UPDATE 1-Lumber Liquidators' defense not convincing enough - analysts

UPDATE 1-Lumber Liquidators' defense not convincing enough - analysts Fri, Mar 13 13:21 PM EDT (Adds chairman comments, stock valuation; updates shares) By Ankit Ajmera March 13 (Reuters) - Lumber Liquidators Holdings Inc's shares fell as much as 10 percent on Friday, reversing some gains from a day earlier, after brokerages cut their price targets, saying the hardwood flooring retailer's defense of its products left some questions unanswered. The retailer came under fire after CBS's "60 Minutes" show alleged that laminates sourced by the company from China had higher-than-permitted levels of formaldehyde, a carcinogen. Goldman Sachs said the company did not explain why its flooring could not pass the safety test, while floors sold by others did, downgrading the stock to "neutral" from "buy". The brokerage also removed the stock from its "Americas buy" list, adding that it "anticipated a hit to sales from recent reputational challenges, but the hit to margin was more severe". Lumber Liquidators gave a blow-by-blow account of its testing process on Thursday, and said it planned to boost marketing spend and adjust retail prices to show "that Lumber Liquidators has the best value proposition in the industry". The company said it expected current-quarter gross margins to fall to 37-37.5 percent from 41.1 percent, a year earlier. Lumber Liquidators Founder and Chairman Tom Sullivan, in an interview with CNBC on Friday, also defended its products, saying "our laminates are safe, we don't skimp on our products." "60 Minutes episode did great job of scaring people," he said. Goldman cut its price target on the stock to $35 from $40, Wedbush Securities to $40 from $55, and Jefferies & Co to $33 from $52. Despite Lumber Liquidators' defense, its first-quarter forecast shows that customer confidence is shaken, Jefferies analyst Daniel Binder said. The company's shares were down 8 percent at $33.17 in afternoon trading on the New York Stock Exchange. The stock is currently trading at 12.2 times its forward earnings, well below the peer median of 21.6. Up to Thursday's close, shares of the Toano, Virginia-based company had nearly halved in value since Feb. 25, when the company first mentioned the then-to-be-aired CBS show. (Editing by Sriraj Kalluvila and Kirti Pandey)