Taking a closer look

March 13, 2015 | Dian Chaaban


Yesterday, a buddy of mine was telling me about a 60 Minutes segment he watched last week on CBC about the dangerous levels of formaldehyde in laminated floor wood sold by Lumber Liquidators (the largest and fastest-growing retailer of hardwood flooring in North America).

For those of you who don’t know much about this toxin, formaldehyde is hazardous to our human health – causing cancer and other ailments including skin and breathing problems – and the worst part is that it’s a silent killer which most of us can’t even detect by smell.


I walked away intrigued and concerned about the things we buy as consumers – and the risks associated with buying things we assume to be safe, or simply just don’t know much about (you don’t know what you don’t know). t’s a great reminder for us to ask questions and take a closer look at the things we own – especially what you own within your investment portfolios.


Most people don’t know much about the market – whether it’s because they have no interest or because these things aren’t taught in school (don’t get me started there; I sincerely believe this stuff should be taught in school – financial planning at least, but I digress). But even if you don’t care for the market as a whole, it’s important to me that you understand what you own within each of your accounts. What do you own within your RRSP? What’s in your TFSA? How about your kids’ RESP? Is it mutual funds, ETFs or stocks? Alright, so which companies do you own? Or which funds? How much are you paying? What’s your overall asset allocation and diversification exposure?


It’s worthwhile to take a closer look to be sure that your investments are in line with your personal goals and within your risk tolerance and from a fee perspective, reasonable for the amount of service/planning you are receiving. Higher fees and improper asset allocation / diversification are the silent killers to your portfolio – you won’t notice it right away but after time, you’ll wish you took a closer look.


Back to the juicy stuff - the 60 Minutes exposé on Lumber Liquidators (LL) suggested that while formaldehyde is present in the glue used to hold together thin laminated layers of flooring, the 60 Minutes team found that 30 out of 31 Chinese laminated wood samples sold by the company failed to meet safe level standards for formaldehyde set by the California Air Resources Board.


But there are 2 sides to every story and in a filing with the Securities and Exchange Commission, Lumber Liquidators said that it believes 60 Minutes used an improper testing method. “We stand by every single plank of wood and laminate we sell all around the country and will continue to deliver the best product at the best price to our growing base of valued customers,” the company said.


Following the 60 minutes episode, shares of Lumber Liquidators plummeted because of the negative press. The company went on defense mode this week on an hour-long conference call with investors, stressing the safety of their products and defended its compliance practices. “Because sensationalized reports provide little context, customers are understandably concerned,” said the company in a statement. “We are confident that our flooring is safe and we intend to see that it stays that way.” The company is also offering free air quality tests to concerned customers, and would consider a re-installation if a customer wasn’t satisfied with the results.


The stock soared 13% during the call and locked in a 10% gain to close at $36.08. The damage however has been done - since then, total sales have plunged 7.5%, comparable store sales are down 12.7% and negative consumer sentiment has doubled. Its stock has also been hammered, down 50% this year.