Dive Brief:
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Lumber Liquidators last week was mopping up the fallout from a brutal 60 Minutes report which claimed the retailer's “Chinese-made laminate flooring contains amounts of toxic formaldehyde that may not meet health and safety standards.”
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UPDATE: The Consumer Product Safety Commission, a federal regulation agency, has confirmed that it has requested the results of the journalism report's findings, but declined to say whether it was conducting its own investigation.
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UPDATE: The company’s stock fell more than 25% the Monday morning after the 60 Minute broadcast, compounding a dip the week before on anticipation of the report, and continued to fall on the CPSC news.
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The retailer was forced to hit back, saying that tests done by CBS News for the report were improper and accusing “a small group of short-selling investors who are working together for the sole purpose of making money by lowering our stock price.”
Dive Insight:
The investigative report by 60 Minutes was indeed instigated by Whitney Tilson, the founder and managing partner of Kase Capital Management, but Tilson maintains that his moves add up to a "confluence of interest” rather than a conflict of interest. (It’s worth noting that Tilson made some $1.4 million by short-selling on the news that he brought to CBS.)
Still, CBS did an independent report and its own testing, and it could be difficult for Lumber Liquidators to recover from this, which Tilson maintains, unless it gets assertive about assuring customers about the safety of its flooring. That could require the retailer to do some investigating of its own into its Chinese sourcing and manufacturing.
UPDATE: Much now rests on whether the Consumer Product Safety Commission agrees that 60 Minutes conducted adequate and accurate tests, and such a finding would likely launch a more full-scale investigation into the Chinese-made lumber. A CPSC investigation has already been requested by Sen. Bill Nelson (D-FL), the ranking member of the Senate Committee on Commerce, Science and Transportation, who asked the Centers for Disease Control and Prevention and the Federal Trade Commission to also look into the report.
