Lumber Liquidators Inc. shares plunged following a “60 Minutes” report claiming the company sells Chinese-made flooring with illegal levels of formaldehyde, a carcinogen.
Shares fell 25% to $38.83 on Monday after a Sunday evening broadcast of “60 Minutes” on CBS. The investigation, which used hidden cameras and undercover reporters, found that flooring sold with the claim of meeting California health and safety standards did not actually pass safety tests. The investigation also found managers at three Chinese factories who admitted to false labels on products to make them appear to meet regulations, according to Bloomberg.
“60 Minutes” said it tested Lumber Liquidators flooring from China sold in other states outside of California. Of the 31 products the show tested, only one would be legal in California.
During the investigation, Denny Larson, executive director of Global Community Monitor, and environmental attorney Richard Drury purchased boxes of laminate flooring from many retailers in California, including Lumber Liquidators, then sent the products to independent certified labs, the Washington Post reported.
Lumber Liquidators flooring made in the United States did meet California emissions standards, but every sample made in China failed the test.
[quote text_size=”small” author=”– Tom Sullivan” author_title=”Lumber Liquidators chairman and founder”]
Our goal is to sell a good product at a good price. And we don’t get the price by skimping on anything. We get the price by low overhead, huge volume and being very efficient at what we do. And we’ll never sell something unsafe.
In response, Lumber Liquidators said in a filing with the Securities and Exchange Commission that the show used an improper test and that it stands behind all of its laminate floors, according to the Mercury News. Lumber Liquidators said it contacted Chinese suppliers featured in the story to confirm that all products made for the company are compliant with California health and safety regulations.
The company also claims that doubts about its products are being made and fueled by “short sellers,” or investors who bet that specific stocks will fall in value.