Dive Brief:

• Still smarting from a March “60 Minutes” report claiming it sold Chinese-made wood flooring with toxic levels of formaldehyde, Lumber Liquidators’ sales took a 5.8% hit in the second quarter of 2015 — a slide that sent its stock into a free-fall on Wednesday.

• The loss — which was worse than predicted — came as the company anticipated criminal charges from the U.S. Department of Justice over its foreign sourcing and a potentially costly claim related to the formaldehyde allegations by the California Air Resources Board.

• Shares of the company are down more than 72% since the “60 Minutes” report, according to The Wall Street Journal. In addition, the company reported 2.6% fewer customers; a 2.4% dip in the value of its average sale; and a second-quarter, 25.1% decline in gross margins compared with the same period in 2014.

Dive Insight:

The company blamed five months of formaldehyde-related bad publicity for its financial woes, but in a conference call this week with investors, company founder Thomas Sullivan — serving as the interim CEO after the departure of Robert Lynch in May — insisted the firm did no wrong.

In its quarterly filing with the Securities and Exchange Commission, the discount retail chain said it has removed the flooring in question from its California stores “for the time being.” The company previously had questioned the accuracy of the tests used to determine formaldehyde levels and continues to deny that the Chinese-made laminate it sold contained dangerous levels of the chemical, which is used in the resins that hold the product together.

And Sullivan said in a statement this week that he expects the company to recover. His strategy: “Simplify the business, take care of our customers and deliver excellence at every level of the organization."

The company is under investigation by the U.S. Consumer Product Safety Commission and is facing more than 100 lawsuits.