FND - Earnings call transcript Q1 2019 | Floor & Decor Holdings, Inc.

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Operator

Greetings, and welcome to the Floor & Decor Q1 Earnings Conference Call. [Operator instructions]. Please note, this conference is being recorded. I would now like to turn the call over to your host, Mr. Wayne Hood, Investor Relations. sir. you, Thank

begin. You may

Wayne Hood

and good you, everyone. afternoon, Thank

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

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

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

Tom. call Now over me let the turn to

Tom Taylor

for you, Thank XXXX and conference earnings thanks first call. quarter everyone joining us our to on Wayne,

of the first guidance of on and $XXX year's and last solid share pleased top quarter our start our very same-store our results fourth our all consecutive our guidance execution end the further exceeded are delivered on highly flooring per quarter year, the a call. that sales with Total record XX.X% multichannel, sales earnings to of million of from in increased sales hard-surface as with last line on demonstrating our strong million across XXXX and to growth we long-term functional the growth Comparable we areas. high XX.X%, grew XXst store quarter We comparable provided business model. representing X.X% of earnings potential differentiated, power $XXX

store from on last the growth. that cycling our Harvey, Houston comparable increased sales Hurricane period Excluding market sales top is X.X% results in strong of past prior XX.X% year's

We excluding are XX% from sales double-digit our when new pleased cannibalization. Houston same-store and of that comparable store had stores the impact over

reported earnings. per X.X% decrease in of first first Moving $X.XX We quarter XXXX. share, earnings the $X.XX from quarter of per of a XXXX on to diluted share

earnings last $X.XX adjusted above margin share, of guidance control. effective Our and driven share diluted $X.XX well to as $X.XX as were the better-than-expected expense gross year's per by up per our XX.X% end from $X.XX high

earnings and of we the me into on as move and of growth our see the of and we quarter sales let year. second first discuss some landscape drivers quarter the XXXX Now remainder the how the

each touch three, how growth. connected and and two, store expanding I will they improving are Pro of billion sales large core and our opening to customer share help growing we achieve on now flooring improving the of estimated and us are: pillars sales; market on the stores; customer grow reminder, contributing focus the new X% industry a As growth to long-term and these comparable experience. our experience; our earnings $XX four, targets warehouse addressable our

quarter, in the bringing warehouse markets in you have Kirkwood, we a We represents successfully in opening our to new the First, opening store first year. a that fraction of Atlanta, XXX opened store store States. large stores. X the locations, warehouse X which market We ended opened new potential visited many of warehouse in total stores In with quarter X. United our existing compared last to

We and same a stores All compared to X the store Florida store In opened X nice year. open second of X in last in second in our Jacksonville, California. quarter we'll also XXXX, starts. very off Carson, to are the stores quarter

we on Tampa, quarter Our on a average, opening which XX% Saugus, remain stores. The plan Worth, area, Fort growth. consecutive runway our and to significant Texas; only have new successful for include markets we Boston in second in stores unit Massachusetts, XX second our year Florida; seventh openings growth. believe represents open We stores in XXXX, in where we Massachusetts where new represent, all already Saugus, store the would will operate of

XX% in XXXX. of openings expect store XXXX markets new XX% We in be existing compared our will to

excited balanced store are we ourselves we in about the potential a for more XXXX, cadence Beyond opening of stores, positioned have strong XXXX. pipeline and

can the densely pleased sales particularly performance populated initial type are of we potential our markets, about with these in stores markets. from of excited are operate we that and more number We the

Lastly, old in Hialeah, Florida. the second quarter, to Doral, Florida we store relocated our

relocated relocated we We have X X all stores X sales. different in now cases, have store seen In nice the a in lift markets.

lease opportunity plan our relocate ends. continue stores as and We to are on to encouraged their by relocations the evaluating the today return additional

Moving growth, sales. of our second store comparable on pillar to

by Our was transactions growth, store up luxury X.X% average from growth laminate, increasing comparable plank XXXX store driver quarter Comparable our quarter our from rigid and improved accessories categories. ticket, core largest first at of an X.X% was X.X% of trend and remained in water-resistant decorative our growth installation on last saw vinyl sequential and We expectations. the our sales our first sales the comparable X.X% year. driven growth midpoint in of year-over-year which

performance merchandising our to within our categories. sales Turning

of year. accounted sales come Our sales laminate category, year from our XX% increased to XX% last core rigid vinyl for plank sales last strongest where and our from luxury continued growth versus total XX% and

our Our decorative installation year, well, growing accessories from sales performed also last XX%. sales accessories increased and XX%

growth. there total to Our continued is is sales categories and from strategy we working, our comparable runway installation store higher-margin drive believe and decorative for accessories are and

across We expect beyond, website measurement will customer that our and this that added DIY, am are our our metrics that we believe BIY significant from our with improvement accelerate that satisfaction To we our to BIY of We to improve our market customers, both come and to experience. and build We incentives, and if of increase portion customers, deliver growth differentiated customer have will and the all believe how meaningful points growth in-store a with continue touch a in to in made experience our and engage and share. making Pros and DIY, XXXX Pros we changes future consistently we we then excited metrics. end, I current online. momentum

XXXX Promoter the Net measures all-time of first the quarter services, customer an Score, did willingness reached satisfaction merchandise and high Our of scores. in which our to customers recommend as our

Ratings, XX% now impressive customer X consultative We number initiatives from our the and reflect in last improvement our Our year. drive experience our higher. believe have stars to of in improvement stores Google The results a is or is where that these also stores you when our over more in selling of Seller reviews reflected even service more almost create ongoing have tripled environment. consider

customer strategies as hard-surface our are of objective others maintain designers well our flooring designer differentiate hard-surface We platform with Expanding the best of the flooring. connected free. to growth. for should is These to is position CRM offering place integrating our our service a that pillar as continue also us our leadership Pros towards and many best-in-class buy and as third

sales the In Our compared our end X% XXXX, continue sales at our e-commerce year XXXX. quarter strategies account e-commerce to X% traffic with the results. for of increased from first and of XX.X% and sales deliver now last tendered of

numbers. Looking more those closely at

sure about We XX% see a XX% pleased rates. that volume, from is being are opportunities. the with us who of synergy We and gives the our the online the platform purchase up have their to website their stores also in exciting journey. about buy customers decision process. which in ultimately of to estimate continuation us in drive picked sales during of demonstrates will stores, robust make is our between It customers need our opportunity value unique importance attachment and they to complete us the and e-commerce project to all physical another our What cross-selling to visit engage growth further buying they are order in materials that

platform. We of And and will our the continue more to e-commerce pillar customer to our Pro. better understand add systems tools deliver behavior fourth and investing and further brand in is growth leverage to and personalization

do number not Pro we better our key of investing Pros year, that as we capabilities share. opportunities are store though program wallet you pleased and into with a within personalization. lost of rewards customers As launched are of along over shop that our program drive time, members XXXX, that new of XXXX. launched reward to we us. CRM enable proprietary our PRO end an pleased contains add of this we has continue have with XX,XXX well with deliver tool store our customer metrics members, know, Even we increase -- we embraced sales. will App priority each our CRM In store. the Pro-driven and in points-based are stores XX,XXX to Pro drive comparable Pros that dashboard growth delivered how in have satisfaction integrate also and out are we up as existed existing look our solution. many adoption XX% in our Pros that Collectively, wallet our ours us of Recently, strategic engage and Premier engagement, with to seeing that year. only at another base is This last solution program rolled from as measure successes a to that this areas brief to now Pro the umbrella service in for market our offerings these XX that of was examples have share higher continue penetration using database using we our Last currently We're of

how my to about affect and comments I'll are company. and the we that latter. macroeconomic turn the thinking industry me start geopolitical let factors our the Now with

be are our in existing to decline of and drivers potential particularly to cautiously better said, store XXXX, reduce We That others, diversification into show ease. believe improving been it effect beyond. impact and go sales comparisons our expect will the many home are early occurred have price of sales for the home goods expected the year-over-year appreciation, company, tariffs recent on Recent we and we our business in that the believe as said, will that diversify risk pullback sales countries that metrics as in that moderate notice, trend, customers X March second half Chinese-made macroeconomic the that postponed like business. will meaningful a data XXXX that our optimistic further for Among XXXX in the until of rates sequentially to were serve comparable and namely a origin XX% That to in our second home and XXXX. points to pleased home and an are sales certain have accelerate continuing existing proposed in we, catalyst housing growth existing persistent we progress interest we when XXXX. company-specific half industry to

further our As will the ease previously Houston base and difficult stores entering we new more through market move be will the in sales XXXX. store comparisons as caused mentioned, Hurricane by sales there Harvey comparable

In addition, leveraging to to website in-store sales drive and we strengths. merchandising, by our growth plan continue

our trend-right results many of one many generation next our in I cases, is strengths know, & now the exclusive turn and product the always that that merchandising to As core quarter towards looking Trevor details you discuss Floor and outlook. of more is our is call and XXXX over of innovative the to Decor. will of to organization first

Trevor Lang

Thanks, concentrate margin outlook statements, the the I XXXX our XXXX increased which comments on for basis basis of and rate, equally were items margin our due gross going our the leveraging was supply discussed XX and XX% were The gross major and negotiations sales margins. I'm our well year. sheet above between about will margin discuss gross with merchandising sales, strategic remainder product of already gross XX year-over-year installation improvement first Tom strategies, first among Tom. and quarter some categories This last margins quarter improved increase first sales. split quarter income points some of to quarter contemplated retail chain the costs year. second costs XX.X% changes to then to lower in the balance my that start reserves, including from quarter higher due on gross favorable so the with margin in from of points supply higher XXX our XXXX inventory better chain results slightly better higher-margin increases. guidance improved suppliers, lower and product as XXXX in These to product decorative as and to accessories first the like primarily our of

Let XX.X% now year. press the of from and start and some store contained which I'll and last that release with deleveraged me discuss in to expenses last year. basis XXX variances our XX.X% various $XXX.X our rose XX.X% to are points to million their operating expenses, selling

of operating came our stores, of from expenses new deleverage points stores higher operating All expenses basis store on sales. the XXX and their leverage selling as existing

the in in last quarter due where cycling quarter, faced Houston the Harvey. to are sales leverage Hurricane increases first considering We headwinds with pleased market, obtained existing stores are the first large we in year's especially the our

we new a first higher we quarter with opening markets, in new in previously the We about new first quarter in XXXX of opened have more cost. stores which opened of as stores last X of in markets including percentage Additionally, XXXX, store X in talked carry compared densely higher year. the stores populated a

X stores selling store the sales and higher selling than greater our percentage deleverage. expenses opened as Our are year and new XX% driver operating than a expenses our stores of is this operating and of approximately

reconciled last in from expenses the release. first year, to administrative are items quarter $XX.X XX.X% press unique and that Our $XX.X general our of inclusive increased million million

effective these items, what accelerated quarter forecasted fourth to are XX%, in administrative our than expenses support existing center had control. unique depreciation and as XXXX, our general have store we we related was building our to leave Excluding primarily slightly the to increased on prepare which due current lower which the expense of

from favorable occupancy was increased $X preopening year, and quarter last we advertising to costs. first million expenses million XX.X% than Our $X better which on more expected

expense million we this terminated. interest since in than have mark-to-market an higher planned expense interest future. in had Our to adjustment the due was we we variability expect cap about interest rate $X.X not that our Therefore, do

these first operating net guidance, earnings income, our discuss conference investors of periods. enable and non-GAAP be the EBITDA core performance can comparable comparable Before GAAP to in updated please better XXXX annual will earnings and as a GAAP basis disclosures note in with to directly I discuss release. in our both understand our non-GAAP adjusted our release between quarter believe described I measures that our call. found measures reconciliation on most A connection non-GAAP metrics issued earnings this We

Taken combination $XX.X the from us million, management first our $XX.X a exceeding enabled expense of record EBITDA $XX.X $XX.X guidance favorable the of gross and year adjusted quarter report of million. and disciplined margin million million XX.X% together, to up last to

year our despite XX Our to adjusted growth. EBITDA XX.X% last making investments we are expanded support margin to rate from the basis long-term XX.X% points significant

XX.X% $XX year. million last increased net adjusted million to quarter income first $XX.X Our from

ahead and with the compared first per weighted year. the diluted shares guidance. adjusted earnings ended outstanding share XXX.X XX.X% last first up of high quarter of We XXX.X quarter with our million $X.XX end $X.XX, was million Our average

our versus Moving ended last year. million balance the financial available quarter plans with quarter $XXX.X $XXX.X on our to support We first to a position first growth liquidity with million very in sheet. total strong

X.X% in-stock to year, XXXX opening our further period inventory increasing the and from year-over-year XXXX, new be positions. our will This improving merchandising well, Northeast managed last support was inventory XXXX. new of stores new XX to reflect build at stores, earlier total in to relative the more a do D.C. end we basis expect our of it While the on same higher

Now our guidance. turning earnings to

in XXXX we on outlook from to outlook you updating imposed release, reflect press on first the earnings and in are the As saw results sales changes products our quarter China. and sourced tariffs import

now postponed As previous XXXX, March guidance, be beginning had you earnings our XX% until of to further recall, in XXXX implementation will tariff which a notice. in an we assumed looks

discuss tariffs important imposition the to remains guidance would modestly Absent sales comps, the of and third from the throughout case. margin related earnings gross composition building of the and of earnings assumed will from quarters. fourth and XXXX adjustments the be in tariff to neutral amount earnings blocks undisclosed XX% most the occurring our pressured impact price would our be of net more overall outlook. we planned tariffs the by rate that expect Our I lower had was margin The costs from with our related year the higher and benefit increase, XXXX and XXXX recasted now tariffs and of prior above implementation levels. an gross the similar pressure

We $XXX XXXX. of sales million, X% an based sales to This be million net XXXX quarter outlook second on growth of to increase to to XX% a XX% of expect quarter range the second in store of our is X%. the versus $XXX comparable growth

Excluding comparable be the we market, range X.X%. to store our in X% Houston of the sales expect to

support to costs new margin diluted for second per in to estimated is earnings the to X.X% to Diluted center, $X.XX expect to $X.XX we X.X%. be with and $X.XX of our earnings share. be the to our relocation be range store is share $X.XX quarter per Excluding our adjusted operating expected expected the

assuming million shares of quarter outstanding second for diluted weighted XXX.X the XXXX. average We are

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

year outlook. our to full Turning

a and XXXX. the growth of store of XX% based of our fiscal X%. X% $X.XXX fiscal is on sales billion increase range to warehouse store XX $X.XXX to to sales XXXX expect versus sales new comparable be openings outlook increase for to XX% in net We This an billion,

to store we are approximately increasing are XXXX increasing now fiscal for our margins Chinese on fiscal planning with points. the XX margins comparable tariffs from XX basis approximately X%. gross increasing basis XX% X% XXXX not to second we on be Excluding Since XX impacts planning XX%, to Houston, sales the XX plan gross to we of points to quarter

full SG&A. to on year Moving

remainder SG&A be to to $X.XX $X.XX EPS be of adjusted per Diluted XXXX XXXX continue due our of We to be expected outstanding diluted expected earnings deleverage sales is now fiscal to $X.XX, the million percentage and estimated to to is for share year. expect stores. tax a and be is as to expected to to average shares Fiscal the $X.XX. XXX.X rate XX.X% is new slightly diluted

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

expect XX% fiscal approximately $XXX to to turn for back We adjusted an be EBITDA XXXX of to I'd to fiscal call the XXXX. closing million, in $XXX.X to Tom XX% over range the a few remarks. that, of With over increase like million

Tom Taylor

proud our of am another we I and the planning forward successful how to days in call and turn believe year. updating you to quarter lie best We performed of result. to your look like XXXX now early our after We'd firmly for questions. are ahead us second

Operator

comes with Fadem first Zack Wells Our Fargo. instructions] [Operator from of the line question

Unidentified Analyst

on calling Zac. for Rick is This

share First -- pricing if competitors guys just particularly are assortment, We've question a guys stepping of just in you your their seeing in is you terms are curious of gains? promotions, on changes of I'm just the LVT. flooring lot pace any market seeing competitive up and environment. the seen are in

Tom Taylor

when we quarter, with our think category, an -- us, that for Yes, had XX%. we're first in at you total increase of in the pleased mean look I I

SKU has want on still to what feel always driver to We completely Lisa, continues bit a what to pay is continuing -- traded -- different, are last attention big Competition -- expand years. boxes pay us differences of X for our like independent do our count. We to we attention the the our competitors we you to been SKU that kind little publicly do. for in mix We a our count? do. category

Lisa Laube

Sure.

depending a below competitor, anywhere a in more on is as they kind perspective, we customers, the huge find change not big-box a terrific comparing prices to -- and in of well a big stock. category, seen SKU It's way. gap. In continue We So responded actually we as than what X you're to in have would our that count big-box our in the be in this say have. from who after everyone category have, in the certainly, XXx have total, market. you still From to I would going perspective,

pleased so And with we're very growth.

Unidentified Analyst

one just And last one. Great.

XX% comment Looking this can it if more at quarter, it that. range, historically high the productivity store looked has wondering new than been, lower in on just the you

Trevor Lang

Yes, Trevor is speaking. this

it's year. when opened think last time the timing versus probably stores I new just of the same

our as versus new XXXX better productivity be store XXXX. expect sorry, we exit XXXX We year in slightly to this --

Operator

the Our line Gutman Morgan next Stanley. question from of with comes Simeon

Simeon Gutman

sales tariff you now undisclosed is question first built else it is for the guidance seeing had Is there tariff-driven? that sales with that Is we're something the that the you into some is Trevor, changed? mentioned change entirety? that all before? in amount your Or the

Trevor Lang

of is change increasing is Trevor. majority the to this due tariffs that to from XX% Yes, The not XX%.

it's performing, due due at for change the But looked had the business it say the and vast majority to how also took the tariffs. I year. of the yes, to rest us those to we change trends is retails of having would not and forecast all We

Simeon Gutman

little into of the guess, how second versus existing the outlook, just Can the waterfall of mentioned, internal get is, macro you second a Tom Okay. home your What I and on efforts to a a just sales my major not bit pickup. half stores -- to because And acceleration us of an put share with half, there's -- potential much full follow-up that you -- then year maturing? would pickup. versus acceleration implied the

Trevor Lang

Yes.

Houston. you're are the the stores performed. has really, comp to much stores into the excluding that What That's new how then in base. have the consistent with acceleration we of things, the that's been higher away if our get that proportion secondly, Houston, two from a being fairly excluding And of a I our think be seeing driving for we're business year coming expecting further core looked is just half cannibalized, you we will the back comps. business, and at drag business further

QX, in new X XX. to we we have comp By the the into in year, the end time up the example, of 'XX get class For of and stores the it's base. from

improved, majority macro, just are did from those we of thinking we're at the that we that acceleration. think trends, going the economists, turnover some that. as is will if will can We're would -- what So -- what obviously driving we happen, not the we That's plan the if year. forward, do people how how current assume so housing which welcome look think we the rest the of

Tom Taylor

Yes. in be way I want mean, we to that look, we thoughtful the guide.

If you than out a we Houston's look than took how XX. saw stores took if opened look better stores of the we performed and better at store -- that cannibalized kind stores XX% too we pre-XXXX X. Houston, first at quarter The out purposely you comp, and our you just the and comp of minus

still feel going on. So about what's good we

Operator

of Securities. line with the Forbes Guggenheim from comes question Steve next Our

Steve Forbes

to X% for comp the guidance quarter. on focusing second Maybe X% the

from really just -- behaviors customer the trying I it, you're better understand best, on as of mean, down, anything You the at see obviously regional I what the to anything and Because than basis? it's consumer out just it. the saw we trade what think is whether to you lower health today is we're about good, seeing there mean, it and call here? store level.

Tom Taylor

Yes.

really Easter. second the start bit We a in. delay thoughtful quarter. I'll Trevor -- a trying of So and can had be delayed We're in to jump

mixed had So start. a of kind we

have since things the April, into got of improved we As start April.

I average the better and in thoughtful current feel trends, good. continue we but at So doing the to But best wanted about -- we than see to consumer, we better for look guided. how we good us, our be

continuing up average across be to the and retail participating categories all continue our We in, up. we're average see is to unit ticket

we their are I as -- consumer the feel So we to we who just mean about the look at good want health. quarter. be We category, this buying for thoughtful

Trevor Lang

if at would exclude I I X.X% Houston, of we one just are called is X% planning to lot you, we a threw you numbers thing comp. we that know for a And out, add

we those still same in there. metrics I all And housing so you of coming some guys got you headwinds think And follow the Houston follow.

You we QX to in turnover like in continue us in the the business part market feel have, and the had of QX. outperform And declines is. good household to pretty some about for where we big early

Steve Forbes

of the to second then to And drivers quick right, that And expect a in then the the business XXX upside during your profile moderate you gross of benefit, guidance of to maybe the XX. the versus XX should guess, part saw the we I the quarter, was right, expectation? just margin What relative the in the of follow-up what on quarter? surprise,

Trevor Lang

planned product reserves actually the in that our the just previously. So had better -- our we some markdowns guidance. than margin good distribution as itself came team to have was we've some came And at reserves inventory didn't some had of we We -- the better just the we costs in fairly centers. had close chain very same supply then also --

going rest XX% but obviously big in we year. So of was that as again, of gross We've into the rest The thought we've thought all talking guidance. as the the not the I'm that margins of year tariffs guidance. takeup the the reflected about improvements. that about margin to we And the the relative for all reflected we've gross rest effect, of all reflected year

Tom Taylor

bit benefits for a the team of And plan -- in quarter's increase we -- We've management a runs we've better put a seen our done nice getting in of last incentive an total our particular. too, selling some other the call, better installation -- the do We that I mentioned little sales terrific. mix been within put I project, job if accessories we're around so to think as the in margin Trevor, department rate. stores. that it's you in look, thing

Operator

UBS. Our from line next Michael question comes Lasser with of

Michael Lasser

the mostly point to due was your mentioned tariffs. reduction XXX guidance basis comp you Trevor, in

an between how slowdown in subsequently tariffs, like in is and you now that your to down having business. the seems pointing turnover break the So impact housing you're would lack of what it

So how would that you down? break

Trevor Lang

been How point back that's to is -- as QX's had as it, then go interest specifics planned it, we at was we for, I range. change XXX on that's do in just think reflected depending it. the the majority looking to you're performed of midpoint we we back in -- I think have rates the the of well. think than would -- of think tariffs, what people first though, people tariffs. most yes, basis Yes. we the half result period lower about of time year, because and the up the reflect we down do and you -- to at having how be a turnover. not back anymore. points of the you're that The then household turnover's compares are is didn't I And tied the negative on They're little what to some plus been big change optimistic people from up give more bit, household as said, now they're quarter pretty about the against but the of going kind going part came final exactly actually year. And not

Tom Taylor

to just Houston, stores outside you planning And look, at X%. look still we're for Yes. if for the of X% mean, us, I guidance, annual

XX base, so the comp third, quarter, the So Trevor fourth if X got you second stores many at X said, the the in as look in it, we've entering in quarter.

hoping pullback they like think rates stimulate -- We market shouldn't they last upside. it's comparisons we the the if from -- that moderates. that will, comparison Houston interest interest year, we're they do, the rate Our like in ease. The

Michael Lasser

now harder just reduction that run you April to the double-digit even... of comp after was to rate you And or think volumes reaching with your start comps, guidance years Tom, mixed, maybe year. to for stores in the gain your it's share are unit mentioned Do closer coupled

Tom Taylor

look, -- No, do awareness not no, think the that our no. -- think we brand I country is I in XX%. unaided

awareness unaided in we one Our comping who brand knows is markets we're still. where comp our -- where XX%. the hell markets No are

bring So that tremendous we still awareness upside in. have to

do more any harder, business are store many that capacity. gets of. don't we've we harder. at any double-digit have out yes, right? look, we that's of stores But So so Our don't We got can't That -- gets it years have have store comps. -- you

the not that's case. So

Michael Lasser

year? the Are categories to to product you you're those of going now couple give more any testing us that half test details back the launching? you in closer be a Can of new

Tom Taylor

Yes.

X adjacent we adding are So categories.

them to with in needs of that the bath Things a customer hardware. project. now. One store go is It's

bars towel a nature that for. easy and carried It pretty we've and of of things a take customers never It's but like that space. things lot our So hooks have business. asked doesn't

that they So and be But vanities in vanity will that. these will be dabbling have be that initiative the quarter... we We'll in of then make pilot in second coming Both work. we're test. tests. are And sure to in in

Lisa Laube

quarter. second Late

Tom Taylor

on quarter frameless to the second initiative. our pleased vanity Late performance countertop doors. shower And and our continue be we with

and a decor and gives try specialty work, ability they things the we'll the basis. big forget us them flooring continue not that's do things, to But a to umbrella and continue as a try we're the test, company broader us to we'll that. going that to roll to look, store what in So gives faster we're to do and hard-surface we going But first. out we're

Operator

line McClintock from with of Barclays. Our question Matt next comes the

Matt McClintock

comment your an you dive a remarks prepared little to in interesting that wanted made Tom, bit. into I

You already trend your developing fact LVP a given next was the innovative if, everybody new different than to stores. to I wondering well in the potentially, see talked that before else, are trends product and starting tend you about see you

That's question. to point. that's my necessarily hotter first wondering maybe even if say what don't it becoming is, You but is there LVP this I'm have something than just at

Tom Taylor

say we're a such such and seeing -- opportunity. category. assortment buying better and and within best broad have we the line got stuff. customer that innovation They're seen mean up to up the So wouldn't step I we've I next we've

we're to able than others some offer offer. things able to And are that. customers we're different towards seeing So gravitate

many So the I just category quarter to continue to what after having be do to is pleased the we've in with with -- the it of amazing. grow been years XX% very able so performance it's

it so and makes right customer got stores. sense adjusted bit. So flexed to a be our seems space we've in little space, buying up We've

Matt McClintock

a responded not Okay. And talk a independents as they in. while saw result from in you to share just Can the market whether of taken was it's or on question how tariff -- And terms then my now second it? the what that? XX% since you of been have about is incremental put you maybe

Tom Taylor

Go ahead, Lisa.

Lisa Laube

when as that about were They most they out pretty clear. last tariff, significantly very of absolutely or price customers, are see Yes. no Sure. quarter sense there below were same independents that to the all were much to did No, their increases there. answered they I We When the already the XX% taken. of independents. talked think independents were We we we some that. it's got

we last end at that, further And XX% just saw went the haven't first any really of the seen that in. so when we year movement, more

Operator

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

Seth Sigman

of different bit Is wanted on the a up ex love were is in comping guess a trend, regional I I know seen ex Anything double stores would there that. specific and they was there Just I cannibalization. Houston XX% more about share the Are stores? stores? get digit. than younger that little color those Any to And that to that that more to on bias? the past? follow double-digit what you've characteristics?

Tom Taylor

I'll guess then Trevor, I add you can So and in. start,

the than think a X, then for when are interesting stores, stores still comping them that towards pre-XXXX of again, got they maturing we've yes, but are part -- comping XX. slant better the portion I me

really we still of So all across stores. the solid the age performance genres see

having different I think performance in no states, that in the type particular the regions. place. country. part, around of other There's different interesting We're it's

So broad-based. to... Trevor, know, it's I don't pretty anything

Trevor Lang

the household we when I digit last environment, upper right will as an at the say, where environment turnover hit X, look do think you the I you it's was in declining well. mid- think, business, or as high I a again notes. in up Houston, good. come I just comping the single X No, into X our excluding better to mean better housing for business months, would

we planning, pleased was to in mid- comp we're environment. equivalent for performance. an that single-digit that with gave long-term our upper that When So

a our the of environment will strength in versus shows competitors difference us that likely just in continue to to that who So which -- challenging environment. for our gap hit this -- model in widen different a

Seth Sigman

impact that Okay. higher we I over Understood. cannibalization. is guys guess the then mentioned you how on should be time? in been And it's from about intentional And than that thinking that, comps past? The

Trevor Lang

higher in the Trevor is this quarter. Yes, It again. first a was little

in us markets. the last XX% year-end you it year versus time, and XX% existing new call stores will this year, in of heard opened open As that guys we existing probably this reiterated again say our in we of our stores markets

a first in So higher little bit was -- the it has quarter. it

might it were think but we a bit we little versus really not meaningful year, higher, the be For last year. where

Operator

Our question from Horvers comes JPMorgan. next Christopher the of with line

Christopher Horvers

So I up follow to Houston. wanted on comps ex the

-- of the an were X.X%; you trying you at X.X%; the saying, to the sort at XQ, So to and from And were X% XXX to underlying Houston. in X.X%. died the points I'm basis XXX now of you're in in is most down a like that XQ, reconcile That's comp trend to -- that tariffs. XXX ex

markets? to trying that it back in steeper acceleration in reconcile does half So Houston math. a And the ex the imply

Trevor Lang

Trevor, is Chris. This

rest has been that's will forecasted the and And kind way, of it our way assuming the current things for the that down, those upside we year. them in down, the kind should us. provide think last built another as forecast seen and are was the we of we'll that will those assumed mid-single-digit we them, then If trends better, continue. then which if the evaluate rest turnover took for if existing nobody thinks news to over well. We've Said as declines. months turn of I turn X we've the housing the the have of trend happen, things great we think but for year

that, to saw you turnover. to down step QX the that's completely to QX, we in correlated On the housing step QX down that and existing mentioned, QX our is view

guys probably of and get was late December, negative much to the September housing turnover to saw saw close And was XX% you time kind mid-single it last as by you as digits. into year, the of in As got existing January that. you down

we and view is saw. that our so the in that's And impact saw we traffic,

Christopher Horvers

right then you everyone's -- and on And so focused housing now. macro could

up moderation you was that particular salt regions like in comes client So any is not particular Any It or sharp? that talk to could something where [ph] about lot And in? be would categories? is to there. there back obviously interesting in innovation and so strong it sharper is in understand. LVT a state conversations. that then And a -- other coming driving assortment very product perspective Where trends your coming category from the really in product slowdown regions

Tom Taylor

it of So we've guys a that footnotes stepped in where are the sales. XX-Ks most changes categories -- had piece down perspective... in from regional of I'd see it, say on then can in the product our category have you our And

Trevor Lang

state. We've But strength -- We didn't region. said, we double have do as got digits across really stores talk comping the all in I about parts have we of every country.

it's talk difficult about don't performance. So But really say. we kind of to the region

Christopher Horvers

of And you you pretty gross comparison how about second have the last then just a talk margin forward, Understood. we seemed there. thinking Okay. year, drivers easy quarter? the to Can you're gross as look margin through in the

Trevor Lang

what in the installation drive That's increase business done a don't had headwinds talked we focus we best. a that repeatable have gross we that the year think first accessory is and on great The margins. merchants The have majority we think, the the going believe better to about of, again going with the just increases. Yes. to job chain kind We is put gross -- quarters, margins. we're same of last on out the helping we supply

And drivers quarter. in are same planning we the is so we're second in for that the really saw what quarter those first the

Operator

comes Greg from the ISI. question line with Melich of Evercore next Our

Greg Melich

make the One to right. X. was just sure that had I I got SG&A

driving That's straight SG&A a -- we get openings openings more but that? second half. in There there what's have that. was half, year's obviously the in last second other in in more we that's pieces because just So were more moving but leverage no

Trevor Lang

Yes.

much just you're as in the year into SG&A as up to think, think are that we're stores anniversary opened if Long last part do store about and of we -- had our the this of of you're -- Boston do year. think out still leverage store-level I and We seeing is towards then better the to get XX get of year in XXXX. new store Seattle open getting reason XX to leverage this the the those We we Bay versus, year, talking SG&A. planned back I end SG&A year, and the as and said not stores last this end we XX in stores stores Francisco of setting that all stores San total those Area, we of ourselves a year, we're have and our we Island

Greg Melich

the it's it's into to maybe new the Is flowing X stores it if it then you risk do stores the base. is And X basis fair to a it. trend XXX But estimate? of a as things, realize sort funny. little real here that Got you think that as once gets a bunch ex say how different base? the of of XXX new the Houston, the is point? that ex or how come much into a little comp bigger Is I picture fair about

Trevor Lang

Yes.

Greg Melich

XX were about don't stores, year think sort time, there the the after, of do you year rate And you the nature that's out over next year's? still to Okay. good run modeling think is since unusual go of last have you -- you if and to a something as that is next

Tom Taylor

new better getting We're at stores. opening our

the in going is years. points new XXX last We Our that or lot a gone store keep up to basis volumes have thinking moderate. X X

us. just like We seen be okay another great It stores opening higher to is our that if class looks moderate that did means because 'XX happen would that actually are haven't the of be for of going class We yet. stores volumes.

third even we stores, comp first, second it after Those volume, they yet. year they to but happened So really and that going in comp. that's the and opened higher big, keep hasn't thinking happen, though

to going that's hasn't think and it do I mathematically, wrong happen. I've But yet. fortunately, been So happened

Greg Melich

think, how we're if the large-ticket the already given environment. the not XX%? about Great. on go impact competitive pricing XX% through to to you I product, then last especially Do that And any competitors of going passing guess there's occurred, the tariffs in your on nature thinking shift or of are the

Trevor Lang

them most comments, we've what in our competitors' I mean public seen reading have of just raised retails.

all flooring, them manufacturing as price I said, Lisa most you about sell we level. the increases independent as at have and well about that the the it public flooring of retailers companies as on of them that -- seen If talk passing think talk sell certainly

great how done both Our the assort the changes have where about a being merchants line. merchants great to thinking job, products and you for in and make can

can strong see you margins our incredibly from first results, were As our in the quarter.

So well. under our difficult it environment team incredibly managed a has

Tom Taylor

Yes.

We've job which of in negotiating helped our think with which significantly tariffs we with did able I really cost merchants suppliers the the us. get to been partners a price. out grown good phenomenal were lot our attention We've suppliers. pay a And we're our with XX% to approaching. But really -- suppliers. of close we

good pricing, first. we our stand. We we where And value-retailer feel a are about

Operator

from Seth Wedbush. with of comes Basham question next Our the line

Seth Basham

margin around question My guidance. is gross

now there, in increase just XQ else what a factors? embedded in it think key increase? besides your the expectation tariffs supply beat, drivers is tariffs? is we or nice Is chain outlook. and it to other that the You no the increase about full Or have year for If

Trevor Lang

improving that's mentioned. it. quarter. margin. put stab the a merchants in Yes, what more first this the getting of the cost great job assortments as take at just is a It's Tom They together, I'll assorted and gross we again again. Trevor saw The done out, have product our

some chain supply cost we are to until not supply those team D.C. the get we customer's selling us. higher-margin for to Our emphasis done that's And complete a category for most more sure That's got we this sure good. credit. increasing and because our increasing opening we year, we on leveraging and upfront, of those accessories make chain quarter, We're again, then the job much where that making D.C. installation costs we're Northeast that give fourth

gross And so related to last year. this would gross those why are increasing margin call and versus we're is year what margins I

Seth Basham

seeing it margins growth That's a aside? putting you look on helpful. category-by-category tariff LVT, big expand there, basis, issue obviously at if the are And category, you a

Trevor Lang

I'm head. the just top my off of looking

continued category. have margins our think I to grow that in

case. believe the So that's yes, I

Operator

line next Our the from comes Rick Stephens. of with Nelson question

Rick Nelson

competitors your in How you And bamboo of color to declines derived the around could of experience provide are your if pointed that bamboo? So category. sales some your Wondering that. from business? much with one steep

Lisa Laube

we same. the Sure. same, heard we Yes, and seeing are the

is business, We of are XX% slow seeing a our wood portion business. category down. of very only small is It total which that our

for But So that slowdown... for seen us, it's category, have not we yes, a problem. also that just

Tom Taylor

what we It's is stores that Floor & have flex one selling. our space of the ability model the the to benefits to Yes. of Decor in is

if or category going in we space slows, we that's to So vinyl on that then coming laminate, expand luxury towards -- is bamboos. of the the decrease the add SKUs that to the category, if and if SKUs business bamboo plank

one roof. just it's all of So hard-surface categories a benefit having under flooring of

Rick Nelson

there? That's competitor I a store know fair. new market. Any format that a got you've in seeing in a stores couple Also, Okay. comments opened of you're of Orlando. what

Tom Taylor

Orlando. We're our pleased with in It's business been really terrific.

we So they're we've performing. X like got way stores there, and the

We lot model all competitors. have our We for think to a they We do. just our that pay respect attention is what different. of of completely

competitors. than XX,XXX bit square a one just feet, from than different Our over stores roof, -- of they -- under one assorted. our are locally It's a little all larger average prototype categories

Operator

comes question Bank Lynch. the Suzuki of America Merrill next from Elizabeth Our line with of

Elizabeth Suzuki

X basis it in points the quarters that of like inelastic price full the that that, seems imported tariff in Chinese place. year you indicate Just fairly from would year given increases category. baking demand is to in have XX% over comp that on that those you are almost I think of goods for mean XXX presumably the been

you through the fair pass of categorization such material price can a that's environment? a you think If do demand increase, current

Trevor Lang

to because And we're increases value our the category. assumption was to we're to to pass source think of was I we be along going that a elasticity. right? price it adjust coming sell leader, is us value price our lot what elsewhere. find the everybody more competitors because have ability And always very in were And assortment doing we and than way and that to that listen, very think together we're is able test that and again different I to we're testing our difficult leader the --- those there if is else put who allows from China, that so us just

Tom Taylor

be And so other that the assumption hard through same the whole component spread really installation. would whole anticipate other as market. our when price up to at changing. is you the look went I market the would is biggest the going on wasn't think have hard-surface flooring we you job That calls, and flooring stayed and The

all So when the you a XX% that look the increase percentage at to of what it tariffs, price big. even end with was wasn't user, the

Elizabeth Suzuki

Okay. Great. the outlook and share And small rate, change slightly one D&A lower positives slightly count, there like were follow-up. in expense. looks several lower just It tax interest in like quick

was X.X would so So outlook you anything that since mitigating call previous those positives or out the that months that, given?

Trevor Lang

mean of there I No. were changes those. in small most pretty

forecast not process and very to a our just of based price we're modest think they things. went we I those on statutory detailed But changes some tax and where other rate just up have going much do a tad. depreciation

of So just when last X months versus based guidance we more true-ups the on information gave update.

Operator

Our line Chuck Grom of with from next Gordon question the Haskett. comes

Chuck Grom

to the attributable in the margin, that initiatives product you and increase sticker size add-on a the in ticket have have to try some the the there, margin question quick right? the quick follow-up. on I basket store growth project? guys referenced then much improved So of a how doing was complete you're I rate, of sales And to

Trevor Lang

mean accessories. increases ticket Trevor. was of Tom in number installation Yes. This due But I walked had some categories. a in is that certainly as to our through, we of

people together just I it's more are think -- the we put well, as seeing have again, the basket. stuff in assortments the so And merchants put

Tom Taylor

installation add in And energy the just mentioned we earlier, think, designers the in a basket, more is call our on getting as lot definitely the in the our I right? is small And associates our to is We quarter, project. you we the thing impressive we're I deco script better We're I doing -- look, put went are getting helping and think the that from to store, sell the servicers terrific if we're sales are across they and -- All we've sell much up my -- didn't I've thing, that initiative. Yes, project things not were -- within what first into we working. installation really fourth then it's quarter, doing going in other a the energy in our provide were the accessories said total up this more XX%, about around talk design too. the of service accessories. the put but everything We them which board, whole XX%.

those So efforts, feel between X concentrated I helping. like that's really

Chuck Grom

I That's just then, more on tariffs. helpful. can, if And one the

still is mean bless ways. we was revised sort X, guess then a go X? back that it revision did point risk in bit understanding I don't to goes the of the And more in the So margin be looks XX% a -- in kind end, I it different little neutral I is it tariffs. to X/X, to math that would the guidance, like if any know couple if XXX there from of on I to about know that. basis of down, of XX% probably you the guidance if been -- being this it asked sort you've of is just from can of to

Trevor Lang

the to did And was turnover my on the say think what last housing midpoint the then was with I'll of the Again, majority absolutely guidance. answer -- I that. just Yes, bit of reflected tariffs. majority just stay the QX the consistent the we

and would XX% I even news be think allow us we to our to on just sharper welcome if that would went tariffs certainly X, that. be you welcome to -- would prices. the That

Operator

question line next Blair. from Our Hofkin of Daniel William comes with

Daniel Hofkin

how Premier of what so the Pro question was then you far? you're are that about been? going about is you Loyalty learning? forward? quick second on And has What provide Could running that thinking my a talk just just Where is going Program update kind that cannibalization, What now? you so

Tom Taylor

on going members We've Premier. pleased we're with with Yes, Pro so joined. XX,XXX what's now got

stages it. out and people just think our new it, If CRM in that we're still of kind the We educated early getting about can rolled information you stores introduce the getting about use. it in

helps way How program rolls. Pro PRO that purchasing, they're them unique of a Pros the how when store, have are is up thing often really Dashboard called redeeming, kind which they're We have isolate our if using doing. signed the to a in our the partner which Premier that's in programs, they're

spent of Pro we a can at for do getting the of message lot kind the to out not we're store all in they up. a that there. time signed it. up still we looking So If them shop We get and and program, signed have they're

with people here. up it. So we're number the this amount got pleased on to of from we've go results of the it. continues pleased think We We're

Daniel Hofkin

Okay. then on And cannibalization?

Trevor Lang

fact up I versus little sorry, of part we're our And It I'm be a missed the of bit year But the really existing to that so be that's stores piece stores is relative markets of QX. year, are other in that last it class rest consistent, how we a driven those the of markets, we was in We are is you our year, the stores the to that again, sales would last opened I bit when sorry, generally of we in most Yes, of the higher fairly markets, us. in of for higher-profit think say new new our that will markets. 'XX XX% little existing 'XX in sales, expecting question. business higher existing versus this the higher-volume, cannibalization for opening profit and XX% open -- stores for modeled I'm new maybe year. by year. stores we've up

Tom Taylor

the but meaningful, cannibalization mean really is are stores I good. new doing

the quarter, really are Look, our XX%. the back total stores we're just new growth in first was good doing. pleased sales the on really So go way at

So we what feel good about we're doing.

Operator

final the Matuszewski with comes from of Our question Jefferies. line Jonathan

Jonathan Matuszewski

of of has your there entering different that the the expectations any of from it price anything initial been been in densely customer, First product, kind of new whether the one, mix you market? e-commerce Pro, just have metrics mix before penetration, that Northeast there sensitivity populated markets, surprised be

Tom Taylor

good. They're

like really densely well. we They're what's performing going on our market openings. So in populated

I think there. resonating our the it's with -- is brand customers out

we know open just how and really able is because quickly. in the country, knew populated us for takes store. don't who them to been stores Northeast it I there. in the get what's part moving a people and in Northeast know we've are, think I particularly But there's long, while populated areas in in really, people I to still was rather the of the people so many interesting, up were see to surprised the were but excited that they get Florida we get knew that who areas, were sometimes you you

are the It's I performance Pro So in out to it off of -- I've the markets have mean been while we over. don't a customers pleased get in. Pro we know the there yet the to way store. really new how switch -- up But started the think out. takes get with We to figured that started there. customers also we stores and have it have with we're pleased really figured

just pleased And that we're with the and we're so happen getting to stores. already

stores year those do So I'm year X in and I'll what X. see to excited what

Jonathan Matuszewski

then And of from worthy maybe that see that And could in Can the on quick lift fleet a share done across helpful. you've a the other opportunities little terms a the bit relocation? of X That's relocations. recently? follow-up Great. you seen that that just you you've be

Trevor Lang

This Yes. Trevor. is

So the range been the these high-volume stores. lifts double-digit in and have were already

appears did our highest-volume store be So we're we last from to that store. -- it likely very that go one encouraged our volume year could the of relocations ninth-highest

bigger getting good so relocations. to those generally parking, from stores. And locations, The seen really are better results we've much better relocated some stores

new aesthetics into a just put is driving that stores Just our really the lot we visual volume. of

at got -- a that continue So will will the as end at relocate. to we that probably handful we it's We lease. look of a stores come stores the up of

Tom mentioned, it's absolutely it but the meaningful, decision, overly been and right be incredible. business lift So as has won't the

Tom Taylor

your and everyone in Okay. talk Thanks. Well, quarter. the you look, your questions today. call I the I to second appreciate and we'll interest, joining appreciate

Operator

concludes conference. today's This

Thank disconnect and at lines participation, a day. time. may for You your your you wonderful now this have

Floor & Decor (FND) 5 May 192019 Q1 Earnings call transcript