It appears bad news has just gotten worse for Lumber Liquidators. Recently the U.S. Justice Department informed the company that it would be seeking to level criminal charges related to the foreign materials being blamed for consumer issues.
This is not the only current PR crisis Lumber Liquidators is facing. It’s common, with this sort of issue, for there to be a cascading series of public relations challenges that go hand-in-hand with the legal and financial problems.
In this case, the regulatory filing hit on the same day Lumber Liquidators issued a report detailing questions related to the safety of its products AS WELL AS the government investigation.
Also a hard-hitting 60 Minutes expose’ that put the company in a difficult place with viewers, current consumers and potential customers.
Regarding the financial news, news outlets are reporting that Lumber Liquidators lost at least $7.8 million (29 cents per share) in Q1 of 2015. Because Wall Street watchdogs have predicted a 16-cent per share profit, the news is a double whammy of negative PR for the company.
Lumber Liquidators is placing all the blame for this troublesome turn of events on a Chinese company. That company reportedly, provided the building supply retailer with laminate flooring containing a “high level of formaldehyde,” which is known to be a carcinogen.
In addition to the criminal charges and the financial woes, the company is dealing with upwards of 100 lawsuits related to this case, many of which were filed shortly after the 60 Minutes episode aired. That’s the modern-day one-two punch of negative PR.
Make the news for something bad, and suddenly lots of potential victims, who may not have otherwise known, will appear, lawsuits at the ready.
Whether or not the suits are legitimate — assume they are for now — the PR crisis expands exponentially as the number of suits grows. And as each plaintiff shares the news on every available communication platform, news agencies continue to report on the growing number of cases.
To be fair, all signs point out that Lumber Liquidators is going to take this issue on squarely. In the meantime, the case provides a clear example of just how fast bad news can get much, much worse.