Diamonds and Dogs

10/9/15

Lumber Liquidators (LL) is back. Lumber Liquidators has been on a roller coaster ride this year falling from $70 down to $11 after a hedge fund manager and 60 minutes piece stated that Lumber Liquidator was importing floor boards from China with excessive levels of formaldehyde, a hazardous carcinogen. However the stock has rebounded nicely in the last month up 15% today after a $10 million settlement with the Justice Department for illegally importing timber from Russia back in 2013. Lumber Liquidators is still facing lawsuits for the flooring imported from China, but with the stock still down 70% year to date, hopefully most of the bad news has been priced in.

Gap (GPS) is gapping lower today. The retail company, Gap which owns such brands as Gap, Banana Republic and Old Navy dropped 5% today after reporting disappointing same store sales for September, lowering margins for the third quarter, and receiving a couple downgrades. To add insult to injury, Gap lost their top executive from Old Navy the other week to Ralph Lauren. The company blamed weak sales on less than flattering female apparel. Banana Republic executive, Marissa Webb, is stepping down from her position as creative director. She may be an escape goat for this debacle. One thing we do know there should be discounts coming from Gap in the near future.