Dive Brief:
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The U.S. Consumer Product Safety Commission will close its investigation of Lumber Liquidator's China-sourced laminate flooring after the retailer and the CPSC reached an agreement Thursday. Earlier this year the flooring was found to have toxic levels of formaldehyde, a known carcinogen and a chemical that can exacerbate respiratory issues.
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As part of the agreement the retailer has agreed to not resume selling laminate wood flooring from China and to continue with a comprehensive testing program that is part of the retailer’s recall program for customers who bought the laminate flooring from Lumber Liquidators between February 2012 through May 2015.
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Shares of the embattled retailer rose more than 22% Friday on the news, according to USA Today.
Dive Insight:
Lumber Liquidators has been operating under a cloud a year after "60 Minutes" reported that certain laminate flooring products sold by the retailer emit toxic levels of formaldehyde.
Once a darling among investors, the company since then has faced a series of lawsuits and state and federal regulatory scrutiny, which intensified earlier this year after The Centers for Disease Control and Prevention reported that the cancer risks from the flooring were even worse than feared.
Lumber Liquidators says it has boosted its quality-control measures, and suspended sales of Chinese laminates and offered free air tests to customers, but the year has been marked with missteps. The company took more than two months to halt sales of suspect products last year, for example, and pled guilty to charges of making false declarations on import documents, paying millions in a settlement.
But as the company steps up to face the music, it has also shown that it may be able to put the worst of the consequences behind it. Earlier this year the company reached an agreement to pay $26 million and 1 million shares through insurers to settle a securities class action lawsuit. In March, the company also reached a $2.5 million settlement with the California Air Resources Board.
Lumber Liquidators has been forced to offer significant price cuts in its effort to attract customers, and CEO John M. Presley said last month that the retailer still has a chance with customers as long as the bad news continues to die down and its store associates have an opportunity to explain that its products are now safe.
“We have more explaining to do to the customers that come into stores,” Presley said. “So we certainly believe that it has an impact on us. It's not an impact that we have been able to precisely measure. And it's an impact that we see diminish over time as we stay out of the news.”