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by Heather B. Hayes
Virginia Business
May 2004

Success, like failure, often feeds on its own momentum. Just ask Tom Sullivan, CEO of Lumber Liquidators Inc. Not only has his fast-growing company become the nation’s largest direct retailer of hardwood flooring, it has even managed to catch the attention of Bob Vila. The famed home-improvement guru installed the company’s signature Bellawood floors in his own house and was so impressed that late last year he happily signed on as company spokesman.

A celebrity endorsement is always welcome, of course, but Lumber Liquidators has been managing just fine, thanks to its own simple techniques for growth and profitability. “We offer a very good product at a very good price,” Sullivan says. “It’s very easy to be successful when you do that.”

Sullivan, who suffered through a string of failed business ventures before starting Lumber Liquidators in 1995, has attained success by applying some hard-earned lessons. One is keeping overhead costs low. Unlike most other hardwood floor manufacturers, the company cuts out distributors and home improvement stores by selling directly to contractors and homeowners. It now has 45 retail stores in 30 states. The company also manages to negotiate bottom-dollar lumber prices by agreeing to buy the entire weekly production of mills in Brazil and other international locations. “Every week, they have an empty warehouse and a full banking account,” Sullivan says. “It’s the best position they can be in, and they reward us with even lower prices.”

The other lesson that’s proven valuable is having a single focus. That’s a change of pace for Sullivan, who admits he used to get “too scattered around.” In fact, Lumber Liquidators for several years structured its business around buying up scrap and excess wood supplies in bulk and reselling it. But Sullivan quickly determined that having a niche would be critical to long-term success. He chose hardwood floors, because he’s always liked them. Then, as health concerns over carpet-bound allergens and changes in interior design trends and personal taste shifted homeowners away from wall-to-wall carpets and towards hardwood floors in the late 1990s, Lumber Liquidators saw demand go through the roof. “For once, I was at the beginning of something rather than at the end,” Sullivan says.
The company took in $65 million in revenues in 2002, an 86 percent growth rate over the previous year, and topped $100 million in 2003. Sullivan projects that Lumber Liquidators will reap $170 million in 2004 and open another 10 retail stores. The company currently has 300 employees and expects to hire another 50 this year.

Although Lumber Liquidators offers several different brands, its Bellawood flooring line, which offers 300 different types of wood, species and grades, saw sales increase by 51 percent in 2003 over 2002 and another 73 percent thus far in 2004, according to Sullivan. The Bob Vila endorsement, he hopes, will boost brand recognition and product credibility among buyers. A full-on advertising campaign — courtesy of television, radio, print and Web media — also appears to be working. Sales at existing stores have risen 30 percent. “More people are finding out about us,” he says.

Lumber Liquidators expects to have 100 stores opened within the next three years, but Sullivan admits that staying on goal will require addressing potential challenges now. The company plans in the next few years to increase efficiency at its distribution center in Colonial Heights by installing a computer system that ties production and manufacturing to retail stores. It will also add another manufacturing line to increase production and will continue to expand its network of mill contractors. “The way I see it,” Sullivan says, “our biggest issue will be just keeping a good supply and keeping it moving.”

Return to Virginia Business - May 2004