FND - Earnings call transcript Q1 2018 | Floor & Decor Holdings, Inc.

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Operator

Good morning, ladies and gentlemen. This is Floor & Decor's First Quarter 2018 Earnings Call. [Operator Instructions].

As a reminder, this conference call is being recorded today, Thursday, May 3, 2018. I'll now turn the call over to Matt McConnell, Manager of Investor Relations, at Floor & Decor. begin. may you you, Thank

Matthew Mcconnell

Thank you, of Matt Manager everyone. Good Relations. morning, Investor I'm McConnell, Danielle.

Joining call President Q&A on Lisa Officer, and Officer. me who our in Laube, Trevor Executive Taylor, Also us and Lang, Officer; Executive Cheif will Vice Executive Chief room join session. Vice the and President Financial today Chief is are Merchandising Tom the during

is of Floor Decor and I'd or performance company's in those during Reform from forward-looking statements. including those events, started, financial are or its future get differ Private like of contain such call that safe this to any company's is a future listed uncertainties. and future for reason, language. we you market the the Please to statement to statement. guarantee obligation expressed subject could within Before of Act including results forward-looking also statements that actual results. expectations, made harbor Comments conference of characterizations not past and any & conditions the refers note projections webcast in forward-looking a or remind assumes filings. market projections no risks future to Any materially of meaning XXXX Litigation Securities update such information statements forward-looking The SEC other

comparable SEC related be on website, directly defined our During replay this ir.flooranddecor.com. recorded most Relations reconciliation earnings press of will this ir.flooranddecor.com. non-GAAP conference call, Investor available release, financial available with measures Relations together the which to website, Investor discuss Regulation be G. on in is our call, found A the by A materials, non-GAAP the as company may measure these measures financial can of GAAP

the turn over me let Tom. to Now call

Thomas Taylor

and Matt, everyone joining thank call. you, you for Thank our to

strength fashion-forward disrupt with business trend-right the surface products. to market continue gain residential our as first the and industry our share of demonstrated innovative, and model we results hard quarter Our flooring

in we'll as we new in this in the opportunity Island populated tremendous markets Long a opening strategy year Boston, place our densely confident in team new have initiatives. We our I'm and stores execute Seattle. to have and

credit work of success to we thank dedication and Our our to hard all their them customers. to our a associates, and for would all of is like

results. turning our XX% sales increased to Now first quarter $XXX Total million. to

store comparable by driven of XX.X%. growth increase Our sales XX.X% primarily was transaction of

doubled Our above to comping luxury had share $X.XX. comps categories average. adjusted the positive earnings diluted with plank All per and installation company model laminate, accessories

saw basis Harvey due comp estimated an expected, from XXX quarter's As XXX Hurricane basis last which moderated points points from estimated benefit we the tailwind. demand to

store comparable the Excluding sales Harvey, impacted increased our first over XX%. comps Hurricane by quarter just

consistent our to store last better and the that The we're growth comparable evolve as nine not And just ourselves come differentiated concept awareness customers. the market strategy. our our brand and responsible or for we serve years growth. our from fact resonating to to There sales over build and strength of one continue people change business initiatives Our are has share. gain reflects challenging constantly talented many initiative is

our outline strategic progress briefly priorities me Now key and XXXX. let for

As customer. Pro comparable in invest to store expanding reminders, customer priorities store and continuing connected new increasing growth, are the the growth, our experience sales

serving Florida looking forward core in Beach, Lake to City. opening Virginia these stores and our in as to and markets Seattle In the we St. store open of stores. quarter, new new new as existing continue Denver expanding the two awareness as we communities markets, growth. new warehouse-format a and the XX We're of brand. increasing plan including one quarter, total stores, In four store well First, opened Salt Florida new first base store the of Petersburg, second for we

the of we're and XX leases signed entering all in best country. housing the new excited markets stores planned XXXX, have for to We some for be

Our believe investment. time We return be right populated stores to improving gives these more markets. will enter new confidence economics densely the good and the these on a is us this productive that store over time

store stores, store exceed the operating is of stores which evidenced new sales class our track and both of in our to on XXXX Our teams. estate our of real is of class great the in first-year performance record strong illustrating profit, XXXX store performance and execution operating

A trend-right product store is innovation dominance increasing surface Floor sales. Second, advantage hard Decor our assortment our as in-stock across well every job and flooring centered we sell. lock products, of comparable around & broad distinct quantities as category

on consultation service, and and enhance customer for providing in-store marketing or our by Regardless in-store to of connected investments customer shops new experience. a customer both merchandising these on and our consumers visual experience online, online, Pro our our optimized how are further experience technology We focused to both improved continue our redesign a focusing investing strategies, positive customers. integrate

brand. We market in surface believe gain we to we flooring and the remain significant Floor is residential the industry. and new As share of continue faster share. market hard opening there Decor capture increasing stores the confident will & grow opportunity than awareness We market

Third, expanding the connected customer experience.

tendered strategy Our for total online of sales quarter. first working as our well integrated gaining in sales tractions continue in rate website a our to accounted sales growth. at our total the connected is than through faster X.X% Sales grow customer

strategy products about their other. learn that We our each having have pick tells store, that up to website buying builds us more important. in very presence majority our which prefer to multichannel vast and customers become The touch our the in physical our is of process on confidence the more convinced orders and builds channel even the see,

research serve as to chat source prior existing important inspiration tools center as a after of customers and services for new call shopping and and education in-store. well and as Our website

our customers that indicates research website research that from visit ultimately during Our approximately their us period. XX% of buy

store, XX% time. Floor can that indicates is hard the to a Decor we we also them the shoppers in to & buy over and surface research customer get market Our if flooring convert can visit of

channel. of our new of introduce exposure an convenience site, and the our Given offers broadens the helping by customers to brand the additional existing customers & Decor Floor of it reach

to to like continuing help the how-to customer. videos and Pro content are Do-It-Yourself add We educate

greater customers investing on are we We also customers popular interacting These stores an want to Consumers faster Pros want repeat important of Pro cater inspire experience, us. rewards app, continuing and our program, the to and our of sites. expanded continue Pro initiatives is them. than typical today to to will and engage a credit on improving the social media as we through vignettes very include working this integrated a and offering the end-user, Fourth, improved invest well average better to important Their in are many delivery week. that Many in customer. and an every spend provide as initiatives customer offerings. Pro integrated base. that We're

expect initial We middle the results in We will a encouraging. the initiatives, are of forward it look runway take throughout providing ahead innings with the our and updates year. to to and long test believe opportunity markets our time roll out from fully these we're Pro

future over time rate Finally, store and same philosophy. core over and of a grown the have EBITDA XX%, sales the an Reinvesting growth an last five back business XX% at at our growth has years, comparable to stores period. adjusted at growth into respectively XX.X%, that become average and of average our XX% annual to rate sales support we rate new

newly As and our become Miami to of our illustration our reinvesting when investments transition a is necessary. expanded company, of DC. the business great back our growth try philosophy to needs DC The analyze plan of continually of ahead we recent into they the Savannah

Additionally, XXX,XXX we Houston quarter. square by first expanded our during the DC feet

L.A. our the back critical years strategy increase square are new ahead. by half XXXX. to in feet DC unit plan to XXX,XXX additional These in also We XX% an our of investments growth support the

current will to relocate As and a but in store service will least need we next we growth, support believe our decade. for will next new look expand enlarge store our and support center. Trevor the this moment, solution to likely at of share we we very decade center, our

was improving it and our proposition. each great strategic summary, a value we capabilities against our make customer to quarter priorities, in and of further good So progress continue

and Before I enables to Floor It which all commitment do and their and team to great is job of for they thank end, & results and Decor financial I'll our the head turn now over our dedication and to the I you've want over call day-in go performance consistent members day-out. CFO Trevor, deliver. our strong to guidance. seen us of the Pro Services,

Trevor Lang

quarter morning, fiscal regions, and see investments. I Thank the strong and discuss second to categories of will you, outlook quarter, everyone. all product results, then and review strategic to our XXXX remainder delivered Tom, and make momentum the continue continue for positive across and another we quarter We XXXX. key good first our

a first creates the quarter XX% competitive the XXXX. of to business $XXX,XXX,XXX stores We total first increase XX XXXX model end sales in or First compared the to whether quarter website. our demonstrates quarter positive the or ended XX experience the distinct that our quarter of stores, year versus through in-store warehouse-format of an provides period. prior Net with $XXX,XXX,XXX XX.X% increased advantage customer a in of that again

Our to points XX.X% and XXX first of quarter Houston. market, driven be in was post-hurricane comparable store our approximately positive markets sales momentum by increased other as in of continued as basis estimated the well Houston outside demand a combination

tickets was though largely Our average first and comp by transaction increase growth, driven transactions quarter both year-over-year. increased

in sales XX XX XX.X% basis our quarter to -- the the to to the margin first damage. quarter $XXX,XXX,XXX XXXX. from of distribution lower The Gross was gross deleveraging due profitability. increased in lower in fiscal XX.X% increase or due another approximately increased primarily from to increased Now XX% margin first points worth shrink XX of and to on costs by quarter $XXX,XXX,XXX Gross XXXX. basis center points in basis and points approximately profit cost to first rate approximately

leveraged due of leveraging and compared store of quarter As first basis approximately XXXX, our points a SG&A primarily to preopening expenses. to sales, percentage total the XXX XX.X% to

one three our leverage we costs. quarter previously, XXXX, the first which mentioned I year-over-year versus in the to store XXXX contributed in first opened the of partially of SG&A quarter of As

had expenses operating expenses, of the which marketing first for quarter. Additionally, benefited we in the including quarter, a number lower-than-planned in and SG&A areas,

-- was primarily quarters. spending due this -- to majority However, of in the of timing spending it come later the the three will

in $XX.X prior XXXX. the margin $XX,XXX,XXX increase during period. XXX basis XX% leverage year operating Our expansion X.X% to the as points strong growth, the compared increased drove a of and SG&A gross to to Operating in first sales fiscal first quarter margin versus to quarter million income

primarily pay $X,XXX,XXX XXXX Our down The on adjustment second to interest $X,XXX,XXX the average approximately of quarter quarter is was proceeds in cap, expense interest In the mark-to-market first as year period. $X.X also quarter last year debt not to using guidance. the an due the to from prior of versus benefit in for in compared due IPO which rate the interest expense our the our XXXX, interest of first well contemplated was a we rate. to million as lower recognized a decrease

Our $X,XXX,XXX the due in in of quarter reported the exercise stock XXXX the to quarter benefit We've provision the taxes of effective of first XXXX. in earnings the first the income options primarily in in of quarter The and adjusted $X,XXX,XXX compared was calculation reform first December decrease the to of was tax passed rate XXXX. due out tax stock to adjusted today. option for

measures. net I that note and discuss non-GAAP guidance, discuss income please both I and Before XXXX GAAP will

of or EBITDA of Adjusted adjusted of share per in XXXX. first quarter $X.XX most to of first XX.X% non-GAAP $X.XX quarter As enable to our diluted a income these in $XX,XXX,XXX first earnings of with adjusted be first non-GAAP $XX,XXX,XXX better periods. between core issued metrics comparable in comparable disclosures connection basis to to share in income or release XXXX. per per this diluted This understand believe to an Adjusted or adjusted the earnings our net increase to compared our measures our the reconciliation increased $XX,XXX,XXX and quarter on XXXX operating in represents A call. the $XX,XXX,XXX $XX,XXX,XXX in performance quarter found their release, net GAAP of were share financial compared can in EBITDA described we in the directly XXX%. earnings investors

$X.XX will I available As $XXX,XXX,XXX favorable operating the explain mark-to-market the and borrowings ended due the adjusted better-than-planned to outstanding. $X.XX on performance, quarter, of $XXX,XXX,XXX -- under our with rate We borrowing approximately on to I due approximately facility to timing liquidity due cash interest is quarter $X.XX and one revolving of reflect better EPS of our and caps. credit the of spending adjustment

the end at XXXX. $X of Our first inventory up was the balance the of of quarter $XXX was XX% fiscal first versus million, million quarter the about down XXXX, from but end which

guidance. turning Now our to

release, first press I our from outlook. our A we're few the about saw raising year to want you our a quarter. EPS strong As adjusted for make points sales following guidance very and

XXXX, digits Houston, high benefit fiscal expect the First, moderate to the comparable our digits and be for to excluding single throughout we Houston for move as in we store sales, to continue to the low double year.

decline our assumes to capacity gross other Like businesses, absorbing costs modest a mainly assets. in contracted now in Second, high trucking domestic margin excess outlook fiscal locking actively we for due transportation are XXXX. of

of of higher assumptions XX still mitigate lastly, remainder third last headwinds product margins entirely on the about be cost XX seeing contracts to it time get the in mix gross by we our points our believe projected quarter. lock basis spot to being these this While fully These our selling to will And We're significantly cost be the from will headwinds in about the over flat this improving support higher we will utilize level assets. working growth, adequate the margins to in market. through remainder DC Miami versus market, be gross the to landed requires some quarter, that and reflected we're year. the second capacity quarter, fourth to the the And trucking our in Houston year. also the are down inventory we in

we've in mentioned Seattle. the last the made call, enter strategic decision as to Long Third, and Island the Boston,

class relative class and like and new success our Los markets. stores, stores, time previous Chicago, now is with step XXXX Washington to confidence Our from performance improved Angeles, gives larger that Jersey, in along of us markets to new into the right and DC these New XXXX our of denser

relative operating believe we and and relative and should various evaluating will expense operating to store our invested it as this which compared are XXXX store prior these expensive we've mentioned, further as we opportunities XXXX, moderate with additional what Even for relates second much here more XXXX. we investment However, in to can fiscal call since previous new an fiscal we in support we margins years, investment our flat this provide expenses these store require operating start-up will preopening of for to obtain manage details fiscal Atlanta. finally, on center leverage quarter And estimate store expenses Tom are more lead And operating markets $XX to million prior than openings, higher in to years. in stores to summer.

additional options, team done space. have as ongoing in and which of be with year even we store forecasted write-off a believe majority has completed Our costs in on noncash to result $XX vast plan currently support our long-term assessing job buyout be we year, fantastic the will half center the we first cost move, last could below will of XXXX. portion lease in A take financial what million, this recognized some nonrecurring of occurring relocation up our

million, quarterly increase XX% quarter XX% Taking to will second sales sales XXXX, earnings a be $XXX be to the account, no range net into of fiscal million $XXX in range versus XXXX. of This the would outlook in our on of out earnings. reconciliation of second an metrics store intention these to growth the so costs of Our expect the is for XX% release, in factors adjusted fiscal a increase comparable on XX%. based to to impact be quarter of and these call non-GAAP we unique there

versus of the expected discussed. outlook to X XXX planning to Our in to the increase planned basis quarter in factors gross opening diluted I per mentioned, previously XX XX start-up assumes store number second is only Also, period. increasing $X our expensive due a cost increasing we've of $XXX an XX%. expenses decline XXXX. $X.XX for the expected not also point new quarter most for second opened XX% the last of quarter, to third decline quarter second as due is $X range margin of million and basis the We're just approximately this the to in increase assuming in quarter stores margin million just due to quarter operating XXX points, million entering to costs. second new a average This year-over-year store share also start-up weighted quarter four new stores markets. six-month of our second to year Adjusted to also the are of $X.XX, in earnings second but on ever operating over outstanding We're shares to be XXXX the I of stores our lower also are of more store we

second quarter of increase adjusted our XX% quarter an second over expect of $XX,XXX,XXX We to fiscal $XX,XXX,XXX, for X% to to XXXX XXXX. be the EBITDA of the

year, the store new net increase to $X,XXX,XXX,XXX, based expect store net sales full range XX% now XXXX. outlook fiscal on store increase growth of openings, new The XX% an of and of XX to to in the we X.X% XX.X%. versus comparable an be assumed sales For is sales to warehouse XX% a growth $X,XXX,XXX,XXX

our our remaining of be still outstanding increasing for end XX.X% And our end estimated the range the adjusted anticipate Diluted to million, in shares We the XXXX are to of rate fiscal of and the narrowing EPS range weighted and XXXX. be EPS to three effective modestly average be the the adjusted normalized high fiscal we of now range quarters to are estimated of XXXX. $X.XX. tax is $X.XX for in $XXX fiscal bottom

this tax the XXXX occur impact does may possible due consider stock fiscal reminder, in discrete adjustments. not the that to a exercises guidance of As tax option benefit other or

XXXX. is remainder $XXX The of approximately total, planned center distribution what support support million being this CapEx in our center be be relocation. be since to XXXX store $XX XX% The to million We range $XX capital to Capex, we new of on $XXX for for store million due the directed $XXX infrastructure, and the openings to XX% increase $XX budget in with million $XX million of e-commerce versus an XXXX. of on initiatives. spent store million, to million to $XX and is $XX the million the in remodels XX fiscal EBITDA earmarked million, will the potential to fiscal is range million year March $XXX CapEx centers. towards adjusted store over expect to higher IT, to discussed X of

results our to the over it and details to that, I For operator, related with questions. we'll all to guidance, release. turn think refer please And other earnings

Operator

Instructions]. [Operator

question first line of Suisse. Our Sigman from the comes Seth Credit with

Seth Sigman

A on first than couple guess, be of to you different tracking clarifications. that either but just I pretty to to previously, much there is as seems impact for worse expected curious just point? this at anything hurricane better believe that the the It going year be leads the or is benefit. expected, you

Thomas Taylor

to it flood. believe, From Yes, is which like absolutely its is. line, it considering we the hard top a is tracking predicted, historic

haven't really We It's the what's line. a job -- something a predicting but good happening top dealt with company a kind onetime with as that before. teams and our like did of event

issues But on As mix were with to some pressure people and gone market. as to rebuild some there. buy, were they're going overall, when Trevor puts we're buy And predict. pleased the that going what's got they hard in this mentioned, we've margin to what exactly

to out. -- -- will of outlook. today, of plays happen happening. hasn't it we'll it's how event. we going We our a thought It's But as was But a is onetime changed what again, it yearly see kind

Seth Sigman

the I they of drivers at That's helpful. a first figure quarter, consolidated basis, I'm guess store-level a your out And on Is comparable to margin math basis as lot quarter, you quarter. some XX leverage a we if the figure that but store trying second we on the comparable lot zipped the seems bps look through right? operating comparable less imply just basis. for that. Is what the So a to XXX store then, bridge implied guidance And basis, just a we pieces just the really of that I'm be within to expenses there. out moving Trevor, leveraged conservative? think for like what is different looked it would as trying look actually on points on the basis. store a at Okay. here? second about

walk us you would could it that, through If helpful. be

Trevor Lang

good P&L. in Yes, and the apologize confusion due advance store our But for of it's the to question, timing. I'll new all

stores of are out fairly that we with are nice the If because consistent the you pre-XXXX, just looked got leverage operating getting in comps leverage we're at that, operating QX close. our pretty

to some that be when of of XXX% stores the it, do there. those the appears we're new 'XX, that to opening stores has So the we're and new a with in timing of what deleveraging coming in of

item going to and out our Now are is for on a different example, this be $X P&L, we costs break line our it $X.X -- as clear, from I to million. store mentioned, for start-up million

XXX% increase. in that do six-month a ever opened most we've again, number So that's opening to has new with of And time. the stores of period

year, that costs. with costs comments, of that's the I we'll taking those $XX on my marketing portion is, and occupancy just and we're for step-up in labor some Associated And million because markets. expensive in mentioned costs be prepared as

out you say to in will So that, be leverage consistent QX stores, saw that to the fairly in the operating QX. pre-XXXX simply back

expensive, the opening you're in densely these from we're of deleveraging stores that more the markets. All seeing populated newer comes

Operator

Elizabeth Lynch. question from with Suzuki comes our America next And Bank Merrill of

Elizabeth Suzuki

well quantify product those materials, category just costs around. pass year-over-year Anything is your and if any? ability -- the quite move expensive as as customers? through increases to increase freight I cost know you raw And your to heavy Can obviously in your to

these imagine quite a I'd So up going costs lot. are

to just that? on some manage how wanted So get you clarification

Thomas Taylor

headwinds we of seeing bit little a the of we're to that? realm. unable all but seen We've that's more commodity of side Tom. that wood nothing activity a touch a domestic domestic but is we in tackle haven't it's chain, bit seeing from nothing question, On -- out price to that that Trevor pass some that Sure. talk -- But increase been on standpoint, domestic I you The will or and From little let freight. really solid the supply in than if just freight. some with we a business, freight, Trevor, has we're effective. have about deal do our do want we're This headwinds. to. can't have historic, along on been

Trevor Lang

because the out expect Yes, The I as or about so -- into two the fair get that which to center Savannah we so relocation trucking of we Florida. the of margin Miami is we some all so this. But now be higher rest costly, would move higher year. we product our of less impact done large Miami center the But domestic the as are distribution slightly and DC to is year distribution call cost headwinds to inventory, things store DC. overall the to gross think rest amount the that move But overall and better. there new of through margin landed-cost going that throughout inventory. be when of is be a because Savannah down gross center lower Miami get that out to of we've the our much landed efficient margins will And distribution

the that's do confusing, distribution move kind to bit distribution domestic on And six-month that right. moving we transportation that Savannah cost, but you're So that Savannah up I our a think to to we Miami through I issue of center. inventory that's know as five as a move see

-- very aggressively domestic taking assets. had. we those in they're things, leased look or kind over and our cost transportation were quite didn't procured as changing We you quite a of fleet. XX% through we all dedicated we not didn't our at ownership of We And were that as leasing we many of into need duties, fortunate drayage international costs, materially. If aggressive our those costs, our

that's So excess those. capacity in got some

grow, to continue assets. to sales we're maybe going back those of some our So give

just end that And I but see gross And XX the this -- down to mitigating and margins, year, the into also the that XX XX we think QX think the be towards our gross We closer the get by in will as to as mention about as in call of end QX. basis flat. we points prepared said year. it, get from margins we we it coming of comments to

think those. that QX. we've issues worked get of the end -- QX as kind we in And are are think year, we effective these and So to through of we the

Elizabeth Suzuki

just And And That's between you big Great. could really versus DIY talk about? Pros then, whether talk any two? helpful. sales you the difference appreciable essential quarter? And to there MRO the rate about was in can growth opportunities of the an

Thomas Taylor

Yes, well. on this is to I on We what rate, very this, that break appear will about We're visibility the be we'll versus the aggressively comping each of point, Tom. yet. talk DIY CRM the have better apart you're working don't consumers to where segment to at double-digit when the with getting customer. we're Pro. doing goes But both

But again, -- said the increased. As don't we have our And measures. in comping at the I demand for product. the all getting better. Pro we But look it on as good at this customers when -- get kind activity the to consistent, if not specific have well, last rate, backside we're of store call continues has again, of remained awareness we're

awareness about awareness XX% is you it's unaided still If company. our for levels, about think our

are to as we getting people are open we know just So who more stores.

in store. And segments the because lot happen. we the in them about more we learn brand, Both use And drag us. well. the stores think know will doing the I more to get Do-It-Yourselfers continue people anticipate don't more pros who a Do-It-Yourselfers more that about of will pros are

Trevor Lang

years. think in large and six not last five we do had we And that has interviews changed just two that and is, would I mix last to months that meaningfully surveys studies through our fairly thing the done add and the customers, exit over one talking to

our and they but the are as purchasers, pays that's a were about it, we probably guys customers, lot. some don't XX% professional You for influenced changed recall, see product, paid we consumer about but either. that for Buy-It-Yourself XX% We DIY the customer. the changed think of define customers as by where XX% Pro And which customers hasn't

see growing do a much growing we space, But lower our MRO bigger the base. customers larger has we corporate a also albeit rate. It But our that faster a On much business. again, smaller from at are sales to base.

Thomas Taylor

our the within more that started. that, better customer within from that's our teams We're of stores. of we do to areas stores through And that motels. to been, professional sell staple business, job of registers has think sold in course, to we've So is the that We to of a commercial a sales business that going the own hotels, our I lot networking getting personally. bigger ramping nicely. always their repair division asked that That in in always But runs maintenance to Pro the stores, that.

Operator

with question Lasser And from next our UBS. comes Michael

Atul Maheshwari

This Maheshwari is for filling Michael in Lasser. Atul

per SG&A was your per growth and feet quarters. the So last store SG&A square the several below meaningfully

first changed what to past in the quarters outperformance? drove several quarter So you seeing that in this compared what really were the

Trevor Lang

store this It's stores stores year. Those opened one because volume periods, new half you only stores to -- they efficient. one factually really do previous than have simple. opened -- they give stores, mature our When an and in it in that first again, versus appearance we opening to year. We the pretty do new -- open only of than stores. will higher the a last that of with less quarter opened But lot And back we store lot our fewer is a of more relative the costs SG&A just stores. our had

Atul Maheshwari

an to how how on in the you impacts rise as really growth? rates would some category? a a thoughts have it much seeing rising And rates that What before now marketplace rate can And act category bit? risen specifically have impediment your as you're to Okay. for begins provide follow-up,

Trevor Lang

watch. market, to and going macro overall Certainly, fact of future. rates X/X grow when a a factors over out, of interest of When income, Americans a No, headwind. years depreciation, and But you foreseeable number we'll look There's discretionary we tailwinds to all a continue it's homes for lower household formation, headwinds we balance the format think be the old. still one bit rates question. those element. good are good that and of XX you Interest GDP, rising rising are is it's consumer household at and

Thomas Taylor

unaided our People our don't is. XX%. earlier, said still -- is I awareness don't know as who brand And

we'll stores take So happens we as open rates. matter what grow and no with share awareness, that we

Operator

with next McClintock comes Matt from Your question Barclays.

Matthew McClintock

in your used we you in the Tom, very with the with sales Pro sales being just little there? correlate to service pros time the if builds as immediate a when on the out? business? wondering done about Does mean, I is you've have business? improve could how something to that store. speedy on impact what an I your it get to they get talk to focus that Or efforts Pro them helping over you bit that time was Can pros does

Thomas Taylor

So, on give yes. I will you some that. thoughts

So our money in we energy of lot quickly. have is customers stores on a Time and out spent of getting a professional for professional.

out. make to for we invest to easier them get it to So their have product

So years and we've of done a few several over made I'm through one, going been lots because to we've things: it, it's investments.

able when an has has back Pro XX invested stores be when area store product desk. center get we can the years created a them within teams could command stores our average ago, than and for About out getting zone of to the store the of the come to that so technology out a they two minutes. in less So a where that store. check-in a of Today, in of back people out could We the get the our It Pro the and of all quicker. Pro them the to we is know we entering. in back

our pickup checks-in, to XX rate someone Pro are average of when out. So dropped minutes a down getting has

a that, about couple time. pallets is a think buying at you Pro of a If

it timeframe, pretty able that being results. of it we're their in pleased rack, with to trucks a out out the get get get So forklift, a to

Pro part out second to The that of not we're is in communication on better focuses pilot desk and store a The professional it the Pro quickly. done. in app and hold the we get get are the really for of on,

getting here, on have out truck. see -- can even customers so pulled pecking order I'm of and and the of and product So it way. have back the they monitors can we lot. quicker. at go store invested to -- I'm where put the in have my we the their they're they getting their parking in the order can know also in in We've get out announces, I'm the

speed us, lots of just up. and Pro investments which lots help of So still that coming will have happened investments are to

how every into in the our mean, experience, we stock any them. that Now make turn broadest better I The does love special don't against compete have can sales? assortment the pros day. They We order. don't

free cater services, of has them. a just can't that out So the we We them lot it But design side really to quicker. them their been do we theirs good. shopping to a frustration is buying on experience get also give

get the back the we think the store, them will and the they the so happier more of from they'll And us. out buy be I of quicker

we'll think know get a sales don't lift, of wallet I instantaneous it's time, their I if execute better definitely with So an we these as in initiatives. more but

answer, the through kind long story. of we've but much So done worth that it's whole so going

Matthew McClintock

I my guess A high lot question going on level. be just would other here.

store to what -- out growth or was store break you vintage the just story anything One on it where are upon by thoughts the of yet that I'm are years you that point came you your have the to But stores markets? at to And past year the growing? relative every the still was date. evolved like interesting your -- that. how point order aspects we wondering, maturity, haven't to not to found trying IPO your like get mature are X.X of where conceptually, maturity I over out seems really a original when

Thomas Taylor

of unaided level, you because when very growth, anemic nine you sales XXth we're our growth when of in stores at is still comping We're this same-store awareness that of are are out all have When mean, a still out -- double-digit maturing. we're cannibalizing. I getting at not our know our Yes. we're rate, of growth stores. oldest getting stores all year our you

it that to a lot, a got. or of understand a not we're the marketing we -- of the think brands. whether investing and we're but until can tax word benefit a a we've to portion better And -- of investing more campaigns lot lot. spread the taken of tax I you in trying our not as reform get we maturity? do We've define So

open more stores, we our awareness. As helps that

compete we I of we taken. traded there's awareness independent against share And we flooring to still publicly still a more think be ton where had. can get, against. compete be lot people more stores a product the share that to the then And them. that so There's of still sell There's our

XXth all So you're When we've like continue this to of at comping in way around year. that, do comping our -- stores rate long well. been a

Operator

Our comes next Chris from question Horvers JPMorgan. with

Christopher Horvers

gross to year. outlook earnings for swung margin You the for but the guide, prior basis a by about the XXX outlook relative raised points also the you

comp So bit my investments perhaps offsets? incentive the question year? planned is, outlook are the Are that the back to the than Or started posture change earnings little in you is a it previously less extent you of conservative dialing where is a what swing? to

Trevor Lang

This is Trevor.

little sales little We're quarter. bit higher forecast. our year. So a in current the further now first completed are the obviously a We've through

we And that went what down. You're bit. needed to we up right. we felt We did like little we And saw this a we margin through. year, tightened as expectations our spend gross take really

there. Sales out is taken business. down. is up. we've kind the are how costs Margin And of got SG&A right. you're of This we So

Christopher Horvers

guess where saw pools you those SG&A offset? And I to opportunities of

Trevor Lang

Little stores, Really lot. of business. a most not out the of across the bit

immaterial for been have very we here. a Some as invest And years corporate things. year. is we throughout we're nice high -- as year, the felt impact. we more to -- just probably quite get here we've where investing comp the Incentive heavily at areas very a We've over there's And office. like pulled a cliff going this seven on here didn't in back

original built we close what on fairly we're far So forecast. we thought the when

Christopher Horvers

sort a rate been some last to within relative the year. but market. quarter underlying the not cadence, in general just There's the in And Understood. only growth moderation modest of

So the can the sort there stand particular in as about is You Or across categories? out that like quarter any sort some of within ticket Was nice you first this category the was that of see any standout? quarter. did cadence talk improvement on felt is -- broadly well? it

Thomas Taylor

faster have rate The trends really. not consistent, previous a to been businesses as businesses in be the grown at Not, seen that quarters. the continue relatively No. same so have the we've

So a haven't we category anything perspective. seen from

the And well. the components I inkjet think batch to that still relatively our new. resonate to durability of that wood of And that drive been lot innovation carry a categories still into stores. the innovation have continue think think the added product and as I the I to continue people is components we around technology

few So quarters. in we're difference than we've the over performance last not seeing seen department any

Christopher Horvers

the I you the think mean, And assortment you out your category, perspective? then seen is, how and luxury on step my in stands do question market? plank up vinyl props there competition last an Have the from value promotion

Thomas Taylor

Yes, I'll let Lisa.

Lisa Laube

is We customers fastest-growing really We market that one product. the DuraLux like We've with the for there. water-resistant for of that new in the followed and out to up first of a think laminate. industry one proposition it's program now that certainly Yes, that on value is us well. got our NuCore. that best categories space We as and were the waterproof

from introducing. what So very but doing we're a and competitive over new all perspective, yes, we're programs it we in we're see the confident that

Operator

Goldman is Our Matt question from Fassler next Sachs. with

Matthew Fassler

loyalty the question relates My Pro program. to first

the here at loyalty move to in start to if see talk You Pro Like starting And spoke Can business was app top which about the about do on and would traction you you really you line? pace some benefit feel impact QX? to needle Pro it expect the at to there not, up. this you the point to the would start what get numbers? the program

Thomas Taylor

Pro out on fully the loyalty we're rolled It's program. Yes, progress. in not

to from We're benefit We it. thoughtfully versus seen it markets, markets within benefit have, a We time end markets. pilot controlled by got have rolling the out. the takes in should It -- get we that our year. all of

period going an And While in enrollment years. get where get we benefits think people we of where market, the comes saw we once improvements education really versus involved there's to period in it. are teach we control enrolled, benefit the out them we the real There's it.

their more pros goal trying spend program share Our do is of while creating making of with them get to -- us. the our to this more loyalty of

we're it's long get we benefit a And over it benefit the years rest So to to in the come. When going some provide the now. out around, of way rolled getting country.

Trevor Lang

But help but Do-It-Yourself also Tom for said. the to X CRM And just our and holistic professional putting for with to to also technology world-class And those add us integrating strategy. in X years. the customers. we're next mentioned, only Matt, processes And talent that as that, customers about are thing process. our I we're XXX% would agreed with what Tom CRM some all manage not

You just see don't on those. a lift quick

very the it with encouraged putting are team we very technology. that's encouraged in. We're So with the

encouraged, at the a probably where Tom mentioned, we looks control been are traction We'll guys be But versus this that as very detailed on get program. we've fairly encouraging testing giving loyalty you QX on there. test market as more very in and QX point. it We update

Matthew Fassler

And I on follow-ups a of couple have Great. expenses. then

be aiding look entries of year out The you you'll will next of of it leverage expense you against next same-store -- the of the out is I'm to answer need Or to market SG&A like terms longer to in degree. year asking business? for question that first is, what a leverage a Houston do Now hold thinking you'll ratio said have the think about the what the point flat? leverage considering it along some fact couple I'm question do about point. presumably you with in you the be be cost what to minutes looking will comping said What when sales that clearly kind the of comps, think you no as some the ago.

Trevor Lang

I'll two. in break it

flat just getting that the we look a plus make call So let's our to with margins. and stores, I pre-XXXX you percent need nature, inflation we're sure think three-ish stores, probably things operating when of just at

do than to of we'll X%, better So extent the we margins operating the stores. out the pre-XXXX reach

'XX as stores the to that in therefore, amount year. about the to in rate, are the we've guys Xx and and Xx those XX that new at 'XX, we're think substantial next perform Historically, of comped leverage opening As are stores our going well. stores you need to got you know,

continue think do that happen. to I so will And

As we think about those stores.

maybe you're in operating "pay" consolidated mid the for you So from margins. order class are when basis stores together, those XX to roll comp to new negative perspective, very because get that leverage, all impact a operating need, our a just above going the stores, in to on on to mid-single-digit blended overall of

say comps going would We're but So kind need get sign I single-digit up mid- for say you're leveraged. XXXX I that to would all to ready yet, of not to to that's upper the today. budget

Matthew Fassler

last the finally like margin. to to with wanted then color And tight. that us for the that, make be facts, the year-on-year super just of your given and briefly, on low-end QX in told gross along profits. the at just us That's helpful. sure solve reasonable, If year QX to solve and the midpoint I the would we really sales the rest of need trying to as that's expenses expense gross But look QX, for you just In I year, ripped about look performance what pretty you it 'XX seems guidance. to gave at

really year, directionally to being that -- think you year-on-year? know two the break get way compare right So cycle is that out expense the the there didn't to about one can last easily you quarters of I pretty as

Thomas Taylor

quarter, ramp because our a we'll and with everything the we did exactly to You're timing fourth new have modest that DC up the get Matt. have in actually store right, expenses in improvement expectations With Houston current and did of are we openings. margins all when the operating we

well. year Some at the there big end corporate the as of investments

our is to modest as increase expenses of QX, and gross that margin SG&A the flattish said. yes, In in we operating to even I leverage So get going our with out margins we're have get QX. a expectation

Operator

Our Peter from Piper Jaffray. Keith next with question comes

Peter Keith

for puts how margin a when QX, you is? bit impact maybe inflation companies. basis that an QX. of into on and XX up about the digging little points big more QX, Just pretty seems a lot like Could transportation it Looking frame the XX pressure be to gross at in widespread you think to of cost Certainly, takes. of

Trevor Lang

to really push the Miami that back things, again. -- three those It's that subside. have I will for harken would remainder just then through year, costs, what higher to in Trevor inventory cost is got I'm Miami that said. going this This we Yes, to we of landed the

we overall It's hardly they -- spot Our and chain increasing. domestic just to ourselves, that in this one trucking because lowest at needed have but than markets and supply time. do go hard more are do of didn't of trucks probably Again, to that sure the our with anything increasing. age. we support that procure out are we get there much the to procured the to we day are it's costs make costs, so had wanted And capacity to capacity could

those, those mostly minor market two. mentioned, during of to itself as so what of the three. those buying And is they and out the is smaller it's kind come of those back the different shakes That's Houston the we people And and from third bought products the storm. the of

Peter Keith

then And Okay. the about talk stores. class just want to also of

to showing So, XXXX. you're each seem you like above good And hear year. guys running stronger XXXX stronger improvement that and

comps in still the comp at Is it trajectory 'XX curve are base, maybe XX. then three, in is general back dynamic look same it cycling, maturity you the the where that year still enters comps when seeing when and that's how that you about like 'XX now it two XX place? So year and

Thomas Taylor

of I and that is in still today, happening. new doing going mean, place. still stores But better. trajectory that's is Yes, It's the get general that the harder. to are better as

Peter Keith

Very one for One quick Okay. good. me. last

one publicly that look headwind. your weather with as a wasn't peers, northern guys newer, QX out how headwind, said you stores it out shake of for but your a does How -- one So traded called did some granted you? are

Thomas Taylor

Weather our category, our doesn't really shifts affect minds. sales in it

was the it a a but in in Northeast, quarter. and colder us, meaningful this it first or definitely impact for winter have definitely the doesn't it more us was -- doesn't for have maybe impactful it impact So an in

Trevor Lang

closed that days. before in our more view to come saw after. week is the We pros But point, or week Tom's the the

Operator

comes Basham from question And Wedbush with our next Securities. Seth

Seth Basham

on margin. is question My gross

outlook a stand, to guide headwinds those you would providing but XXXX, expect not this the for about year, recover think you you're given facing lot pressures obviously, the XXXX? in of As

Trevor Lang

Yes, do distribution of we but leverage center right. we'll sign mean, give up also expenses for out that, our I next year, yes,

look as give yes, us there's that would of optimism things to So XXXX. a number we

Seth Basham

it. Got

be XXXX. standpoint? mix And should a into to are year about a guys thinking from mix this benefit product or margin, in equation? Is a relates we how considering margins as you So gross the it you gross growing to headwind in

Trevor Lang

the now, Miami Houston, as inventory ones because is Right a domestic it's But of are bigger Miami bigger headwind. the is trucking And costs little bit a of overlay I inventory. the not the higher on yes, mostly but the cost meaningful. mentioned, of but... issues, The that

Thomas Taylor

and our that and products. really sales. windows. lot going best you store about and our mix think have Designers good doing going benefit initiative We're And a coming to margin -- a and within we initiatives, rates margin on side inside better as Lisa to design our She's and tend better of the designer services job of evolving well. of the Customers done a head terrific help year if forward. serve of have the our our how that. I design hired rate. about in a kind centers almost her are higher we two also involved designer within the one We have like can a now. team ago of job We're And mean, trajectory the we on stores. We'd of doing in best. are bringing we buying with

our some should we've mix help that So in-stores initiatives also. that doing we're overall

Seth Basham

would last store on the that I And plan as larger thinking the new right. same payback the open? All in you opening markets, period mean, question be for those about about to stores you're the me. typical you

Thomas Taylor

they Yes. should they mean, the markets. should I -- really be do densely populated

we'll be Some that buying. of do that a be we the good markets biggest anticipate and They'll best in payback the the good. And of we'll enter. will markets some housing

Operator

John Our Stifel. with from Baugh next comes question

John Baugh

seeing We're the grow the margin? wanted we LVP do about and How leave trend it. the both mix think follow on nicely. how let's up grow gross line that Houston and of question, impacts and waterproof nicely top I laminates out to

Trevor Lang

called two the category best almost the now. comping top line, years our I'd we out say, laminate on probably as for

have margin so stores to sold And that team that's that our benefit in category bit is a so comps as well, well. category a as what Lisa's That has -- is it that and helps. the nice itself, of been done improving helped that

Thomas Taylor

that'll that still -- country, is I It's as water-resistant earlier more the into traffic too and certainly, mentioned the brings Yes, the to think drive the stores. lot a that more awareness innovation new. getting, and consumer, across marketed relatively into that we

should we foreseeable some for So get benefit good that the of future.

John Baugh

the Just and the assume are headwind or it's being hearing to we're slight wood that? margin share. what How indifferent you're question a was of I are Or in benefit? bit impacted little terms a dynamics? ceramic a Whether

Thomas Taylor

I it's headwind. no, I -- do think Yes, don't mean, I a

would not But benefit. us, it's probably much as that's for impacting the a certainly, I think that know -- and tile solid it's don't I it's wood impacting a wood. headwind. as There's case. it be engineered

Trevor Lang

of last departments years, XX.X%, if all mentioned, five at have Yes, been the as our Tom have you averaged look positive. comping our comps and

better. most over part, and when over all losers, seeing XX.X% year the do So there's for comping year always departments your of you're but winners you're year,

John Baugh

And perspective war sourcing all rattling there then is anything and/or trade saber on in just a seeing you're my from with going All question Is this imports. specifically on. concerned talk? China, about second the

Trevor Lang

yet. not No,

Operator

question next comes Binder Our Jefferies. Dan from with

Daniel Binder

you comp I provided? was within in coming in your you is market what for expectation Houston comment of the that could -- comp on up wondering if guidance the QX terms the just added

Trevor Lang

this Trevor. Dan, is

or such points XXX% XXX QX, a out XXX to last have between And called in basis increase a We flat in had get QX. they So just headwind as so be estimate some as release, we maybe much basis a a everybody, points we'll And points QX. of about because quarter called XXX guessed called benefit basis XXX we QX, huge in earnings -- points QX basis in as that year. we in we QX. we've quick somewhere reminder had About last market. for just XXX as as we would out over for in think lift

-- because actually, for so not that a not And little is detriment, us. -- bit is so large of Houston the really for it's QX year, a

a very So specific it's answer.

Daniel Binder

but the in what's on Houston And have issue specifically there? caused pressure, margin some missed -- part but wasn't product that then I may what of was the your it, know mix going I it major

Trevor Lang

happens think on. quarter Customers lot product, like that I come had early sales the year. get it your hands issue. and and call a buy their this of in when in were lot wouldn't just an margins they go higher in, they great We of a the our up I so did of can uniqueness fourth part they QX. whatever

better a good pace, not normalized people back probably going as to product and buying as that's much more and best of more that, the are product. maybe Now of the

Thomas Taylor

They were on buying anything get hands they could their quarter. in the fourth

stock back in it And the everything. so the because we're fourth on was quarter now better margin is blend in than

in good than the they So buying the fourth product quarter. more had been they're of

Daniel Binder

items. more two just then And Understood.

Just there any QX just broader if quo? would clarify you changes that little And status seen pricing to was what you expenses you and have there? expected those promotion mention were in unique anything some a then, two were? than lower industry, four. in did shift Are the on that bit doing Trevor, at wondering I through you could Qs more

Thomas Taylor

shift I'll talk competitive can environment, talk in the Trevor about the and about expense.

is to anything hasn't So different. doing we've I you, can what changed. seen. we're tell I'd say, promotional It cadence, similar not

that asked question. You

by always been more to Pricing challenge do a believe five promotional it's in is towards to that different we'll I've that than to investing help we years the that awareness, react players in marketing it's react our attention past and I've reform is same different a different to at been different putting in I need benefit. here, We marketing feels markets tax years to we don't any to We to that when continue five We're pay more But times. marketing our from of All been geared that. here. are awareness, competitive standpoint me. that. as into of environment the so part the that. build brand

do something All that good what we of We from And do. better, try do if can We do. competitors things. what do we they the watch it's they learn to that. try to

our proposition assortment, the professional that with that installing competing our the in-stock believe our proposition having just we broadest just the into as still consumer lot pros, evidence of them all better. we not real think value having not the store, if a there's we total say surveys XX% So and to the get convert total the catering time. value customers, we is of And

we builds, pretty do can a mousetrap. And So as awareness we we've think well. our got better

Trevor Lang

is Dan, Trevor. And this

-- question, The maintenance stores. we're our second Those done. distribution were things, and expenses, going finish came but we're your customers the to earlier, get remodeling center. to the going marketing into to We're going to pretty We're maintenance still the remodels. answer expenses, mundane-type spend expenses lower, to our in get that marketing the

stuff up in and in that QX we'll So as spend spending QX. just that and end much March, really mundane didn't

Operator

question final Fargo. Wells Fadem comes Our with Zach from

Zachary Fadem

newer How is further context to your the better, the you good, are take terms decorative your laminated, intent higher-end higher-end you overall other relative add in upward of mix your the strategy. say And product to within it offerings? as best So performing products, of would products sales?

Thomas Taylor

we I am product and if in category with the will part, performed. start across jump the pleasantly with there's something. how in I -- I brought So has each can Lisa surprised then first miss if higher-end

In to well. we've and little value. fact, our we a bit show in, it invested the were invested product. and design of presentation joined And trying to really mean, company, been centers And when lot that, differently, We've center. the outlet inspiration, the create we've as better surprising. in it's a in inspiration. It I tremendous shows we've showed shows put I an had products as able done a storage,

So it consumers we And the what higher-end higher-end, we bringing finding do, products. when the true equation of in in [indiscernible]. holds we're value

surprises bigger where store, the in of one probably is. sell the that's think I matter to store every no we're that high-end able

doing. pleased very I'm around, we're way with long what So

into want not everyone. our stretch as like appeal of turn We to going in. we'll to customers, higher-end -- stuff in. good products bring be by We're It's focus. It's major them a imagination. bring for that our going we are are we'll to to values high-end But -- find not shop to -- higher-end going to any good not going we're we continue to

Our to them team to in goal get be is We them they think price in category. can to well. And the able her then right, can possible. sell didn't -- and inspired be right, we and democratize and our we able buy we'll want be people if come and to them stores things Lisa were

Zachary Fadem

of talk the also variables, in When the about things could brands stock, where your what's in little trend, all category? say you And customer Great. order? bit in considers pecking importance falls like on a the your brand would what's price, the

Thomas Taylor

buying. they're what on Depends

we grouts that you acquiring have relevant our good job customers to what right use, of the I you really our brands of really think are for. use, think department, a In we is the think important. are install accessories you the back our brand the is that the merchants And corner product, where we there. done use have really asking brands store our which that tools

different the specific specific And you because just don't -- a brand that's spend less of time of wood in departments, come a specific opinion. more, into they a a not for to relevant out coming a as people in the approach tile." consumers, venture we has I'm have brand. It's we more it strategy for It's X want water-resistant It's have brand not a Y. private why looking worked lot say, in saying lot want there's asking lot you looking don't brand our much customers spend relevance or I'm us. -- product. I'm that if my on little working "Hey, of they for laminate. for As looking becomes a And brand, we for plank-look

Trevor Lang

interest our call & joining you in Decor. everybody. today. you your Thank Thanks, We right. appreciate All Floor for

Operator

and concludes conference. this Ladies you. gentlemen, Thank today's

You participation. this all may for you your lines disconnect Thank time. at your

Floor & Decor (FND) 5 May 182018 Q1 Earnings call transcript