Lumber Liquidators

Lumber Liquidators store at 9990 Robious Road, off Midlothian Turnpike, in Chesterfield County.

An activist investor group in flooring retailer Lumber Liquidators Holdings Inc. supports the chain’s founder and former CEO who is exploring strategic alternatives including a possible buyout or a merger with his new business.

Lumber Liquidators Value Committee, led by activist investor Mario Rizzi, said Friday that it believes dramatic change is needed at the Toano-based company. The group owns 5.7% of Lumber Liquidators’ stock.

“The magnitude of value destruction and the board’s failure to hold itself and management accountable necessitate dramatic change at the company,” the committee’s statement said. “We support the exploration of strategic options to ensure the future viability of the company and its return to a position of growth, profits and competitive leadership within the home improvement industry.”

Thomas D. Sullivan, who founded Lumber Liquidators in 1994 and was its longtime CEO, said in a Securities and Exchange Commission filing on Aug. 20 that his investment firm, Florida-based F9 Investments, had bought almost $11 million worth of shares in Lumber Liquidators to take a 5.96% stake.

On Tuesday, he said in another regulatory filing that he wants to “explore strategic options” with Lumber Liquidators. That could mean participating “as a purchaser or investor” or a possible combination of Lumber Liquidators with Cabinets to Go LLC, a national retailer of kitchen cabinets, flooring, countertops, and installation services owned by Sullivan.

“We believe that Mr. Sullivan and his team have the knowledge and experience to conduct a comprehensive reform of company operations, management and governance leading to the substantial, positive changes necessary to realign the company’s focus and strategy,” the Lumber Liquidators Value Committee said in a statement.

The committee said the chain’s management has made several errors and failures in recent years.

“Current management’s brand positioning and self-proclaimed high-low retail strategy was a deviation from the company’s core value proposition and has proven to be a complete failure,” the committee said. “Board members lack retail, sourcing and turnaround experience and this has led to weak oversight and is a fundamental impediment to serving shareholder interests.”

Lumber Liquidators did not respond Friday afternoon to an inquiry for a comment.

The committee said that it has tried to make suggestions or propose changes, including the appointment of an industry expert to the board, but that those ideas have been rejected.

“Meanwhile, the company persistently loses money, merchandise sales and customer traffic continue to fall and expenses have ballooned,” the committee said. “Shareholders have suffered tremendously as shares have plunged.”

Shares in Lumber Liquidators have risen 25 percent in the past week. Shares rose 1.9%, or 22 cents, to close at $11.80 Friday on the New York Stock Exchange.

Sullivan served as board chairman of Lumber Liquidators from 1994 through May 2015 and as its president and CEO from 1994 to September 2006. He took back the reins as interim CEO in 2015 amid a scandal involving formaldehyde in Chinese flooring sold by Lumber Liquidators. He resigned as a member of the board in late December 2016.

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