Watch $LL Tom Sullivan’s interview on CNBC last week:
Rather than focus on the “short” side of this, reverse the position and lets say I’m long (I’m not)
IF I was long, I’d be asking the following questions:
1- Why is Sullivan the face of the company? His interview with 60 Min was a disaster and the CNBC one was much worse. He honestly sounded so distracted on CNBC it was like he was watching TV on the other end of the phone while he talked
2- IF the China made wood “only saves 2 or 3 cents” as Sullivan claims in the interview, why the hell are they still using it? So far its use has brought a DOJ probe (possible criminal action) and now this? It can’t be worth it for only “2 or 3 cents”
3- Why not follow the Tylenol playbook? Pull it all and regroup and at least prove to the public you take their safety seriously? It would at least solve the problem from today onward.
4-They like to remind us how strong the company is because the Chinese laminate is such a small part of it, again, why not pull it then?
6-Rather than bicker over testing procedures, why not come right out and say the formaldehyde levels are below the limits? They have NOT said this yet, what they have said is that the test used to determine they were above “was not a real world test”. In fact, the CEO last week admitted CARB found “elevated levels” in their wood but then again complained about the test. You can’t admit your product contains elevated levels of a carcinogen and then say “but it doesn’t matter”……people won’t buy it
Not getting any even mildly reasonable answers to any of the above would put me in a panic. I would be especially bothered by their choice NOT to pull the Chinese wood or stop using the laminate from here on out until the debate is settled. This decision would lead me to believe the savings from it are FAR greater than “2 or 3 cents” and not using it would in fact put a large crimp in results. Further one has to then wonder if the reason they are being so stubborn about it is because they are scared of the blowback so the game plan is “deny deny deny”. The cost to rip out and replace all that laminate would be staggering and this is before the inevitable litigation exposure.
Finally, I am not of the opinion Sullivan even knows the wood is unsafe. Based on the generic almost incoherent rambling nature of all his answers, I think the possibility is he has no idea if it is or not. He may simply believe what those who made this decision are telling him. Think about, I’ve yet to hear him go into any detail regarding the wood, its selection, manufacturing or the testing procedure. I think this could be a very, very real scenario.
Whether he does or doesn’t is really immaterial at the end of the day, I’m just giving him the benefit of a doubt. Until $LL takes some type of action that does not involve simply saying “not a real world test”, they are going to be dogged by this.