Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Floor & Decor Holdings Inc (FND, Financial) exceeded expectations with a better-than-expected diluted earnings per share of $0.48 for the third quarter.
- The company successfully managed costs, which contributed to the positive earnings surprise.
- Floor & Decor Holdings Inc (FND) opened 11 new warehouse format stores in the third quarter, expanding its footprint to 241 warehouse format stores and five design studios.
- The company reported a gross margin rate increase of 130 basis points to 43.5%, driven by favorable supply chain costs.
- Floor & Decor Holdings Inc (FND) continues to grow its market share and brand awareness by prudently opening new stores and leveraging its competitive advantages.
Negative Points
- Comparable store sales decreased by 6.4% in the third quarter, reflecting ongoing challenges in the home improvement and flooring market.
- The company faced significant disruptions due to hurricanes, impacting 45 stores or about 19% of its store base.
- Floor & Decor Holdings Inc (FND) reported a decline in net income by 21.6% to $51.7 million, with diluted earnings per share falling by 21.3% from the same period last year.
- The company experienced a decrease in comparable average ticket by 2.4% and comparable transactions by 4.1% year-over-year.
- Floor & Decor Holdings Inc (FND) is facing headwinds from housing affordability issues and a shift in consumer spending from goods to services.
Q & A Highlights
Q: Tom mentioned the environment might grind higher over the next 12 to 18 months. What does that mean for Floor & Decor? Will you open 25 stores, and are you investing in this growth or protecting margins?
A: (Thomas Taylor, CEO) We plan to open 25 stores next year, but we have flexibility to adjust if needed. We're prepared for market changes with inventory and staffing. We're cautious but hopeful as the Fed lowers interest rates, which could boost existing home sales and our sales. We're also reducing costs in new stores to maintain returns even in a muted environment.
Q: Are your West Coast stores showing positive comps given the home price index and existing home sales trends?
A: (Bryan Langley, CFO) While not yet positive, our West Coast stores are outperforming the rest of the chain. We expect improvement as existing home sales in the West show signs of recovery.
Q: How do you view the impact of hurricanes on your stores, and can we expect a similar benefit as seen with past hurricanes like Harvey?
A: (Trevor Lang, President) The impact from recent hurricanes will be smaller than Harvey due to our larger store base now. The most affected areas are on Florida's West Coast, and while we expect some benefit, it won't be as significant as Harvey's impact.
Q: How are you managing ROIC given the challenging macro environment and plans for 25 new stores next year?
A: (Thomas Taylor, CEO) We've reduced new store opening costs and are selecting locations with better performance potential. While the macro environment pressures ROIC, these measures should help offset some of that pressure.
Q: How do you see the competitive landscape changing post-pandemic, and are there any shifts in your EDLP strategy?
A: (Thomas Taylor, CEO) We expect fewer competitors post-cycle, with some closures already happening. Our competitive advantages remain strong, and we feel good about our price positioning, especially against home improvement centers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
