Intellectual Property and Trademarks

The company has a number of marks registered in the United States, including LLFlooring, Floor Love, Lumber, Floor Finder, Duravana, Bellawood, 1-800-HARDWOOD, Quickclic, Virginia Mill Works Co. Hand Scraped and Distressed Floors, Dream Home Laminate Floors, Builder’s Pride, Avella, Coreluxe, Tranquility Resilient Flooring, Lisbon Cork Co. Ltd., Colston Hardwood Flooring, ReNature, AquaSeal, Dual Defense and other product line names.

History

The company was founded in 1994. It was formerly known as Lumber Liquidators Holdings, Inc. and changed its name to LL Flooring Holdings, Inc. in January 2022.