Home improvement retailer Lumber Liquidators (LL) said Thursday morning it is halting sales of all its Chinese laminate flooring effective immediately, confirming a CNBC report overnight. The move comes in the face of dozens of lawsuits over the safety of the products, as well as looming criminal charges disclosed by the company last week concerning its foreign sourcing.
The company said in a statement that it is taking the action in light of "mounting industry concerns relating to laminate products sourced from China."
Lumber Liquidators has been under fire since early March, when the CBS News program "60 Minutes" aired a report saying the Chinese laminate flooring contained high levels of formaldehyde, a known carcinogen.
Whitney Tilson, the prominent money manager who first brought the story to the CBS program, extended his short on the embattled company following Thursday's news. The founder and managing partner of Kase Capital Management told CNBC he "materially" increased his short position this morning, and said shares of the company "should be down 20%" on it pulling Chinese laminate.
The company had insisted the products are safe. But last week, after reporting a surprise quarterly loss as a result of the controversy, CEO Robert Lynch announced the company would scale back its sourcing of laminate flooring from China in response to "customer demand." The new announcement goes further, eliminating the Chinese laminate entirely while a special committee of the board of directors reviews the allegations.
While the statement says the review is ongoing, the company appears to be laying the groundwork to blame its Chinese suppliers.
"Based on the review to date, it appears that the company's Chinese laminate flooring suppliers have sold product to the company that the suppliers have certified and labeled as compliant with California formaldehyde standards," the statement says. "However, the company is further reviewing the underlying certification and labeling processes and practices of its suppliers."
The "60 Minutes" report alleged the company knew the product was non-compliant but purchased it anyway to cut costs, which the company has denied.
In its announcement Thursday, Lumber Liquidators also said it was hiring former FBI Director Louis Freeh to review the company's compliance program. And it said free air testing kits it distributed to concerned customers after the allegations surfaced show "over 97 percent of customers' homes were within the protective guidelines established by the World Health Organization for formaldehyde levels in indoor air." The company said an independent lab had reviewed some 3,400 testing kits out of approximately 11,000 that have been returned.