TOANO, Va. (AP) — The Justice Department is seeking criminal charges against Lumber Liquidators in an ongoing investigation over imported products.
The flooring company also reported Wednesday that it lost $7.8 million in its first quarter, as it deals with fallout from a TV report that raised concerns over levels of formaldehyde in its Chinese-made laminate flooring.
It said that it currently faces more than 100 pending class-action lawsuits related to the flooring.
Its shares dropped more than 15 percent in premarket trading.
In early March a report on CBS' "60 Minutes" said that Lumber Liquidators' laminate flooring made in China contains high levels of formaldehyde, a carcinogen. Lumber Liquidators Holdings Inc. has said that it complies with applicable regulations for its products, including California standards for formaldehyde emissions.
In a regulatory filing Wednesday, Lumber Liquidators said that the Justice Department was seeking criminal charges against it under the Lacey Act, which is a U.S. law that includes a ban on illegally sourced wood products. The company had said in December that the Justice Department was contemplating criminal charges.
Lumber Liquidators also said that it is currently aware of more than 100 pending class-action lawsuits against it related to its laminate flooring made in China.
The company said that it plans to defend itself vigorously and that it can't estimate the potential loss that may results from these actions due to various reasons, including the preliminary stage of the cases.
The company said that it had received search warrants in September 2013 requesting information related to certain wood flooring imports. Lumber Liquidators said that it's been cooperating with federal authorities.
The Toano, Virginia-based company said that its best estimate of the probable loss that may result from the Justice Department action is about $10,000.
For the period ended March 31, Lumber Liquidators lost $7.8 million, or 29 cents per share, for the period ended March 31. That compares with a profit of $13.7 million, or 49 cents per share, a year earlier.
The results fell short of Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of 15 cents per share.
The hardwood floors retailer posted revenue of $260 million in the period, meeting Wall Street forecasts.
Lumber Liquidators said that its March sales declined 12.8 percent from the prior-year period due to the allegations made in the TV report.
Sales at stores open at least a year dropped 17.8 percent in March. For the first quarter, the figure slipped 1.8 percent.
This metric is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
Lumber Liquidators said that for the second quarter to date, its sales fell 1.9 percent and sales at stores open at least a year dropped 7.2 percent. The company said that it can't estimate a full-year outlook at this time.
Lumber Liquidators also announced Wednesday that Chief Financial Officer Dan Terrell will leave the company in June. He's served as CFO since October 2006. The company appointed Gregory A. Whirley Jr. as interim CFO and senior vice president of finance. Whirley most recently served as senior manager- national professional practice at Ernst & Young LLP.
Lumber Liquidators' stock tumbled $5.17, or 15.5 percent, to $28.25 before the market open. The shares have decreased 50 percent since the beginning of the year and have fallen 61 percent in the last 12 months.