Lumber Liquidators' quarterly sales fell for the fifth straight quarter as the company struggles to convince customers that its hardwood flooring is safe amid fears that some of its products could cause cancer.
The company's shares fell 8.7 percent to $15.50 in early trading.
Lumber Liquidators has been facing heat not just from regulators but also from consumers and shareholders after CBS's "60 Minutes" report alleged in March last year that the company had sold flooring with dangerously high levels of formaldehyde.
"We resolved several legacy regulatory issues and made good progress on resolving certain other outstanding legal matters," Chief Executive John Presley said.
The company was forced to discount its products to clear inventory amid "significant negative media attention" related to its Chinese laminate last year.
"This June, we were simply in the business of selling wood at competitive prices," Presley said on a conference call.
Fewer discounts helped the company boost its gross margins to 29.7 percent in the second quarter from 25.1 percent last year.
The company's net loss narrowed to $12.2 million, or 45 cents per share, in the second quarter from $20.3 million, or 75 cents per share, a year earlier.
Excluding items, Lumber Liquidators posted a loss of 25 cents per share, which was in line with analysts' estimates, according to Thomson Reuters I/B/E/S.
However, sales at stores open at least a year dropped 7.2 percent in the second quarter ended June 30. Analysts on average had expected a 5.4 percent decline, according to research firm Consensus Metrix.
Net sales also fell 4 percent to $238.1 million, missing analysts' estimates of $240.6 million.
The company said changes in customer trends led to lower demand for some of its products.
Up to Tuesday's close, the company's stock had fallen about 11 percent in the last 12 months.