FND - Earnings call transcript Q1 2022 | Floor & Decor Holdings, Inc.

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Operator

Greeting, ladies and gentlemen, and welcome to Floor & Decor's First Quarter of 2022 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Mr. of President Vice Hood, Investor Relations. Wayne

Wayne Hood

operator, you, and good everyone. afternoon, Thank

on Vice President Joining Taylor, earnings conference President Chief first call quarter Officer; Officer; Ersan me Executive Financial Lang, and of Merchandising. our Trevor today Chief Vice Executive Sayman, and Executive are Tom

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

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

to the Let over Tom. now me turn call

Tom Taylor

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

our are how of in earnings. will the remainder I discuss some XXXX. the Trevor financial call, about discuss will XXXX During then we first review thinking of highlights and today's performance detail of our quarter more

open quarter then with fiscal expectations, considering will earnings earnings first our good pleased deliver sales your and We lapping enter We record questions. exceeded business and year. call and momentum to especially last that sales XXXX the are in for

adjusted basis point physical to our sales to a success. service associates in and record first XXXX billion our earnings previous X.X% $X.XX the Fiscal exceeding XX.X% to quarter share of exceeding per earnings our our first Total of and our We sequential to increase from in and to teams in a are to strategies access associate challenging has execute market Moreover, growth been a a industrywide investments price, training wide and and that proud staffing, standpoint operating better and grow dynamic from happy our lower we that turnover and store, in stronger, confidence us continue believe to our giving store expectations. and Collectively, $X is record wages share grew in core increased share We last support commercial to composite continue ability range environment. competitive added sales inventory our our moat efforts macro-economic product, contributed year, result per challenges. $X.XX from XXX are never our customer successfully comparable these also expectations. sales. in declined XX.X% score. quarter XXXX year's Investing culture

to up openings. our new turn me comments my store Let

ending opened XXX last states. XXXX the of physical XX year. quarter the six We same quarter format XXXX, in of one stores period the January, first format new compared During three first two stores warehouse stores stores in February with store seven with in warehouse opened stores and during we March in

pleased are early the in first excited Portland, opened XXXX have first are store in market and Oregon, performance. its to quarter with our We of

Decor. XXXX. openings Additionally, our in second with fiscal store up Long better open stores to reposition XXX fiscal warehouse Lake stores intend We store stores evaluate strong Atlanta total an each format warehouse quarter lease total in expected plan store net on Garden We fiscal our New and York. store in of by South the in XXXX. store Floor renewal format acceptance to come location second as XX XXXX. nine in opened such, The was plan our of on the XXXX. would remain the we for This of and bring to they the store are store to delighted Island City, we as close to the the count at end newest second & in quarter And we

X.X Day we of studio we plans fiscal Collectively, opened now stores. and additional meeting, continue out of XXXX, have this least sales, time. XX% As half storage be March, operating Tysons discussed including comparable stores of years warehouse over moreover just maturity been fiscal Miami, format after a we operate store single-digit to Houston, we one Investor were our of design our during Corner, three Atlanta we at quarter time, XXXX mid XXX path curve at We openings Texas. high first only have and believe up built opened In average In by five and end group design growth. support warehouse the target Florida, February towards XXXX, of in forecast of design opened fiscal to of with studios, March open second to will sales our at growth move the for longer studios term XXXX. in an their stores the XX% stores these Virginia. In

now our discuss in store detail, sales. more Let comparable me

for with store flooring remains broad strong, among based merchandise across categories demand Pros, surface strength most hard classes. quarter particularly First all and

divisions performance strongest by We where We all stores in their weeks in led store of some south. had of comparable sales are growth particularly experienced sales ever most the our pleased the many with sales the mature quarter. double-digit

XX.X% increased quarter first bringing the February XX.X%. Our growth XX.X% XX.X% March in store to sales comparable in and in January,

reminder, As XX.X% XX.X% XX.X% store January, a year's last and in sales comparable February in increased in March.

sales fiscal up in of X.X% most lap with the our we increased our to look difficult line May store are as comparable XXXX, April quarter comparisons. our in month-to-date expectations and we second X.X% As

The first XX.X% was driven in by our sales XX.X% of store increased average a comparable quarter increase ticket.

and As customer expected, across continuing ongoing retail increase laminate ticket price is mainly all towards and cost increases sales mitigate vinyl departments. our the price in increases, the in points due average to and to better best preferences strong

above from led both average e-commerce. initiatives average company benefited Our our first designer an rate of quarter the from average. increase the and have ticket an ticket penetration also sales in which

transactions which year, in lower sequentially store the comparable XXXX X.X% of declined than the quarter quarter last from XXXX. First fourth physical was decline X.X%

to our than Pros of grow for executed our comparable store homeowner wallet and in a we of Pro accounted that strategy building successfully quarter Pros as XX.X% sales our sales share. quarter First relationship continue growing leans holistic first the faster among sales into XXXX.

We last our of Pros are in strength their times of XX quarter that with year, of equity. the pleased our up and first in shop top validating average XX% the brand average XX% over the growing was us spend

and our clear the competitive We in-stock a job disruptions during are quantities current the advantage continue block global believe supply chain. to

and business, our we towards Let making conversion from working. the e-commerce our are me by improving experience turn are growth web product focusing investments to content on

and the with XX% First accounted for quarter XX.X% XXXX. increased from in and XX.X% sales period, year fourth the year XX.X% last e-commerce in of quarter compared same the of sales previous

are mobile We double-digit website devices. conversion to our both desktop pleased with and traffic and growth on

customers’ optimize digital to we our ahead, content. inspirational product and experience we'll look continue As focus on and

design services. Let me now with discuss making are the progress we

focused only service ticket consistent find when gross customer is customers We our average pro on experience and designer involved, our margin high touch are score not materially higher building in best-in-class and is homeowners seamless experience a for a is that and but stores. We our higher. our design

down and designers doubling clear have design and attract that been to high in enhanced providing retain caliber we improve testing have by opportunities. will designers them begun we our path we by ability structure career in investing organizational and believe with So

and we in company's rate. are contributed quarterly making focused We are designer to design that XXXX a and appointment turnover the penetration pleased improvement marked of the the attention in quarter in first highest investments

stages initiatives about our familiarity are We with services. and building and excited early of these are benefiting from the design awareness in

comments RAMs that Let or to account commercial, in stores. work my our progress includes me turn our with managers regional which our Spartan and Surfaces

times. As By account no with where targets comparison, on of large a lead Services specifications regional focusing market specifications their XX% product soft reminder, Spartan of commercial market by our our have A&D on product that generally long commercial projects and have or product XX% specifications. focus managers hard addressable firms projects

floor an the strong and end, of surface prospects results. expectations implementing are growth XXXX and expand leader we Wisconsin functional are KRS and in We partners, that we how earnings areas February opportunity while hard are we Incorporated is with results XXXX in to strategies exceeded material their first growth Wisconsin, find that They can about a right Spartan's critical of and When and remain example quarter we distributor and commercial nationally. accelerate in based beyond. our in excited following to successfully XXXX. not Surfaces are To integrating in Spartan acquired our pleased small sales a XXXX, KRS

billings XX.X to encouraged Billings we to AIA's increased March ahead, As score see growth a in demand. we in are and commercial implying flooring of that continued Architecture February, for look Index from XX

We our plan from that XXXX. to we RAMs sales of the onboard managers quarter out are our XXXX, of to towards RAMs the XX quarter are our seven XX% regional year-over-year, continuing RAMs account fiscal in build first first addition pleased increased with in

Let about global chain. constraints supply how in navigating me we the update you are

stores, congestion of costs on the capability in significant As remain Angeles chain we U.S. and we challenge. Los Long distribution that supply impact continue port its Beach ports to to our and our our assess most see

Shanghai, have following and this leave more through a our other However, Year, in increase is impact. and Angeles our not and ports capacity lockdowns taken point, monitoring ports this Los business. continue the of divert this closely Congestion having Lunar as impact Beach to it backward step we we But are Asia minimize recent effect than at Long New on the in ships to COVID-XX expected weeks greater of trend the net in a China. dry

expires July negotiations contract slowdown or there monitoring during go are it's We international measures also and We could X. a believe in union between likely the warehouse work that put negotiations. be West longshoreman slow labor and place Coast contract ports

are our Savannah Day discussed we planning March At this port from have juncture, or As we Houston, major costs concerns on Baltimore no at meeting, freight distribution ocean centers. higher Investor XXXX. we throughout our

to collective our resourceful hard store all centers, their and Decor in the for thank centers resilient Before I'll agile, an be call Trevor to I serve Trevor, to of now want over results. earnings to our and prove to work turning turn our associates company. over distribution more the discuss & Floor quarter in our stores, to fiscal continue we detail Together, customers. call first XXXX support

Trevor Lang

Tom. you, Thank

to pleased went total billion, our first public. our fiscal sales growth XXXX was comparable full quarter expectations. our are fiscal in first to of billion deliver earnings We dollars, $X XXXX sales quarter approximately that sales sales exceeded $X the equal year store of we In XX.X% and year of before

are strong We track year’s results. year considering deliver store is a very be This consecutive to comparable to excited XXXX. in fantastic sales our on accomplishment growth growth XXth last

I significant Let Then balance will me XXXX. sheet our fiscal first of among the how changes the thinking and we’re of some XXXX statement, in about items income discuss statement now cash of quarter fiscal the discuss remainder flow. line

from Our first sales. year a driven last increased XX.X% profit total increase by in gross XX.X% quarter

fourth we time complexity the teams of chain The year’s cost basis XX.X% freight than during manage mid to hard with our primarily margin to I want our first of increases. year, costs supply and XX% last XX.X% increase. this XXXX. work to quarter quarter call rate the points the XX.X% better last was The XXX our strong gross shared on margin above due by our inflationary substantial rate all higher to XX acknowledge last point decreased basis and supply thoughtful expectation reported and chain and margin in gross from gross

remarkable pricing other did through a job and teams driving Our margin initiatives. actions

as First attributable was expenses modestly stores operating XX quarter studios sales since increased from leveraging April flat at The operating XX.X% and occupancy same strong basis and expenses primarily percentage decreased our growth. format staffing expenses year-over-year, sales. period sales and reflects And comparable increasing a store the of and store XX.X% was selling XXXX. design than advertising of comparable and expected. with from opened XX.X% The a our selling better as the operating additional points. to store new store primarily new align last store percentage approximately costs Comparable decrease cost warehouse three and X, in sales XX growth year,

prior from and XX year due administrative XX, XX during last general expenses compensation. March year-over-year quarter expenses points XX.X% ended the leveraged to and to X.X% year we First or basis the results of in lower primarily X.X% plan to of prior period. compared Reopening stores open year quarter. XXXX $X.X XX.X% increased incentive to the increase increased to the weeks million an The number or either opened compared that increase is

Moving our profitability. on to

First trailing quarter XXX last EBITDA adjusted basis our in EBITDA decline year’s margin due record in a to XX.X%. rate total grew XX.X% X.X% growth XX.X% points to sales from

XXXX. rate from in increase a significant lapping margin improvement and in XXX expense rate are We basis point leverage last gross EBITDA year’s in margin

earnings the million decreased share period in X% the decreased last diluted year. X.X% to $XX $X.XX net GAAP million same $XX.X last in from GAAP same from year. quarter period $X.XX First per to income

quarter First same from decreased to adjusted million X.X% in net $XX.X last period non-GAAP income year. million $XX.X the

adjusted release. share outstanding per quarter in GAAP quarter diluted $X.XX First shares XXX,XXX,XXX with average found year. declined with previous press our reconciliation our earnings the compared earnings $X.XX last year’s per earnings exceeding ended A earnings complete XXX,XXX,XXX share record We can first from expectations. of today’s to weighted be non-GAAP to of X.X%

our to and Turning sheet cash flow. balance

of The of from improve was new first making up quarter year. the $X.X inventory by last the million Our was last billion, since in-stock stores to or driven inventory, $XXX inflation XX% opening year. our investments increase XX

activities activities same of used quarter with two first cash growth year the Comparing for to XXXX the operating for increase net ending rate line quarter over of quarter decrease ended The other inventory cash Net million sales the annual XXXX. provided quarter items XXXX was was up only our of $X.X XX to result our compounded end by first primarily in XXXX. negative XX, of line XXXX, the by ending cash March million a the X% provided inventory capital in ended weeks the XXXX, was a growth. net of working inventory Our XX in at for of first was X, operating weeks growth over it support net with the operating compared the $XXX the in and of April activities our period. first

we’re about my now thinking comments me Let turn to how environment. the macroeconomic

offsetting recent important improvement changes trends tightening the balance spending. and of believe their bring recorded level trends as be now home to And lowest in will in which shrinking expect Reserve sales, difficult where potential entering home to well needed home interest sheet are run coming and existing of headwinds balance in millennials years. raise of early continue and within comparable home be rising path trends for likely but investment ranks of history. low to are spending equity, in It’s chain. and continue and existing still expeditiously rates and we high consumers said, term high substantial and We control the still investments continue to rates, want slower support that contemplated year, and appreciation, our XX.X% be sales that we as macroeconomic rates the of its is recent goal. XX declines XX% well and Partially prime secular the rise, These remote stock we to its from home XX% cooling could homes the conditions financial store of and sales, home at changes and assessing sheets unemployment documented Federal price continued existing home means long That on the end interest must deem a inventory such prudent growth under on our policy potential equity, include and these rates due buying as the inflation fill will rates, consider. be the to growth potentially and Effective to short interest but allow challenging price geopolitical mortgage previously to stability as to these wages the a outcomes. as strong, tremendous the in factors they sales high range is XXXX are new necessary. growing earned the make old to the and sales years supply range the them business, in work this than these is equity home record Considering home repair, housing to impact values, a inflation more aging environment, businesses plus home and

comparable sales of in fiscal guidance the store declines XXXX. Our rest contemplates transactions throughout continued

fourth X.X%. transactions quarter declined XXXX Our comparable store

transactions first currently our have decreased XXXX X.X% XXXX strongest quarter as from Our of our declined year. second date was results lapping X.X%. comparable in to down store line X.X% with March quarter transactions sales expectations last are and some we

reflects While and to mitigate store & price our transactions our and of preference the is comparable sales unchanged cost remainder better is increasing We decrease share our range largely increases chain the range XXXX. as approach are products, we our gross initiatives, growth product exit ongoing as expected it for Decor XXXX, XX% by XXXX per our for still supply to guidance pressures. to earnings believe Floor best and to rate fiscal margin achievable, driven sales prior

confidence proposition environment. Our any differentiated strongest business to that are will model we in our share ever grow macroeconomic giving continue and us value market

XXXX. and earnings in for today’s is growth year day the every very we And In range to release. by personally our leadership thank of now all doing We outlook entire provided serve in great we included questions. work the We at fiscal associates they’re strong partners to are customers. of lies press like closing, would to still encouraged us. team front reaffirming XXXX our and start the our and fiscal sales of our to the are Operator, we vendor excited their about like take that would beginning

Operator

[Operator very you The sir. Thank first Forbes Instructions] question Guggenheim. from much, Steve of comes

Steve Forbes

here? the growth change How Trevor, back evening. take sort Curious maybe just we taking real impacting? growth estate on a you unit just are that the to guys you you are cautious pipeline. Should plans, the is plan building the of Good to sort XX% for approaching focus the step Tom, macro expect in and of in Or longer-term. how XXXX? pipeline approach more to a still

Tom Taylor

plans our on growth. in unit change No

robust. is pipeline Our

performing New market an is take opportunity stores This to well. are share.

the And not our so a in unit. strategy no, short there’s change answer, in XX%

Trevor Lang

The to only It’s really add cash appears we’re the early going back class in strong it is, thing our X.X but to getting of a the to three I’d class is year, of XXXX in years. be stores. –

making $X volume to number that close close probably first by in million million over year We’re full to gets five. year $X

that seeing things decelerate, if even not some So were today. to we’re

We’re our a to we’re even where not if that’s of cost going from to double sure today, going but capital. return decelerate to capital they on we’re that’s happen, were get

we still so think for a to very us. be prudent investment that’s And continued going

Steve Forbes

build? Are Or sort model the a predictability five the could how three from independence? you creating really a sales. And think predictability from the one if sort follow-up you of still of on sort and sales more the color of local market do those share you within years that maybe pulling how sales on demand Where store ago? year coming about you or of sales today maybe new build are market? Curious versus are year some of provide or one

Tom Taylor

would jump say things. I’ll can couple in. start, Trevor a I

stores. the from our ability be. will the third there’s get are out larger into our to better our tend predict predicting and because our of the opened We when into the more out better. to standpoint market, our we’ve going people feel we The a stores we more independence a stores too take We I on market. more come are improvement rooms has change take As first year think much historically. in center third when do the home or they they analytics come and like jobs don’t then to sales little take a what over we gotten the base grow of stores,

terrific. demand. So stores any lot. a we increased I I see have have few that have some different think data don’t whole been years – last don’t those says that’s changed

a I I better has better locations. estate of over three years think getting the last better things, our a couple the – think job real team done

more XX And helped. are sites is been. that’s awareness base we’ve visible than years, historically think as Our And our the better. grown last they’ve I the over

open pros it more So new in lot better anticipated become coming we a often times the to end stores market, of up particularly than when does we convenient. store, and our because they more a

Trevor Lang

store thing us going there’s only I the or that is allow what drivers two really And to is what main a would see add Yes. stores to predict do. a

an First market, got off, around good we really do there. stores under existing we’ve

So, stores we’re Atlanta Florida Arizona and and in and opening Texas and California.

the Day, kind at million $X.X we start that. are in at As stores we markets, $XX materially full million said stores existing to the than Analyst of least at to those make higher open and million EBITDA. $XX When

good that of finance good And super a do stores we of knowledge things. have to density go good markets. really help got so knowledge a the And three household are is those and existing population, and to us it’s decisions. that household it team, When partners consulting since have good good is, It’s value determined we make what markets, fairly new team, we in we by income. of going what a estate real confidence

those at been good new three what class, we’ve those it’s will really at. We’re numbers. stores fairly really at factors as good perform well, forecasting coming as that And but demographic in predicting and things at those dictate a

Steve Forbes

Thank you.

Operator

of Wells Fargo. Fadem Thank from you. of question next comes The Zack

Zack Fadem

Good gaps versus way And versus the talk Where of in today QX QX? actions any pricing about widen more there typically you full gains year quantify share is you sit price bit to a your level your plan? peers? as the afternoon. Could you versus see

Tom Taylor

Trevor my can I if in maybe guess lot needed. weigh Ersan best to question. that do and to start and I’ll A

in we first continued, we’ve price as exiting as the took said, XXXX we were increases we quarter. modest So,

costs. We continued take to increase chain offset, increases supply price to

ability And taking price the we on price. in look so close really and competition, our we’re good to really at The pass finding our spread, we and feel we way both big a market, attention pay while to our independence is is box place good.

do average able it’s that best. working, of and been our seeing design and not we’ve what’s So same into sole are all We of our ticket lots that so which it’s in square the – customers ticket. got driving penetration things more driving see benefiting are e-commerce, of to tickets see tickets. drive helping the that initiatives at our piece footage those stepping as we’re are well. And better We’ve transaction in the time. We for

Zack Fadem

Got it.

Trevor Lang

relative want little at, just you took to And basis bit said than look ahead we came were increases you’ll you Zack, relative QX QX get – chance at when of kind margin We actually that. see in were the came our or think I XX Sorry. QX we of planning we better retail look XX, when maybe a a mid points a in to our – in for. – I lower.

lower, was a increases way to increase the we modest that there’s the So modest less or than say better took. maybe

about in good what industry. really feel our pricing the we we to relative So see

talking and about domestic You guys a of increases. see manufacturers big lot what Shaw are retail Mohawk and

parts, fantastic in very far, volatile, still chain but a so It’s So of team’s done very moving environment good. managing difficult lots a so it. job with supply

Zack Fadem

need for rest And then, today you turnover, with as and of the to healthy in the plan these the extent year, impact clear sheets. believe curious Got positives square second what it. the you the high outlook? looming order headwinds to think rates as that about you around you potentially headwinds housing rising materialize slowing to Trevor, But That’s half project demand, around mortgage balance outlined potential consumer helpful. I’m

Trevor Lang

We have Those And in this time transaction in decelerated in I commentary gotten are we my seeing called X% years. in than, specifically about little bit we’re down analyzing out trends. May. the down that think, time any better X% a then second We almost I my quarter, the more spent quarter-to-date. forecast what were XX in and trends year

rest those decelerating quarter planning the so the year. we’re And for on of continue every to trends

So, heads we’re not sand. in putting the our

assuming environment. We be are absolutely more bit going a a of it’s to that difficult

initiatives, We of don’t that the see incur we we going we’d today the know, modeling increases We’re the things based our half see feel as with get design, and more of offset this QX, tells we’re the not sales, with year. But PRO, higher economists. we’ll the bit. we’re going our probably but cost that. seeing that for commercial we is higher will be we’re And centric close we a comps our probably with our affect pass pay with along in to us, a up comps this QX little back we’re quarter, on along other with Again, retail to that to back trough. think costs then certainly primarily now. will business. to because our attention Maybe lot than because what doing of into have incurring the And we what

as goes. exceeded answer. expectations our in came We have she February, So far, plans. January, with line steady so our in to were March, pleased that’s long April a But and

So, we’ve thinking been pretty forecast far, at the about doing coming good so or above the neither forecast. in

Tom Taylor

Yes.

our my pretty I the are they’re do I’d five line. back maturing. the And And thing then was in historically still has comments, comp than years significant. think our we conversation benefited mention less prepared often, half is, XX% add think – old, so but our of I moat that I what moat to is only stores the

chain a fabulous rate. a at position to think share continue a I share think and take I do faster merchants our job trend-right in-stocks rate faster I – And just terrific to ability our think done think been product. at in a and started I global improve. are crisis taking happening, have we’ve our This supply

we’re – should really helping which half help quicker the trends, the that’s well. share just think in We’re that, gain back a us far as at of rate, ahead and I

Zack Fadem

Very helpful. Appreciate the time.

Operator

Michael from comes Lasser Thank UBS. next of The question you.

Michael Lasser

Good Is evening. my say is it this question. Is in traffic mentioned five others? far quarters end rate Thanks one assume experienced the might to Is prepared housing to motivating your comp more more of of X.X%? above, to there consecutive What for consecutive remarks, that I the – you decline the hit turnover? year. that now quarter? lot you the declines be total the this to than at a for it range five say X% say fixed but that’s you’ve for high all taking in thus the X% it you’re to is that? mortgage difficult Trevor, your XX-year you going of it that’s months motivating

Trevor Lang

I good the had our think on call summary, Russia Michael. invaded that’s a last that Ukraine. We day

up. have energy been mortgage clear has in rates. So Fed about rising rates costs even gone interest The

– versus take all that Americas’ the are takes takes year rates And That’s mortgage, X.X%. simple cost. just your middle-income coming – you $X,XXX. mortgage $XXX,XXX saw your that $X,XXX today, if payments a of out at We’re a to mortgage, that’s $X,XXX

those last factors sort tougher since have we call. factors the geopolitical and just those So gotten macroeconomic – of all had

giving things think but performing date. us Again, there’s to great we around that We’re our commentary we’re economists, could affect enough commentary. business that that’s just macro not

Michael Lasser

you is, that follow-up your and EPS in Okay. year of low the comps still can how be your case, this low hit question My guidance? end

Trevor Lang

had I think mean guidance. said I is what we the you in – XX.X% we look if

at relooked below things – think we to this we see recently. start I trend that if

traditionally If you XX%, even the to really costs of get more in lower you difficult more years we’d after we XX%. our – have over could somewhat if able historically, fixed fixed been We’ve a go XX%. been kind of nature, that costs. to XX% But environment, – our are in say

So, mathematical, that obviously looking compensation store at incentive payment costs. fairly There’s to very large SG&A, and is quickly we both that corporate. a would start goes our

if more And so we we cost. our lot that be seeing, that saw of a we’re off obviously would of aggressive what lowering trends in – were much

So that it’s simple.

hit us would we EPS. the be that think would XX.X% low end that I what to is tell the of able

cost that We’re that to side below if number, on got we business. of our get would today. seeing not aggressive we And more the start

Michael Lasser

good luck. and much Understood. Thank very you

Operator

next from The comes question Chuck from Haskett. you. Gordon Thank Grom

Chuck Grom

month evidence afternoon. Hey, been thanks There’s a lot Great price demand on destruction across increases. retail past some some guys. results. of the Good

I So, past in your if I can elaborate, and of over seen no, months? if couple see to is answer curious – of business I any was the but the you think that want you’ve

Trevor Lang

One I’d say, was decelerated, I has our business mean it but thing planned for.

against numbers some stores. really pretty big got you surrounding the was Texas because that up hit Texas March benefit we We’re there year. a and of last look and of April, at When freeze the big

and call, expectations as essentially So are the April saw we comparisons our exceeded our you and now. the in dollar said earnings hardest at sales results, guys right actually in in And we plan. was

So, four the our we’re through year. of or seeing guess, today, at week plans above coming and it we’re first the not in I months one

Tom Taylor

across ourselves go compete earlier, historically we way back say, pricing but I’d price I get from we just compare look to I And to is the to, I the Yes. said thing which just and been. are I’ll people what consistent – the one way spread didn’t what the it’s with from at a mention, that we

then that. environment. And markdowns pay a ago markdowns. in secondarily, competitive price less to I than dollar rising good feel you attention competitive about a year we’re actually did we And So, running

So, good we the hear all our don’t I And the I time, feel I’m – in price. stores don’t and about anecdotally.

to this determining not that’s increase, accepting consumers and point. at expected of prices have that, sales I they’re think

Trevor Lang

over getting we out each New were other Year came – to that mentioned well ago we bringing one now is and team our mentioning in on hey, us The We a early. thing Chinese probably earlier. in need last supply three worth inventory calls orders the chain more our inventory, We aggressive in of this thing. year called to be said,

find in the in-stock not maybe so competition. we we’d a even our position And where levels, ourselves like better than though them, they’re much they’re where

a And cost, they’ve in so our to team, is we’re got but another merchandising more fact chain inventory that’s helping at us – our team, seeing we’ve what done supply good competition. to relative a stock of I thing than the in the inventory business think come job that’s that keeping our our team,

another lot do is I So, got that not. thing and the fact our think of inventory a that’s helping that’s business others we’ve

Tom Taylor

right. That’s

Chuck Grom

a little unrelated. my bit Great. Okay. then And follow-up

been and business it’s bigger piece Given that was during wondering business, of cyclical becoming a rising how growing the rate is commercial the I past cycles.

Trevor Lang

trough I hit There to just lot maintenance a think COVID such needs there’s fairly of a into areas those that was for when deferred it. in us, a that of new commercial we’re done. lot be

You good. Spartan’s look at it as guys business, commercial about looks talk on well Tom we fairly the probably as both our commercial backlog, heard very When architectural index, it’s our business gross.

So about show the not a consumer but not this business a consumer is Everything hard these may great. may think seeing at we times. where we’re because this is can year POs. it’s contracts or lead and longer are today XXXX like point, see everything to up, It’s

QX had I fantastic as did. think RAMs as a the well mentioned Spartan Tom just

So feels to be like strong for us. for commercial is a it XXXX year going

Chuck Grom

Okay, great. Thanks.

Operator

comes JPMorgan. Thank from The Chris next Horvers you. question of

Chris Horvers

evening good and Thanks guys.

just about or from as really it in in very your declines there’s near happening I guess in that’s So, that’s – expectations up down if outside term, trade or pricing. trade we sounds think the of growth business or nothing like transaction the

we held from an XX% three-year if quarter. would April, that in So, CAGR suggest the second the comp

through? following we about CAGR is about question, earlier how theoretically, how the actually an think that increases else on to lead those then that if think changes, should I business? price do And when come acceleration? So nothing Because, mean, we up would

Tom Taylor

suggests close if on current roughly today. really I continue, mean, what XX% actually our we’d The be called out think trends modeling I that only to – quarter. current close the you’re we

running it’s our at back look go we’re QX a comps the unique, So, our the we business, to in and year, consistent going comps and stack been of look business. have that’s because and what so the seasonal COVID we that if be as today, we you at look and don’t I’m think we’re hard the about and three-year and QX. to We And we’d QX volume business. stack, get think they’re at as and not QX, QX closer we be QX because trends part sure back would don’t at at you trough raw but did the then as as in XX%, at look promotional three-year maybe. at we be have fairly trends. we don’t you to then made at our to QX it three-year our And at But a look three years look with and commensurate, much

the And in another where think that at QX. so it that to we way our is should modeling are about around be three-year would suggest and it stack, be might look

Chris Horvers

gross and that And stack in then what Yes. fees, had the the the upside? the in earlier impact – fourth the quarter that probably Got just it. had I CAGR. margin, change Is demurrage Probably you on you to? gone? the drove of versus year. some – of know the the margin early to about And that on in exit. the I on that how slightly call, does looks where terms than calculus maybe you all actually you up last so and think how better XX% talked gross can in or get

Trevor Lang

we’re of think detention, – It’s guys. definitely basis and good we demerge lot gone. beat were planning. in we was a better not XX the points I QX, That’s there than

costs. demerger, but lots cost taking on in taking on detention, lots We and not so much of are still we’re of in

– the a volatile. and the very have the true. the current costs Again, markets and think is pieces managing come the bit. up detention we We I again, not we view we’re they’re are currently said down. that year, coming ended six ago better. demerge But think world it’s rest as down the of months about spot being The and this of

probably where our date. as feel that’s position. we be as upside the the to well Again, could retail about competitive really good So increases

demerged So retention, markets, spot current Could us. opportunity I an say continues. yes, for mix would be

it were from. if that’s come – to would we where so And have upside, that’s

Tom Taylor

thing that our best categories best are and are better our – is I’d Yes. add, still only Trevor, we categories. comping The

So they’re that’s margin, And helping. and that’s to to is increasing, designer been then a margin. – benefit penetration our a that’s and still benefit also

those is So our towards. things are control gravitating that then the consumer and are within

Chris Horvers

much. great. you That’s very Thank

Operator

from you. Thank comes of Morgan Simeon Gutman Stanley. The next question

Jackie Sussman

Hi, Sussman this Simeon. is for on Jackie

on or consumer back are the question, price anything with elasticity you high- low-end guys price the on seeing Just elasticity?

Tom Taylor

best-performing our are mean, category. and categories best I better

that prices the So to customers up are coming stepping highest have. and still we in

our is critically in surface think and important, I – I jobs believe people these the in the there. all hard trend time do floor, don’t do

like, when come So be with to our going buy better and tends to it’s it in, what I us, they’re and think they they best.

continue consumers a So of lot. a – not seeing spend to much

Jackie Sussman

the bit Got Can pipeline about or quick you. And of a a little backlog just question. follow-up you talk projects?

Trevor Lang

retail a mostly It's business.

remodel. It's up us in still is majority business The of be overly what It's business. significant to large backlog we fairly So of is we not ton residential a a the a from have our today. commercial don't base. vast sell for expected small

$X and from business. about So in do sales we Pro in we'll feel strong. the backlog relatively good the versus But the And again, still commercial small perspective this over that's it's a billion consumer year. perspective,

Tom Taylor

still robust. the question good what they've their We Yes. and it's day shop our and pipeline beyond, what Pros the we us. us, They're from stores And data out tell done, ask have got across tell we weeks thing the they backlog that in markets. don't I in jobs – mean then It's country. a – getting that from they from is away go. every can only they're

feel is good. like we pretty So backlog the

Operator

from comes question Karen of next Barclays. The you. Thank Short

Zeyn Burak

Karen. much on versus would from for continuing space business This housing relative of to to as within home and of from – is taking Thanks maybe that, you related of light you the discretionary the business to potentially Zeyn what model comes actually slow your Are of remodeling able how to more the business replacement discretionary parse softer questions. And repair of of the our about purchases? nature Burak macro characterize talk for somewhat presumably here? broader resiliency down a out in and improvement the more the in context the

Tom Taylor

we XXXX in the we part takes in saw XXXX. lot leader XXXX. the tell pretty you, I XXXX the the remodel. residential a retailers, And when here as is And far think leader. of double-digit see experience our I comps the as between of that. downtime, more my tough. rates maintenance? versus you we low-price good trend and when we a we better late first the mortgage know inventory share of – and was where especially low-price other We cycles, don't is And have we are my will experience replacement of early in If we QX of a up sell fast like what the and in housing much understood market operator versus I QX the overall vast have in a a very think don't then And question, a cycle bit How I did went majority that deceleration business do.

a equity that have. and meaningfully the wealth we think different outperformed But home the market. I it's even people lot then, because the now

the here, two company, are we're important, a lot speak that cycles leader so those does believe better more better. much can the when but been I do I've that if and usually to And low-price I only price becomes a and stronger

Operator

question Greg comes of Thank from next The you. Evercore. Melich

Greg Melich

that Would majority Thanks. to design the follow I fair? center, and the on up like mix a impact. of cetera, wanted sounds ticket mix pricing was probably growth It et year-on-year. be

Trevor Lang

lot of higher, growth it's higher, Pro – across combination ticket's e-com ticket's designer it's the working best, the biggest our are I better price, of in All those and well, our... think, definitely things ticket's is yes, part – a it's higher. It's all. with a

Tom Taylor

Transactions. Yes.

Greg Melich

to and layer let's I right a we let's started in you year-over-year? is trying expect quarters? a what say, off back year-over-year So the I'm was that now, you in X%. get something Should Or and at to expect on of is those the to roll of next pricing if sort last of a basis comp guess just accelerate pick think that pricing number, year in all the on that to roll half are in tailwinds I couple

Trevor Lang

the higher retail we expecting I year, of are the we chain costs. because our half expecting more think supply back – we're as think about

others capacity adding you $X,XXX more know, up long a costs, down we as are and even Wasn't capacity. spot international the are paying lock Our for guys ago, in to were market's us container that container. order –

Now we're a lot more that now. – paying than

half will when XXXX, of probably we seen the in date. that's we've back So of part the what costs relative being come increases year, back the to more because in some see of retail the those higher to

Greg Melich

imported, the China And from Europe, could you what us in supply either of chain are from given update percentage or challenges the world? your on sales

Trevor Lang

Yes.

we're – think Asia's... I

Tom Taylor

XX.

Trevor Lang

is But Well, close higher that. than that's overall, XX%. to percentage China. probably a Asia It's

XX%. than think less Europe is I

Greg Melich

Got luck and good guys. it. Thanks

Operator

next question Thank from of Wedbush. Basham The comes Seth you.

Seth Basham

Hey, thanks evening. good a lot and

you clarify, transactions to comp ticket when in to XXXX for last and relative guidance Just in changing us of to February, store spoke some how average comp much now? your

Trevor Lang

To better. been date, we've

than Our in thought. better had we sales came

the trends we the comps on knew we're better. we not though, were is right Our are a The transactions. were are where rest that a expecting we about continued I'm year think little we deceleration – the as of originally bit changed I now essentially we guidance. think when so sure what's in gave we

but that. a more a in assuming on offset than to a higher – we're planning more in slightly deceleration So also retailers increase transactions, slightly higher slightly we're

So ends comp the the up overall place. at same

Seth Basham

Is of direction couple it parts? offsetting XXX points each other those each in a basis

Trevor Lang

we're lot economists. changes biggest little not bit deceleration of quarter. modest a QX becomes the it then think it And a see at again, I in we the the think year. is back part We transactions. by more probably And

to deceleration as view on – modest current deceleration the we're thinking you'll is then the will spending. is reacts how be consumer Fed does it. more of a half quick how the back our see what think about highest in driver the I year happens big QX, the the that currently is get and that But and much confidence and impact we and you really that

Seth Basham

very much. you it. Got Thank

Operator

The you. of Baird. Justin Kleber question comes next from Thank

Justin Kleber

guys. hi Yes,

Justin hear you me? Can Kleber Baird. from

Tom Taylor

Yes.

Justin Kleber

Yes.

leverage. ask So about I to wanted operating

You on leverage. made comp I standpoint? be stores. the of staffing fact a stores from there from had leverage anything investments? obviously And would last we basis the aware thought points store I lean that just a on comp running XX comp, you've more timing is perspective should – have else of and on a were Or of XX would recently wage mentioned guess or got sales you have Is year

Trevor Lang

down the we're out. our Last with we to now I'd year stores, store Two stores. ratcheted XX%. only of with call up ended when things, COVID new XX% right? year in Because XX% the guess, really And I new year, we we growth started

just that's Now stores. total, not the comping the

more So we've and XX% higher than newer stores got a runs stores. our and mature lot more new at stores our newer cost SG&A our

we you year – of a XXXX, pause so that took one COVID QX and started versus up XXXX. as Just going you're

that we're piece we a And just of we're have We last a other younger a And They in significant increase a have made. of certainly, an the and in is, the inflationary of we July yes, minimum $XX SG&A. in labor-wise, retailers stores then base. environment. about lot much You made talked of year. raises January the became fairly got in more this in – year. investments higher retailer We lot second

it us to two while anniversary so take And well. as Those things. are big increases a those the will

Tom Taylor

that also weren't stores last the He's right year. –

Trevor Lang

Yes...

Tom Taylor

pretty of in We a place were chasing years. good weren't staffing last last year, staffing and we're now the in that we couple for

Trevor Lang

That's right.

Justin Kleber

form few to in of helpful. being from you. ago, similar to That's on Okay. so I a clear seeing it – bottom exclusion if give you the how relief on guys ask do that reinstated line? operated me you Or you ago. about wanted I wasn't categories are lower the flowing or believe Are USTR excluded. to Thank recent you were back to then any the And which certain that consumer just unrelated And Chinese that prices, so, years decision? the as month a to tariffs imports

Trevor Lang

we're Chinese at are just aware of not – we're changes any impacting tariffs. Justin, that Looking

Tom Taylor

is knows Brian if I anything. he don't Robbins know on,

Brian Robbins

on been that be now, change. change. some – to hope we But second There Brian. waiting no has quarter, for looking relief. it's of not the end for right the may We Tom, anything Hi there we're just the keep towards

Tom Taylor

you. Thank

Justin Kleber

thanks. Okay,

Operator

Bottiglieri Thank from next comes question The of BNP Chris you. Paribas.

Chris Bottiglieri

taking questions. Thanks guys. for the Hey

any to into track you this the purchase to business. to of purchase? you. any activity And different long of you relative of be in I transactions? as much at Like question Thank trying level leads, a how are how look to my kind seeing have you've are Or you understand visibility ultimately category the transactions they negative cycle those typically, begin versus Just the trending guess is seen? when similar DIYs from would customer you

Trevor Lang

shifts I'd that Yes. materially. or any lead say believe trend changing things really samples in anything would we're not to us are major seeing

Chris Bottiglieri

it. Got

then It on crew. unrelatedly. you ask maybe pent-up wanted from be wanted in-stocks on And helpful. of catching store where sounds just about I quarter-on-quarter a some were just to like That's inventory, you XX% up that to Okay. basis. level per

should how get to on inventory perspective a of looking about we want Or that if the you the turn the you're shutdowns think course per Just of think XXXX, forward? store in over China? kind planning how metric of is of

Trevor Lang

planning this we're on it exit these driving year. as as our up. too, had on increasing in-stock. been, definitely better good have year, has inventory its it we costs, Part business And our taking had of we would the been that's We're as inflation as better

improve to in-stocks. our a and need of team people So fairly think really yes, system we've large about got we good where a that

to continued we've over to so But the each our in-stock. And do to there's still quarter last progress improve make more four quarters. work

would lean would issues Shanghai we a year. expect major that rate we stocks in assuming But of to faster good right today. we we're increase get in our in continue inventories our at going categories slightly sales to for we're than China, to to So – the going going we have on because know any rest expect don't now, the in that's in what's with be

Chris Bottiglieri

sense. Got you. Thank it. Makes

Operator

Joe comes the from of final our question And of you. line Thank Feldman TAG.

Joe Feldman

question. afternoon Thanks good my Hey guys. Yes. for taking

if weighted but seeing stores, are going half Just lot out slip because delays that back material any this to I but the permitting more even recall, be related there. XXXX? you update seeing On to hearing I Thanks. were wondering sharing and related for keep stores the about the to just If might materials? estate delays to new year, thanks real of of a you're the I'm issues any numbers, the

Tom Taylor

year out getting XX% with Certainly, studios. problems coming doesn't some our had fixturing studios, problem We We design delay growth. our don't they're growth. that last count was there's China but unit we in unit of had challenges, the design anticipate – of some that for any at our but to end our XX% having

So navigate challenging think it's a short environment answer historically we more we but than is been, it's it. can

Joe Feldman

it. That's one hear. just to Thanks. other great question. then kind Got And of unrelated

know productivity. helping you helping have things training the of and to guys training this, the improved the the have associates that remind drive retain some that's can better that with training probably but you to is you done mentioned regard I that? improve should You and changed us

Tom Taylor

So associates enhancements and way over-indexed lot and our year managers. make that I we every we've training would to say that on every year of associates. our the to train how We've the in we train spent managers changes way time we a onboard our –

Our We fastest in environment early of a heavy at to comes tenure turnover an sell the tough Decor. associate's & Floor work It's in. part stuff.

their reduce improvement other associates' through combination pretty a good with That holding to the to has We lots rates. turnover. our of months seems we've of beneficial. think helping We're make turnover been of our things, to seeing the be that wage that hand onboarding. in in managers with with in combination our spending sure six first they're So really done time job three

As we we've far product good, as been training, are good.

it like better. is, change We to and many for evolve good how satisfied We're list better to this. there's just too changes never and and it it call it a but make continue with

Joe Feldman

it. Got

Tom Taylor

the and everyone's Appreciated. Well, interest appreciate appreciate Thank in results, I our questions. you. I

that talking For for to next in times. you certainly our interest, in we everything that your appreciate these associates are quarter. look listening, doing the But thank challenging forward you you're and we to

Operator

concludes this Thank and today's gentlemen you. teleconference. Ladies

You may now your your disconnect participation. lines. you for Thank

Floor & Decor (FND) 6 May 222022 Q1 Earnings call transcript