Lumber Liquidators (LL) is pulling Chinese-made laminate flooring from its inventory amid concerns about the level of formaldehyde in the products.
The company's decision to pull the products follows a March "60 Minutes" report that found that some of the Chinese-made laminate flooring sold at its stores may have failed to meet health and safety standards because of high levels of formaldehyde, a cancer-causing chemical.
The move represents a new strategy for the company, which had defended its products following the report, with chief executive Robert Lynch declaring in a March conference call that its "products are safe."
Despite those reassurances, concerns from customers and shareholders have taken a toll on Lumber Liquidators, pushing down its shares almost 59 percent this year. Revenue has also suffered, with sales slipping 12.8 percent in March. The U.S. Justice Department is also seeking criminal charges, while the company is facing 103 class-action suits relating to the Chinese laminate flooring, according to a regulatory filing.
Lumber Liquidators said on Thursday it has hired Freeh Group International Solutions, founded by former FBI director Louis Freeh, to assess the company's sourcing and compliance policies.
Following the "60 Minutes" report, Lumber Liquidators offered testing kits to customers who had installed Chinese-made laminate flooring in their homes. About 26,000 testing kids were sent to 15,000 customers, the company said today. About 11,000 kits were returned for testing.
The results found that more than 97 percent had indoor air concentrations of formaldehyde that were within the guidelines set by the World Health Organization.
"Despite the initial positive air quality testing results we have received, we believe it is the right decision to suspend the sale of these products," Lynch said in a statement. "We will work diligently to meet the needs of our customers and to ensure their satisfaction."
The company said it is reaching out to customers whose flooring tested above the WHO limits for formaldehyde "for additional investigation and review."
"Those customers are being asked to complete a validation survey to identify any issues with their usage of the testing kit, as well as potential sources of formaldehyde in their home, and will be provided information on methods to improve indoor air quality," the statement said.
Additional steps may include more in-home air testing and testing of samples from the customer. The statement didn't mention replacing flooring that may exceed the WHO's guidelines for formaldehyde emissions, although in a March conference call the company said it would be willing to replace flooring, if necessary.
Formaldehyde can be found in a number of commonly used household items, the company noted. The chemical is used in furniture, permanent-press clothing and floor coverings, and can also be found in the air because of emissions from wood-burning fireplaces and natural gas stoves. It added that there is "currently no national standard for recommended indoor home air concentrations" of formaldehyde.
Chinese suppliers appear to have sold flooring to Lumber Liquidators that was certified and labeled as compliant with California's formaldehyde standards, although the company said it is reviewing the certification and labeling practices of those suppliers and that it would pull the flooring until the review is finished.
Every box of laminate flooring sold at Lumber Liquidators had been labeled with CARB Phase 2 Compliant, standing for the California Air Resources Board, which has strict standards for formaldehyde emissions in wood flooring, according to "60 Minutes." Tests of Chinese-made laminate flooring from 31 samples bought in stores ranging from Virginia to New York found that only one was compliant, while some were more than 13 times over the California limit, the report found.
At high levels, formaldehyde can cause myeloid leukemia and nasopharyngeal cancer, and at low levels can cause eye, nose and throat irritation.
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