FND - Earnings call transcript Q3 2020 | Floor & Decor Holdings, Inc.

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Operator

Greetings and welcome to Floor & Decor Holdings, Inc.'s Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. of President Vice Hood, Investor Relations. Wayne you. Thank

may You begin.

Wayne Hood

everyone. you, and afternoon, operator, good Thank

Lang, and earnings Joining Lisa Executive Trevor Chief me Laube, Vice conference and today on our call are Financial Chief Officer. Tom Taylor, President; Executive President Officer;

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

call, materials available A Investor recorded website. each release, defined SEC can website a comparable will basis company non-GAAP this ir.flooranddecor.com. call, these Investor core is on of performance our found investors our our to measures this of available conference Relations of directly operating the in the non-GAAP financial most disclosures which During the to between Regulation on together believe earnings enable will A press GAAP be financial by measures non-GAAP discuss Relations comparable related We measure as the G. better reconciliation at be with replay understand periods. on

now me to call Tom. over the turn Let

Thomas Taylor

believe of our on will fiscal strategic of call. strong progress our Wayne, are the some you, highlights will we and Trevor well we our remainder growth will as call, grow continue thinking for discuss On to performance discuss and XXXX of I today's your us quarter how third market about to joining call XXXX we review initiatives conference that as for quarter the to thanks we XXXX third our the on will open share Thank enable everyone quarter and and in earnings are making us financial beyond. then third our the questions. then

We cash quarter flow-through momentum, are accelerating very with which sales earnings earnings reflected XXXX generation. third strong strong as pleased well our broad-based fiscal results, as

sales in million Our XX.X% XXXX third $XXX.X $XXX.X total increased from to million quarter fiscal fiscal XXXX.

quarter third XX.X% comparable expectations. our fiscal Our XXXX sales increased store exceeding

We pleased comparable our are store exit start rate quarter fourth our sales and quarter. with third the very growth to

is impact Our last flat which store late COVID-XX third March. fiscal year-to-date our through XXXX are year, quarter remarkable comparable considering which with operations, to accomplishment store of sales the a in began

adjusted quarter meaningfully one improved times annual EBITDA quarterly third XXXX. of and quarter in $XX.X EBITDA million from the million, XXXX and fiscal third adjusted an record than higher increase Our XX.X% $XXX.X almost half of a in fiscal to our a

XXX.X% quarter history. liquidity third position per and ended We no of on net Our adjusted fiscal of with fiscal sheet increased earnings balance debt fiscal third strongest remained to quarter XXXX. the $X.XX quarter XXXX third company's the in the from in XXXX share our $X.XX our

River, we quarter XXXX, New August of fiscal new XXXX. five each total pillars in new strategic fiscal third now in of end with growth, design August. and XXXX me The the three operate store stores City, fiscal openings third stores openings Jersey new provide beginning successfully in fiscal growth. We an of stores third plus in to the in update including warehouse September California in our the that XXX a of XX.X% the Let studio Utah, quarter store at from and XXX stores quarter warehouse warehouse on of Texas small San Salt of Diego, store opened Lake Toms and Dallas, up warehouse number

quarter forward at As new with open will an fiscal XXXX, in increase openings look of from five to to XXXX. of of stores we the XX.X% we to end fiscal that warehouse November. number of fiscal XXX, fourth total most stores we plan This the bring XXXX the warehouse operate of the

stores, the we pandemic. those quarter with third stores new due as new to atypical We in of ways performance are the opened in opened the including very pleased COVID-XX successfully our them

the with vintages, pleased after store forward look to XXXX new pandemic. XXXX growth also fiscal XX% having to store in resuming most are mature our slow among waterfall store our fiscal warehouse growth due particularly our sales new temporary We COVID-XX the to stores. We format

our throughout We cadence fiscal believe fiscal balanced have to long stores the wanted we'll open in and a more XXXX. new in this accomplish year, we

XXXX class the strong stores. of class believe these of be a also will We

second our onto comparable store of pillar in Moving growing growth, sales. our

are quarter the for designer the XX% in our higher homeowner declined our believe increased the a natural On as comparable in a from sales increased of category, comparable in influenced in third basis, business comparable X.X% quarter. XX.X% decline comparable July quarter being August and ticket approximately as inventory which September, in in third would comparable the category. pleased to our ticket basis, growth aggressive estimate impact acceleration transactions and XX%. our store a store Dorian which XXXX broad-based We stack our Fiscal the well versus reflects sequential from is XXXX. wood led of our average monthly increased sales our XX.X% fiscal quarter sales third highest to We comparable emerge store pro third clearance growth sales that two-year of very discontinued the in quarter we XX.X%. an have third store fiscal On Adjusting fiscal store and of our to ticket throughout third XX.X% comp quarter with of XX.X% the store in our XXXX XXXX, in fiscal XXXX. Hurricane increased

are Among fiscal in-stock are were making products be our vinyl the merchandising We XXXX, is six for wood direct laminate said, That strong a decorative differentiated merchandising quarter for stone. believe and accessories, natural third categories categories and there quantities and of prices our our having everyday job assortment. the in that with of all which key our market improved growth we right performing categories, low today. lead result room plank, to was innovative of luxury what will trend lot homeowners top looking across ability at natural an

our pillar experience. connected strategic third Our of is growth expanding customer

sales strong, increasing from accounted and versus last the e-commerce XX.X% sales quarter third of fiscal third XXX.X% XX.X% for quarter XXXX remain fiscal Our our XXXX of year.

up XXXX, our part and stores stores. metrics build connected organic XX% our to our critical content investments In search, XX% well website We The double-digit as continue combination to the picked traffic third website as of behavior as homeowners orders from year-over-year. fiscal experience be COVID-XX our we optimize of paid as That growth quarter see quarter have us due our traffic to flooring made a projects. remain contemplate to changing to out performance leads believe of our in increased of website further third as were consumer our website strong. said, to customer to experience. and direct In the will our strong continue the e-commerce well

there to we successful pro and on further digitally launching no our September, in appreciation in month, of commercial executed Our In purchase by was our successfully our fourth the rests created pillar to the relevant or customers. to making growth we've prizes investments customer. where necessary enter are excitement win stores professional first pro

are overwhelmingly recognition feedback that our are like event building positive. relationships up We and training believe pros. for We events engagement pros this and and event one was over about virtual important with sweepstakes our pleased forums webinar signed very XX,XXX to the long-term the

fiscal of our and PPR of XXXX, incentivizing and their quarter of despite Premier in by earned third redeemed PPR The Pro most are fiscal more impact points frequently XXXX pros. engagement increased of pleased we Rewards, from In fourth is with members, of that drive bonus value nearly pro program year, value points that sales not drive also the redeemed. quarter PPR the earn opportunity third of for also growing We increased members. engagement third To enrollment growth our quarter PPR XXXX, and XX% our only program our in quarter quarter COVID-XX. to pros the of times of incremental We in by non-PPR spend. our fiscal third an XX% points fourth members. X.X the their the engaging XXXX from validating with through last were shop XX% PPR to where relative sales continue three in quarter to but than measured year-over-year earned fiscal more program loyal with spend almost points program PPR pros times from PPR, our are and our

Our just is to engaged & Decor, one research this. get avenue is And the PPR pros our with that share the Floor we more can clear we wallet obtain. do more

further we loyalty. engagement As personalization and efforts drive on we and will enhance lifetime to our move into program build our XXXX, and PPR segmentation

homeowner We updating early to next forward of completion look and pro the our the information, sharing and and are year. demographic results nearing segmentation

and better share. only has successful informs we about homeowners, of market and are but learning CRM customers tool, our need wallet are a very as to implement the strategies resulted to entertain we not Our in a which lot who us investment pros, more

we're free design our growth. fifth discuss pillar me on making progress the Let of our the now services,

and design to internally design not increased number XXXX We design to rate services ahead levels, to fiscal XXXX increase important important growth our of are our is the were of third pre-COVID-XX XXXX. note fiscal of of furloughed are growth on focused only staffing above we and the already second quarter homeowners, pros. particularly to building system our We This objectives. the and rate growing appointments believe to to that high with services of homeowners pre-COVID-XX our XXXX. quickly support have awareness return pleased are considering were in of It's not we fiscal in the runway third our value pros, us that well significant of quarter designers gratifying of pipeline the able driving that And XX.X% fiscal but many to the conversion services to designer quarter using our was as from XX.X%. first quarter of

about environment. turn how me we economic comments Let macro now are to my thinking the

to substantial caused Unfortunately, operating with increase people out discretionary on travel, in activities are income due additional like home spending not and in hotels, eating nesting and having at home. This has sporting do investing much rate. times in the a those homeowners savings as events. leisure are We more unprecedented the COVID-XX to dollars

and existing year. mortgage X.X% what and nearly be period consecutive from new are sales. existing last is the or a We both for rate home of market of that some growth also seasonally rates the month are at the strongest benefiting grew month The fourth million, X%. housing sales clearly In of from seeing a hovering from $X.X to prior annual low sustained September, in home up looks XX% below to interest adjusted

We Carpet the of trend maintain. appreciation preference adult invested States a continue remainder baby great entering great that our homes personalize the the homeowners are a housing. the lot and look for experience. need at and demographic factors demand benefit backdrop and outnumber rising savings million Millennials, were seed And a it's is of occupied longer for Homeowners a low which impacted expect formation exceeding the homes and of and to long-term their before value. among to United is leave combination to from years. that rising others, flooring demand a share company. The also work, nation's increase has largest XX.X interest lower is learn, Collectively, this projects in rate population the The high XXXX, prime million now flooring repurpose to to surface contributing these units of boomers, household exercise, opportunity for COVID-XX is in the a are market to and about of and continues and housing flooring. price interest the us. are aging housing partly This to and they environment XXX our pandemic XX% way demand, home values, hard play. to their the hard to and for homes for XXXX of rate, rates, undertaking responsible consumer be built continue industry the behavior. housing secular ahead us surface nesting, home supply, we housing to optimistic improve

We & are Buy, effective also pleased been Chief and Invitation Charles Marshall Human X, at President Ryan Best Executive Floor Officer Young, of to Operating of of Board CEO and Resources Decor’s Scarlett, today that to Vice announce Officer have XXXX. Kamy PulteGroup, appointed Homes January Directors, Chief

to commercial believe and our will thrilled Kamy our discussions. Board. They diverse and growth are to strategic in operational, with Charles are They add board broad Ryan, perspectives that outstanding We welcome us we assist to executives skills also our will and expertise plans.

the XX of also their We John and John, We same Officer of want at last Lee, Equity announced from Ares have of Floor Spogli effective to Brad Management to Executive that extraordinary resigned contributions Board Freeman Chief the Rachel Freeman & over Brad Brutocao, Roth, years. Private time. Corporation Partner Spogli; Partner for our Group Rachel, the Decor thank

fiscal direct and to surge earnings our of in our of quarter collaboration associates cross-functional our XXXX me strong third result responding by Let tireless saying the teams. demand close are that the

Our thank quarter financial would entire dedication results. now our to the serving customers. like for call to their third work leadership Trevor them team discuss in executive I turn detail to more and to over our hard will

Trevor Lang

a and I'm how our operating sales the going quarter quarter, unique quarter few environment thinking concentrate items great the pleased XX.X% COVID-XX and income we're momentum store line fiscal start changes sales among on balance to the a in from discussed model fourth ourselves sheet a solid combined to about cash great ago with and statement comments my XX% so comparable XXXX. The Tom. with XXXX. due a in flows, just XXXX third of quarter then to us to the major some our are XXXX has remainder associates fiscal third find strong business already discuss statement, of and third distinctive in allowed of decline Thanks, to Tom growth in how we months we swing

increase that Let a XXX third from XX% XXXX me point same increased by gross XXX in with of margin XX.X% XX% begin our quarter our The in fiscal rates $XXX,XXX,XXX driven very last and profits our to in period margin. pleased gross increase XX.X% sales third year. We're a quarter basis our on infrastructure period partially and gross the total supply for by point increase margin was margin rate basis same higher center in product enhancements our department. merchandising natural and due strategies gross by improved year the wood leverage markdowns driven our last higher the continued from offset of distribution to sales, primarily clearance chain to higher

Turning to our fiscal third quarter XXXX expenses.

million store and $XXX expenses $XXX,XXX,XXX increased selling quarter third operating period Our XX.X% to last the same leveraged points. in and year basis from XXX

the growth store same store term last that our result our operating is points us direct variable expenses The primarily selling XXX well sales plans improvement accelerated. our as demand in better for leveraged from expected that leverage is of operating as outsized the leverage and in expense store result basis comparable fixed near and expenses, customer outsize period selling the costs. store experience our than total year. the XX.X% parallel in as hours exceeding occupancy Our to labor leverage expense More specifically and of enabled

through quarter, move we took of to to the we surge the third actions in associates further As accelerate hiring demand. meet more the

should As be exited customers a still they below third think sales our our hours we well. but to aligned the quarter, were where result, we payroll trends better with they serve were our as

hours XXXX. stores, third As leverage of not to similar quarter to to the look we meet quarter more expense new labor open continue fourth XXXX our add warehouse fiscal will demand, the

last as from as and well Our $XX,XXX,XXX with accruals. moved during and administrative year support increased our into store fourth general compensation the depreciation we X.X% of same to that center investments, associated third due quarter fiscal expenses IT incentive higher new XXXX period quarter $XX,XXX,XXX the higher to XXXX,

levered of a As to rate during to basis percentage sales, points same expense last the our X.X% X.X% XXX from period G&A year.

distribution detail costs to meals GAAP with associated income approximately third adjusted year-over-year of impact expense G&A our our third in the in release. and lower meetings. in our to travel are center due offering year expenses store in XX-Q expenses strong from rate for XXXX reconciliation points these XXXX, earnings net a sales last and quarter adjustments our basis COVID-XX and and and support XX closure center our of leveraged Excluding and relocation quarter provided income More about net secondary

decline new in are fiscal small fiscal Our million preopening warehouse quarter the XX XXXX. expenses when results year of We quarter with combined when quarter with third $X stores from number in points three and seven warehouse in of of third the we XXXX third XXXX. the third either the one the expenses center opened open The XX.X% the or compared of stores -- declined to in decline $X,XXX,XXX opened compared fiscal of to year-over-year. stores and preparing that XXXX last leveraged basis primarily design quarter new

Our rate year. fiscal the XXXX effective XX.X% quarter was period third XX.X% same compared with negative during benefit tax last a income

lower of Our from tax XX% federal to discrete items. in effective income statutory due other book the deductions related is than rate tax of excess tax expense benefits stock tax exercises and option recognition income to income rate

drove profitability. total fiscal margin quarter Moving XX.X% rate EBITDA increase increase basis a gross XXXX broad point in third and quarter coupled our in with EBITDA XXrd our to quarter XXX a third sales record profitability. expense The fiscal leverage

year. fiscal from our XXXX last same EBITDA the adjusted $XXX,XXX,XXX $XX,XXX,XXX quarter to increased during XX.X% record Third period

XX.X% increased from EBITDA XX% last adjusted points to margin year. Our XXX rate basis

same $XX third during to quarter from the last GAAP XX.X% Our fiscal million year. XXXX increased $XX,XXX,XXX net period income

year. last third from fiscal share per XX.X% per increased diluted GAAP quarter earnings Our share $X.XX XXXX $X.XX to

from year. quarter to income third last $XX,XXX,XXX $XX,XXX,XXX increased net adjusted Our XXX.X%

from with quarter XXX,XXX,XXX fiscal XXX,XXX,XXX ended same compared year. year. shares average share diluted Our period $X.XX outstanding the We diluted of during the earnings $X.XX to XXXX last weighted increased per last adjusted XXX.X% third with

were Moving to our these sheet during maintain the unprecedented a fiscal we have in cash company's plans. third position liquidity to very history balance growth pleased XXXX times and strong statements. We sheet support have that our and quarter strongest to balance flow able been

As of for and facility was September XX, immediately cash borrowing $XXX our and violating our under liquidity in million XXXX, unrestricted without covenants. equivalents any of ABL $XXX,XXX,XXX available consisting cash $XXX,XXX,XXX

In increase year ended XXXX the The the year, improvement operating paid fiscal is September net XX.X% $XXX,XXX,XXX by quarter our XX.X% the XXXX, week sales. of flow, the and below which cash in year. sales of over $XXX,XXX,XXX last XX same third inventory XX.X% the our growth during the sales to inventory The is we fiscal XX.X% from our a same in XXXX increase $XXX,XXX,XXX working XXXX, trends. fiscal our $XXX,XXX,XXX growth X.X% due in earnings, in taxes. total For in our last from in $XXX,XXX,XXX generated cash XXXX, in the to XX, below which third is same in for in at period. Year-to-date, improvement improvement from the working inventory grew quarter net end income our the period to accelerations capital fiscal increased capital largely productivity our our growth reflects our

as when during the related COVID-XX XX, year. capital Our period for compared with last to XXXX are from of to in under $XXX decrease million declined the is XX a XX.X% or decline opened September same year. fiscal the period primarily stores the last The result construction expenditures new $XXX,XXX,XXX XXXX ended same weeks

than period. lower flow coupled enabled during ended cash XXXX, operating XX, flow Our same expenditures cash weeks double free fiscal cash year-over-year in flow or strong us free the capital million XX generate of September fiscal XXXX $XXX more that for to $XX,XXX,XXX with XXXX

capital $XXX is XXXX Let our capital now to which fiscal expect our XXXX prior of We to the $XXX more million turn expenditures. million. expectations be annual expenditures than approximately revised slightly increase million million, to expectations $XXX X% now to fiscal $XXX me from for

are open stores in fiscal cash Capital reflect expected under investments small start these in million on spending will our fiscal design to flow plans early quarter million. from operations be and to to and borrowings is $XXX associated from the following the stores XX and fiscal of plans be one construction Our XXXX We open several fourth XXXX capital and XXXX center growth to spending ABL XXXX. plan expected warehouse facility. that $XXX with funded

existing million expected and projects expected story and We $XX are approximately centers is distribution modeling nine. $XX these associated to in investing capital projects our spending to be with

capital project our We this to associated and relocate are second be expenditures XXXX of planning second distribution approximately Houston and center half enlarge the $XX XXXX, $XX in are million. to million to in expecting with

support information technology, make $XX million continue capital areas. our new and functional for of support these million and $XX we We growth growth look in center support other store investments infrastructure, approximately store support spending in center, initiatives to to to e-commerce, our our to

the actions Let nesting thinking as optimistic winter. less concerns backdrop XXXX. rise me leisure support liquidity of the into into positive including to heading are fall XXXX. fiscal said, still provide a related markets, now to growth support the the lower in early many and the we're economy housing will COVID-XX, activities about another perspective, as inject and XXXX which to That continue well of on a for macro remainder that the consumers discuss are we cautiously to and Reserve's infections uncertainty rates From remainder wave a there serve significant in market raises how and will interest Federal the and spending

these our in optimistic business if necessary. are closed have and risks we about momentum economic could doors recovery certain the remain While that we we and business, recognize of elevated the the markets

of end we earnings XXXX, as XXXX. that specific not some for guidance sales For practice continuing are the but to of reason, we fiscal like direction fiscal and to approached we provide would providing

growth actions structure to second we and of aggressive expected sales from of cost as outside Our our to due store XXXX better the fiscal reduce leverage selling expense in benefited third quarter pandemic. took COVID-XX we've quarter created than the the

expensive our to balanced that to growth in sales is XXXX is fiscal likely the quarter into third fourth quarter, the more enter As the leverage with quarter XXXX Consequently, fourth quarter growth third to less we the we rate of of profit do growth our in quarter year, anticipate lead on we experienced becoming in of quarter expense we experienced strong and fourth we exited fiscal planning profitability and fiscal are the XXXX. not relative outsized fiscal of XXXX. but of in last the third the same

As a for of weeks fiscal estimate quarter week, will continue means to to reminder we additional comparable XX XXrd XX have We each XXXX, fourth the a us in XX a in versus contribute $X.XX include will which quarter. this between weeks normal main XX fourth $X.XX basis. week XXXX diluted about comments on to earnings of a week per the the share quarter

primarily reported to gross refund, a XXX margin million. benefited would benefit, Section $XX been one-time XXXX our from margin for Adjusting quarter gross approximately have rate XX%. core vinyl this last tariff of fourth Our fourth rigid year's quarter related

open the digit is our in point XXX Our experienced versus XXXX XXXX meaningfully in meaningful less the XXXX more stores five in increase gross in We're current the XXXX In to than for from expectation the expenses the quarter we new fourth of plan new planning and the of in increase to when our year, margin quarter fourth gross basis third quarter. a growth single planning fiscal due quarter last three operating our of we're mid normalized cost to expenses pre-opening from XXXX. third in on dollars, third on quarter more the and compared quarter, as fourth sequential fiscal to quarter fiscal structure increase fourth rate we quarter selling but fiscal third stores. store rate fiscal to margin

of to the our number in first any stores Additionally, in quarter open planning highest XXXX, we in are new history.

incur expenses some pre-opening new stores these of result, fourth in a for XXXX. the quarter we the XXXX will As of

not approximately general We interest contemplated option be our to fourth expect exercises of flat We our does to stock with tax and that expense provision third expect would XXXX. any XX.X% may higher course, of administrative quarter quarter income. due fiscal taxes. previously rate net This, our about than higher the and benefit contemplate for be to

be The in We executive is how expect XXXX. million. and approximately to our depreciation of annual proud amortization incredibly team we performed $XX

like company a than thank pandemic over are brave would associates for questions. their all better that, to operator I the we'd for With call We And to turn before of to work occurred. our like the the

Operator

of this a Instructions] we [Operator question be Sigman first of line from The Credit will Seth Suisse. time, At comes the conducting session. question-and-answer

your proceed may with question. You

Seth Sigman

guess that prepared then seeing on results. Thanks you what's the I the there. quarter. some question that great taking month quarter, the and were you the and of elaborate quarter, to you to that going talk each for the congrats you about the wanted just spoke trends on improvement improvement the consistent to was across how the I And think throughout geographies? homeowner, related, in I just your mentioned on shift mix remarks, of Can

versus DIY pro, Thanks. helpful. you elaborate be on can If that'd

Thomas Taylor

Sure. Seth. is you, Tom. This Thank

each exited at strong remarks, we got with better at prepared an month the XX.X%. incredibly being in said rate and we we September As

with really to of across country. So, Very the it consistency. type see was seen We've performance that across same the pleased all geographies. that

sports everyone, that, good. historically been back lot in and has definitely evidence home. and put consistent And with not know our better business. into space weekend been than in home homeowners just is regions. all spending of money is it at That travel is in and COVID-XX seeing people the and being nesting their that and with strength talked we're guys been. you things terrific a homeowner and across script -- on the the we homes the due about to people repurposing and Our we've entertainment that It's the nature It's

people is in do projects side that our There lot web future. people we other the quarter. is traffic and is category a is the on thing purchase mentioned XX% our cycle say just was our during to in -- The researching a long homeowner there I'd lot researching up of of the

the pleased business. tone of with So, we're really

Seth Sigman

Okay.

So, it indicators as business the follow-up on the to sounds the in strong, margin. leading like remain very gross I also wanted well.

XX% less that year-over-year. third it fourth talked I up think just think you saying to I against you're quarter. quarter, want the than be the being For adjusted. it would about I that's less the -- And then up Trevor, clarify

any there. helpful. Just to be out Thanks. call differences That would

Trevor Lang

because you Yeah. $XX tariff think abnormally Seth, high Section was that we last that got I refund. of year right. XXX got The from million the benefit

backing adjusted XX%. And so last margin year, out gross this that is the

was to a margin. basis nice so, margin. that quarter, XX% increase gross yes, comment we're a Last relative point had the in assuming gross we And XXX

it's continued So, also from a Baltimore it's of it's as prepared out be think the product distribution center. we're that don't significant going margin, we to in but said think leverage high, get starting we but that comments, coming nicely. to up And going to purely I be

about we're costs guys last Atlantic because a getting and And under two transportation recall two, sales Baltimore November the DC. the -- much shipping Midwest higher that will big year, the domestic to stores we on benefits, third You and is out were lapping in our now of one of opened of Savannah. Northeast to mid Baltimore and just lower, versus the we

a that we're benefit so, also And there. getting

as chain balanced between supply and product it's what expecting. we're So, oranges pretty

Seth Sigman

guys. Thanks of Best luck. Great.

Operator

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

may You proceed with your question.

Michael Lasser

stay other letting consumer it's the to flooring bode categories be is year? does -- a installers anything growing? category their business whole compare taking well Tom, seemingly into to perspective home to that for you the have recovery lot your home on legs offer think might been next having than dislocate a has some home, broader Meaning a a will this you that during categories, Thanks about growing Do categories, other the business. home bit case? mentioned potential improvement And project? within been question. apprehension like into evening. related the my or why slower other what that in the flooring whereas need you focus, Good have Can within to

Thomas Taylor

beginning gist your blurry, Is a that the the -- Michael, came is performing I of of got The not part question? as all Could you I consistent. as which performing nature is nicely the question just improvement of it flooring on the well. is hear of little I is, think it, blurry, of flooring. perception couldn't home but the

Michael Lasser

comped At-home mid Lowe's and up XX% up today. Yeah. to are XXs. I comping mean, Depot high Home

home little housing consumers because below [technical -- The clearly Is broader a average requires within home So, seems maybe focus. be a bit to flooring ecosystem. this be can pro difficulty]. the that to in doing

Thomas Taylor

think anything don't Sure. Yeah. to I has with do that it.

the heard We homes. letting in quarterly call. Consumers talked we are the into surveys about their have not -- professionals last

Our a can that Consumers it's normalized are pros it's the homes. is program stores before pros out are backed far strong. affiliate whether our in worry. basis, the on showing our -- pros that are or Their that evidence in no they get backlog shopping up. They're whether of into they're

try themselves they we of pros good a And how that homes. about and consumer are. them into think to the do job on, protect early on good our letting how their to educating ensure I feels to

least So, that the is of concern. our

Michael Lasser

product -- And Okay. recognizing the that margin, pricing on that going is excess cost. product you're it as gross like your up higher margins presumably seems the that -- is are margins, -- seeing of so in

the now? for margins of modeling we right this some be a So, gross And should expanding sustainable quarters, next given several happening what's trend? is

Trevor Lang

we Yeah. -- with accessories a towards reopened getting decorative average, people higher have and as out us. the that in then is assortment. company job also, has right? exception we categories mentioned, mix, that DC I from this we're the called each And with then out, Trevor. called year leverage year. the that's of of a wood we're better Baltimore We gravitate as last on for Michael, And this seeing our product best. The a great the the margin -- comping It's done above team

it's So, is margin for performing it. again And -- drivers, within accessories, decorative higher one category driving which of the product the the the biggest and our is to a the product best the mix margins, then that better better us is product within it's margin margins.

Michael Lasser

Okay. very Thank much. you

Thomas Taylor

Michael. Thanks,

Operator

Our with next your question. question comes Forbes from of the with Steven Please proceed Guggenheim Securities. line

Steven Forbes

Good evening, everyone.

any Are thinking you account next color But leaning managers out how over couple end here? on the year? could just given think And channel that you and about trend commercial should in Tom, we your I of market behind prepared regional you right, be we expand spoke that's initiative as scaling? about been the this in on how was pro detail in great the hoping So, the the remarks. about maturation maybe initiative, into looking the profile

Thomas Taylor

a of can When manager ago. in them big able to of strategy XX are them also started to it we they've store some would a that our adding called the the unlikely good help on that over just to the come table. -- account looking a pleased we'll their We We've how We going managers talent said, I orders started bring remarks, lead we we're in we have good, work and the appropriately. Yeah. a a future. started will continue for go, way effort. into and even position And been how could are next job country customers around we aggressively adding process, towards. the in done with meaningful have to or feel and recruiting experience, now handle couple the we a market they as my to prepared work commercial see very forward excellent be two we're that -- the of adding regional what good These really We're insight good. with to more to it's We to stores year a a and are commercial excited penetrate members too the board little commercial them we're our feel currently that and again year.

Steven Forbes

a just And right. then Thanks. quick follow-up,

driving and relates of from -- relates curious to dynamic. just to anything you as underlying in do cycle? here, trying a competitive of sort catch about to FND I think driving between of as innovation chasing the mean, You or to would end whether are product separation landscape up sort the you you're how demand how competitive market Or you about to seeing people that innovation? the as it far sort speak the

Thomas Taylor

will that. answer I'll go in. chime then ahead Lisa And and Sure.

Lisa Laube

Okay. Yeah.

perspective. we've three There is the over product. our category lot customer. It's that a WPC in last two for on a the is of new think from innovation seen not brought there Lisa. us, SPC So it competitive the has new or and last lot. where the something a features laminate we seen this highest the of two, line offers interesting focused or is vinyl out a real it which apart which that we our We ton vinyl, is the and core end innovation years have been in from with and We for differentiator performance resistant water month a and just great really

got for something us. things been we've the down that's very been pipe. good more that's And coming So

and So, perspective, front I it to looking always would and the on the competitive to durability leading goal for. pertains say that is things that really from are customers a those out especially our be where side, innovation

Thomas Taylor

chime in. Like I'll I said,

unique that The makes to that that COVID category landscape to is, us competitive other and comes is approach our the thing within newness it in. down participate did slow when we each us

in work and hitting a is continued really we store product gap. where across Our products good we've do I to the every new -- ahead think there, bring the this the And virtually. and do newness there, day. that merchants really at new throughout greatest are and to And product stuff line have COVID. And but durability we've think done is got able were continue I the standpoint a innovation lot reviews of our we board widen important. to all from We of great latest category,

Steven Forbes

luck. Stay of Best you. Thank safe.

Operator

question Guggenheim you next Forbes from Thank the comes [Operator Steven for Instructions] your Securities. with line Our of question.

from Horvers question next JPMorgan. Chris comes of a with line Our

may You question. with your proceed

Chris Horvers

better Great that's fourth you. Can the the driven. you than the everyone. gross Good margin looks quarter to in be rate third evening, I'm quarter. -- seasonally, it -- Thank looking quarter. back tends mixed guessing

tariffs, what seen there there? gross are expecting back pricing and environment your you margin you fourth some think share incremental And I in thoughts on, have XQ? -- the the relative with can in quarter gross So, related pressure pressure to to that

Trevor Lang

QX. Trevor. to QX clearance it mix with this do than event the Chris, is Yeah. in really It and does has with between more QX

We have the our in year biggest the third clearance event quarter. of

So a that's category. historically margin lower been

know, you clearance we [ph] our event. got As

a categories. guys laminate, on reinstituted X, XX% As and recall the on it other August regards may water resistant most government of to tariffs you tariffs, rigid few vinyl, core the

was so, And paying going to tariffs. We again, we're know happen. how now, XX% didn't that

we So, bought ahead. sort of

see feel vast to today, two Lisa, not of cost us it So for manufactured And of really can feeling we're marketplace. a and categories as is apprised sourcing, would that costs increases probably the goal going then what there's we some not going impact on this. the dealing lot working to We're using product playbook with out to move those and we're in vendors And retail same that not currently. we to lot retail that are years. people we're been today. We're it we've can our in starting with of this be in because some that take out. those increases, working but you'd what's the We've vendors China. our would of increases seeing likely still monitor is see keeps some and expect the today, a two used lot we our to with where see see majority category a

Chris Horvers

type catch one-time-ish side, then you've And demand, of been Understanding, some a but it. expenses. there's probably on Got with to as follow-up. up another chasing sort labor

You talked or bonuses PTO COVID about any incentive expenses and related that, comp, maybe you other or that paid. quantify special

Thomas Taylor

Yeah. COVID year, knowing When got QX not we much and obviously -- how the were we weren't We to bad incurring accruing. tail end of we just was.

a was actually that So, benefit. a of bit

recall, really year to we're closer strong Part getting actually on, of was has may component progressed because in of the we then that. operating You accrual. had And a QX. it margin as

the pretty incentive comp single range is of that it's total our is bips so us. bips, in our it's impacting a So small, small sales percentage

Chris Horvers

Understood.

Thomas Taylor

There's things. it call big. wouldn't I big any no

to strategies, that invested future incurred. invest in some have consulting sales just overall and relatives very trying our We but to in grow things and other significant some -- we've nothing

Chris Horvers

Understood. Best of luck. Thank you.

Operator

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

You may your proceed question. with

Seth Basham

My good you is Thank afternoon. transportation and costs. on question

the quarter. guys You chain about supply leverage distribution, talked in

could it help you of you relate And costs. you those As transportation understand had seeing margin? if to better costs strategies through us contracts the higher that the on now. relates product into and you see do costs now and impact types your of rate that as What transportation baked expect mitigation gross had to what's kind

Trevor Lang

very is Yeah. Trevor. This We're fortunate.

both States. difficult seem and places because That Our in out certain it us when much two it's capacity get example, domestically of supply job done Things very helps are One, in for internationally. capacity just good in and to contracts, there's capacity long-term constraints has so really chain Asia, the for there demand. some then here teams a there's out, of us locking ways. allows

XX come one we've it. with over getting that's transportation and is to Then we're of have increases. majority Hey, is, deal thing spot up to year. contracts the term But currently, And not longer Those term cost high, today. next XX an months. the part is So, of we're because we our those through rates more that to got have the going contracts, not this going We're contracts. we if contracts these stay feeling get two, next those because increases do capacity longer can important

Operator

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

You with may proceed question. your

Jonathan Matuszewski

Hey, Thanks for guys. quarter. taking my question. Nice

is to versus exit pleased you the can trending rate? September's the You how start XQ, share mentioned release, October with in you're

Thomas Taylor

we're said, I to fourth September. to way quarter. with exited pleased the It's very the we the consistent very start As

Operator

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

may proceed You with question. your

Simeon Gutman

-- ask question to with everyone. it wanted I'll Thanks. two I Hi, parts. make one

you've one tougher year, lined sales were looks up And out pretty know, do or with year the factors? QX comp it I you -- roughly existing Chris's estimates an question home the know to driver this the you housing higher possibility the is told because the question are QX, year. start sequentially year, robust. nest margin. answering Is single gross there even still turnover. I mid outcome? drivers a us, gross is is don't those be And ruling if know digit they than this you're of second of -- biggest And Trevor, that this First, possibility you've going I on look like then the for Or but it still don't biggest the of can't to

it's I outlook. high if next if So, normal or your it but with I'm year in curious just look level, fit early realized, [ph] can could outside? for this,

Trevor Lang

Yeah.

all and in our a that's we're versus we're margin, our so now. of have focused But macro And be from things had we're period demographics I didn't over We're home tails quarter gross the planning hard we third the sales a in and most things that year, very on a million it next the are the XX%, open doubling XXXX so. one beneficial done going And we as in are from growing this the achieving. And year, late get be the that to our harder, to which a of because probably first have a it we to work and we stores on a imagine planning right? our little had of on proxy XX. then a three-year lot for all think to with a just the a stages from that's would I focused It's about it lot the of XXXX. aging would to wind perspective, operating and get us. very two-year XX by right for in XXXX We've -- read much term perspective, our longer income, existing It'd income level year. $XXX around statement, in large now of guys about kind there's opened you and we on are last we're up operating this. still think that. us to to basis, be nicely because goal XX% with now. on values -- goals, a going are going thinking preliminarily something On We noise that home those on do going at fact thinking sites

goals. a set choppy, have we those to So, year this little and still our eyes be but we as we get bit we'll on next XXXX, know year

Operator

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

your You may proceed with question.

Chuck Grom

levels. volatility, margins or going finish at Taking despite the thanks. gross time a year back, the afternoon. all above Hey, to high step Good all look they're like

the XX% And when you think digit a expenses? you you a guidance quarter guys growth I think compound continue year? just clarify trajectory follow-up. you particularly here, single at as up that. the just can sequentially. I then for how just about quick to thinking I ahead, are you your as said mid clarify selling Trevor, fourth look to wanted

Trevor Lang

Yeah.

There's and next level I be incur pre-opening. X.X back XX% we're versus unit about X.X because SG&A headwinds stores to Just stores. roughly going we year on right? to open three if some expenses, to years, anywhere XX year. from going XX for store the think going we're We get as think next pre-opening million to to growth next

that rate. grow much going is faster expense a at to So

public, their XXs stores, new is a the XX% mid SG&A versus low said of higher, Our store. that three as as sales for percentage low to we've for been our more we've roughly XXs years mature

XX% have be continue the to back on want because growth. we'll But So, have some store opportunities. some leveraging we think we do unit level getting SG&A component, we're margin at

have centers, as side, execute to leverage the kinds gross on to shrink think margin. continue for we plan you doubling of results our corporate is time. XXXX can of -- grow goal look those the the of, we we of to We to continue can get what the distribution out things. better/best, chain And we think don't period and then to that damage, continue We corporate. ability all supply leverage we some comment And back during if at again, we to that our the sales XXXX,

are that was of planning part leverage. there on another operating question. And EBITDA margin margin and getting we So,

Okay.

Chuck Grom

quarter selling Just a expense. clarification on the fourth

Trevor Lang

the is versus that used did year And -- pre-COVID I I've last sequentially. post-COVID. just -- say reason Yeah. sequentially versus was

this thought in And did We the this environment, me operating. now how It's heard increase. mid you've was correct. QX about more single talk QX post-COVID to I sequential we're relevant from year. So we're digit it to get

Operator

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

You may proceed with your question.

Matt McClintock

awards going you've results. say said but you talked don't it's that you year. Tom, I And have that. one decentralized. and I've not brought I are clearly. have question I that you're the just before. everyone. are only I the I got And in you those But -- clearly now, and announcements I think pretty that home to get question up already segmented thought never Hi. next -- The analysis is that results early actually made stores great today. am your Good But to have pretty some afternoon, one year, doing good say demographic this, -- guess about right I segmentation to you're too And much next the that

So, give your can kind Thank you, about? at that of topic's least, what without stealing a you. thunder, us sense of

Lisa Laube

Yeah.

last for after that And we've talking data have CRM it understand of been salesforce. cleansed all information in used put we've the new company. with been personalize last do now parts what starting we'd have of each. been we're starting the are of the And able of for year there, and pro, then are years. versus the is the messaging data over to -- a all I what the we to where able from that opportunity. to -- It's we touch the points that now initially just they to go our starting year be desk use two to system. of couple homeowner to connects about various pro and have we or that And our demographics to has all And So, see customer all

a we things future. the drive forward little and But will yet. customers business that our about we things definitely help really some interesting to learning to it's just So, think early reveal are us in the

sharing to first quarter. look forward we maybe So, that

Thomas Taylor

-- trying using because that they're gives pro a is, levels. in some to just focus just we back then under to expectations those roadmap or pat be because on one for information our stores on is then then Matt, and is performing level us or are that the the even team they And to of useful to with we've having us had relative exceeding should scientists to them regional more the -- to have so thing or design much just core store And over data incredibly what what and down doing. them data a I we're now correlate

that able that to to but a a we our -- corporately, and we're down of is going finishing to just level decisions be never -- had level. make store And to past information so are better use course, going we've data just even of have the region and power. And up and to having information whole in we're the

really pretty a had excited and that we're tool it's So, about in just past. not we've the this access powerful having to

Operator

from line Our David of Research. the next Bellinger with question comes Wolfe

You may proceed with your question.

David Bellinger

and for thanks question. quarter Great guys. taking the Hey

So, as just there customer also as consumer average on still or ticket of XX on Any higher trend seeing store in the ticket that apprehension weighing points down pre-COVID is on have you you service design commentary a the trends? maybe engaging and seen so. services? year side, last just over this that's were the to basis they some The any that much percentage an on there? potentially What up quarter, DIY type points are of three down broke trade two or

Thomas Taylor

Yeah.

question. I'll to So, that two take parts both. there's them

a for quarter, of design time part-time our the and really are services, now. it services our there. be. the of took said -- The our design are had our average getting a back We in our have get that. is designers up were a of bit back during getting first speed. we took furlough appointments prepared here engaged get design you them a part we that to in we when are mentioned They're third And And want part-time our lot One to -- did we into designers our are comments, full. slow. about few where our while lot to associates, them to them little a as ticket, just the We it reasons and

we big So, have. we always tickets those have that didn't

-- now looks on -- really homeowner some aggressive that of are purposely. in to is nesting. And around they're working they're old a get gone at third they're that wood increase an we've of are they're they best new evidence that up department And we they're We and the -- nesting looking looking ugly and and deco they're part a home looking and look the department, small They're and the and seeing, their more during we're to look last on the that We've that come we're That's great that's an it people was sitting And quarter. at sitting their calls, their we kitchen. And products when out -- the it. jobs. at so stuff. our attacking lot comping see new they're backsplash wood get if had the clear. department our change seeing Secondarily, average evidence. wood at has way. is, they'd on homeowners -- got our They're done they been clearing stay in think conference out with then kitchen, down. They're backsplash you

in So the backsplash, bathroom. that's a tickets average lot the than less

going our feel stacking overall, I So, we're ticket. into good as feel feel this in are the what's about quarter. those challenged I we about we're I design, in average about I enter in design. think good combination design. But doing where of things what good levels

Operator

question comes line the Our Group with of Markets. Mahylis Baron Alex from next Capital

proceed your You questions. with may

Alex Mahylis

guys. evening, Good question. taking for my Thanks

coming With be the older you to remodel accelerate store stores quarters? in net cash have cadence from willing powder in ABL, in position addition the in dry more mind, or rapidly the to would you the the up

Trevor Lang

This is Trevor.

something add I this. to may have think Tom to

$XXX,XXX stores be versus that It ago wasn't in a are more new our opened that first nice more long seen next spending XX stores We year. year We're lot CapEx first we also going a XX were doing EBITDA. return. our investing on year year to We've This stores. in stores.

got those stores Now a really because stores, EBITDA, the that were stores the the better few got above cost outside some in Northeastern going just and and in of locations. a locations. we've the store. own We've of We're areas they're only DC. a locations $X.X talked we we inside has more DC number close in are the very getting million aesthetics got the a a that We're detailed They're good to one individual where spend ROI going in bigger. on that getting our is some very We we we're -- lot to to high think of profitable be some of Every think that of single in going that very it well to investment in capital we've capital. volume, I about. with case spend associated of

capital And in are as be going next that to growth. unit aggressive deploying we back get XX% to so more we year,

Thomas Taylor

Yeah.

it's And we've been will more of We add a be that growth for I hit that's the never mean, is You does, growth XX% been most stores. as to mostly. a thing as been cultural -- very I'd to decision new a important of our that's but one while much that is which -- growth us. accelerated is retail -- decision. that retail lot units, keep asked of purposeful. most than Culture our a cash

have and We a people store want that. do decor for autonomy them sure and are of to to to takes do to that to that a store. trained time And get own, -- level floor We their ready run to lot they the difficult It's unique that. they're a make have at decisions make culture.

purposely. our we openings So, pace

Operator

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

question. with proceed your may You

Elizabeth Suzuki

Great. Thanks, guys.

as closes? in you think lockdown you round business would guess, potential you is to perform do COVID start How again. to from the close -- could that learned some again there talk go markets did I rise how the do think into stores cases have around last So, about what of And potential if and again? second about you bring

Thomas Taylor

feel purposely close curbside think retail the of doors we we all the associates. taken When And time, We our doors. get stores our because as we prepared, were learn. stores to have that good we in a and our I And really close reopen. we protect could and depends. the sure our and could that to classified we as delivery. central the We ready. didn't first We wanted stores product needed shut we so right the to learned to in, the that the to as we we make it lot stores got get to we Well, to and protective needed shuttered elected a everyone began markets needed

allowed closure. So, open, And it retail operate to and would about depends it's we serve our to open, retail but it's of the could so essential if essential or of severity a effectively customers. retail's all stay that open on professional if we the

Operator

the And Baird. Kleber from final comes with line Justin question of

may proceed question. You with your

Justin Kleber

here. Yeah. Hey, sneaking guys. me in Thanks for

Just on from had pressure and thinking on And tariffs prevent position like expanding peak doesn't how sound when about to turns, will margin next your you think margins the inventory wanted on year, see of a that. do gross confirm kind but it rate? point you follow-up just you Thanks. tariffs. would Based you're

Thomas Taylor

sometime year next that how is mean, I plays start itself when early to have see out. to to we're Yeah. going

So, I we think that's they deal how where that I right. -- and great on merchants the retails ideas raise are And it. to do with think got

place. in is plan the So,

inventory single day margin how have fantastic based in doing. to systems our -- position every as and we're We to get there. our Move position

And so, we'll watch it very closely.

Operator

for Ladies closing we I back call would of to the Taylor Tom this reached turn and to over remarks. Mr. end like gentlemen, question-and-answer today's have session.

Thomas Taylor

again, Yeah. our thank all Well, for associates work. all first, the I'd hard like of to,

frontline quarter. in I'd that. all and thank just our excellent the for scenes like to And our store are Thank are execution an distribution interest to support talking across company questions. on forward look that It's and amazing behind the just It update. in we to center associates Our associates you the centers. And our next excellent quarterly on we was our in you. and board. that appreciate of your your you our

Operator

This conference. concludes today's

Have your great disconnect time. rest at may Thank of your a for lines this participation. You you evening. your

Floor & Decor (FND) 29 Oct 202020 Q3 Earnings call transcript