The recommendation comes after analysts at Morgan Stanley downgraded the flooring retailer’s stock Tuesday, its shares slid 10 percent.
They said Lumber Liquidators has struggled to achieve a sustainable improvement in sales since regulatory and product issues hit in 2015, despite the home improvement industry improving as a whole. They attributed the company’s troubles to its infamous 2015 scandal, in which a 60 Minutes report exposed the retailer for having too much formaldehyde in its Chinese-made laminate flooring.
Analysts said that the company’s main competitor, Floor & Decor Holdings Inc., is growing at a rate of 20 percent a year while expanding into new regions. LL’s stock has fallen 26 percent over the past year, while Floor & Decor’s have surged by 51 percent.
“We would reassess our rating if LL overhauls its brand more comprehensively than the current transformation plan suggests (including a potential name change for the company),” analysts wrote.