- Earnings call transcript Q3 2022

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Operator

Good afternoon, and welcome to the Floor & Decor Holdings Third Quarter 2022 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Wayne Hood, VP Investor Relations. ahead. go Please

Wayne Hood

and operator, everyone. Thank good you, afternoon,

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

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

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

Tom. to me over turn call the Let now

Tom Taylor

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

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

pleased results and excited a XXXX challenges. sales with quarter considering comparable We consecutive and store our third growth, are fiscal macroeconomic current about the XX of years significant approaching year-to-date accomplishment financial

reflect with Additionally, margin strategies which better and the to $X.XX as all than outstanding per growth and of the of $X.XX and an satisfaction us pleased third adjusted homeowner results Pros the our per share. that increase These year's business recent last better of serve gross to XX.X% solid work our are every customers do scores. enabled rate customer diluted share execution our associates our expected recapture, quarter our financial share, model in XXXX per day of we strength from of earnings deliver demonstrated

serve communities recovery validating they our Because by our further Our Florida for to that Ian efforts. a each satisfaction highest one efforts, we to reopened investments was our in of work service are their are three-month moment customer and wages in express associate deep of particularly quickly their our history, making sincere customers the gratitude I and and take want their as associates my to to dedication to training in rebuilding other. the we begin score stores and working. hard impacted Hurricane

fiscal which and quarter, Hurricane openings lower Ian, industry the eight warehouse pushed construction delays We September. with primarily Park, fiscal XXXX, expected growth. new store store planned is stores fiscal one Compared in and of quarter. new openings Florida opening due in including the format our to August the quarter Turning our in third Fern our in to into the opened four three fourth warehouse third store than

ending openings. warehouse factors planned warehouse seven to in fiscal the the plan store achieving stores fourth XXX quarter our year our XX these of XX and with now stores. opened open XX XXXX, have Fourth result quarter we of to-date, annual format intend a of As we warehouse warehouse opening store

a We Orleans D.C. including Tyson's open Houston, studio Atlanta, in are and We Miami, now excited six studios New operate suburb to in Dallas, Atlanta. Corner, October. design Washington Georgia design studios in

our As range believe we XX best second warehouse the store openings think stores to openings XXXX, be in XX weighted to about new to prudent fiscal plan is in for it a the we of and ongoing the By our goal opportunities for account into delays we about US potential half finding so, year. be stores. warehouse construction XXX can long-term take of the of real patient and doing estate

Third year $X.X to quarter XX.X% approximately sales last from billion. total increased

third sales store to comparable XX.X% July, X.X% the and August XXXX, XX.X% including compared quarter of in third Our quarter increased in XX% in September.

and As category. our remain laminate vinyl merchandise strongest expected,

a expect continue slowing we forward, fiscal look we transactions economy housing fourth weak a quarter throughout market the our to of and into and weigh As on fiscal XXXX XXXX. will

versus fiscal quarter of quarter fiscal As in store fourth XX.X% sales difficult XX%, a more third moderately a XXXX XXXX. reminder, comparison the comparable our making by growth sequential for increased

Our up period fourth quarter, about same as year. compared the store to to-date are X% comparable sales last

on Let none made has stores were our we our associates quarter, Hurricane fortunate In us impact and quickly days. gratifying of had XX It XX had to me landfall on days We begin on the that reopen it customers comment third closed merchandising were to September our and actions as store since Ian rebuilding. recovery serve the XX, immediate materially stores operational XXXX. to our and they take was closed partially see damaged.

help X,XXX to we to pallets flooring example, vinyl flooding. their needing Florida of replace For in South positioned from quickly those

and a third any quarter. by our estimate basis of of commercial the and points At Ian. is Our quick was points sales difficult XXX in residential a it the loss dollars for the company XX for actions are over potential billions the to growth damage with Hurricane and estimate size. benefit flood degree juncture, in years this precision months September from from basis the coming remarkable on comparable store our of drag We storm

and not to to market at quantities Florida, price. in lock able value being sufficient positioned due rebuilding job mention are, however, the demand We well deliver our lowest position for to the substantial share

growth a our fiscal compared the sales XX.X% quarter XX.X% driven third XXXX. of ticket, were in in Our quarter growth second comparable by average store with

ticket average sales an increase in penetration increase mitigate continues Our pressures, and benefit penetration an laminate to growth prices an high-ticket, Pro, of and in initiatives. vinyl, and designer-led in from retail cost the our from to increase sales e-commerce

styles points we lowest continue best We our to the trends where price. towards at and ongoing see industry-leading better customer preferences offer and innovation, price

X.X% improving from fiscal comparable slightly quarter third store the XXXX. quarter transactions second last The of from declined in X.X% decline year, a

were of quarter of fourth reminder, XXXX. for and fiscal transactions As the negative down turned our X.X% late a in fiscal November XXXX

start mid We the of -- single in will to second cycling quarter past high declines singles XXXX. fiscal transaction

Turning Pro our business. to

of XX% that quarter transactions the XXXX. third strategy of strong accounted Moreover, our make Pro wallet from than year. the quarter, of to be spent third second XX.X%. to Pros. holistic Notably, the total We Pros are XX% X.X% pleased company's successfully our third average the share increasing total and comparable Consequently, sales, store comparable sales executing top the more In exceeded grow up continue XX% of among on for quarter that sales, Pros Pros by the fiscal growth XXXX. we in last sales a quarter to from XX.X% up are of

net significantly increase the growth Pro celebrates and in last opportunity our expectations third the So This event. Pro generated supported new our the was to and contacts. classes. quarter, continue pros we In created growing brand everywhere with are this by annual year weekly our and This Pro excited with engagement event a above XX,XXX events free event Pro about in reflected giveaways new we appreciation The year third growing Pros contacts XX% awareness. our growing like contacts our from virtual yearly installation opted year.

our build and career of priorities the we further in training on our and leadership quarter to beyond, of development, focused initial we look we fiscal desk Pro are and To As including are the an the framework Pro investing execution end, at fourth strengthening path. teams of objectives. resources Pro XXXX key that on to

team a the us career are fortunate of our unique opportunity. Pro members ahead that We gives growth

end we are Pro and members our certified refreshing be Additionally, all fiscal by programs of expect team the certification to XXXX.

enabling Connect account are by aimed among with of tool Pros. at our management Pros tools and lifetime Pro relationships building excited strategies tracking We These other management new about and are launching associates. value our account deeper and

business. our e-commerce Turning to

As including discussed experience, our that continues calls, strategies prior on focusing and digital conversion. team during contact will e-commerce executing our customers' inspirational further product, optimize

XX.X% Our year accounted of sales year. XX% from third and period the XX.X% for last compared with same in sales quarter e-commerce increased last

ticket the pleased year-over-year company a quarter average are grew the ticket comp. average that comp e-commerce faster than third rate We in at the

now moat competitive about in believe there with to growth or service. commit strengthen this the over five opportunity stores to our per to and warehouse to in opportunities Turning design XXX is have are designers services. free We designers We resources services store. significant continuing design our

Additionally, to in-home believe an or there by with services. we whole is offering home design involved renovations become multi-room opportunity

As Atlanta. such, and Washington Houston, Miami we in-home now services provide Dallas, in D.C., design

margins. calls, see tickets, higher adjacent scores, have gross involved we we average category prior customer discussed and in projects As are designers when service sales installation in sales, material

store Both believe reasons, are time to executing right the designer at total and that above third design staffing growth elevated ensure We significantly service and have place on follow-up the we converge. requirements behaviors right focused sales growth these comparable the in right are are quarter designers rate. strategies For and the we working. maximize were company's our

average pleased to both growth see and in ticket. strong transactions We are

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

XX.X% sales sales once, third our where of and are Spartan growth XXXX to sales third results, again increased We XX.X% by compared quarter by from the the and at very EBIT Spartan's quarter increased expectations. that the period exceeded year. last quarter pleased earnings same Surfaces third and earnings

remained also sales strong. commercial non-Spartan Our

that opportunities in to have challenging we about closing, discussed commercial believe we and In navigate have the commercial the remain teams, model and macroeconomic we our we calls, strategies. the demonstrated agile we excited right business market As that prior successfully. strategies have environment earnings

setting we're our year. of into on quarter we approach continued XXXX the XXXX now fiscal this fiscal As over focused outlook the call Trevor turn financial remainder third beyond. discuss and more end for the and the success in our will up results detail for to ourselves of I to year,

Trevor Lang

solid the growing while very amid results another and income, downturn last We record performance nine persistently sales months caused high in each rates financial two delivered interest of up our operating against and quarter a and rising inflation. housing Tom. our years and by Thanks of

to the strong a and model strength our Our business our strategies, importantly execution of most are our people. results the of testament growth

existing four-year home proud and year, year-over-year of a volatility, XX the decline inflation, particularly that mortgage supply down in same largest XX with period the these over high last in rates existing sales chain year-over-year the are months of We period versus achieved cost results XX.X% last months. in September declines were sales home increase representing

our flows. my line some how discuss our third of statement, turn I the we now quarter significant of comments XXXX. me Let changes remainder about then fiscal balance to items XXXX of are sheet statement fiscal and among income will in cash the thinking

with gross pleased recapturing margin are rate. are sequential our towards the We improvement we making

increases. third Our approaching XXXX. gross strategic margin the to basis year, of primarily a as XX.X% in improvement is rate, XX from sequential of price The our gross achieving our as supply XX% expected margin lower chain target well quarter points than increasing fiscal retail costs rate XX.X% due last better confidence better-than-expected in decreased to by end a

As expected to due $XX.X growth. quarter to selling to last store and store new million increased year, our openings from $XX.X operating the staffing and during support sales same expenses XX.X% additional million

wage and rate from versus entirely store our due year, stores experienced We and year. XX.X% card associated sales. as expense higher leveraging comparable selling depreciation with operating offset stores rent partially leveraged last Our by our to pressure higher processing deleveraged XX.X% basis fees, on transaction points XX stores credit points cost to expenses XX new new last basis rate higher

previous and general last is $XX.X costs from X.X% million year, increased support quarter personnel XXX expense Third year. incentive The last primarily same same compensation the timing our was quarter store expenses staff. shift million of expenses The majority and increased from operating decreased the year. to to basis in openings lower year's $XX.X including Preopening of compared and X.X% to $XX.X million general during came points the new administrative the from last from leveraging higher growth due accruals. primarily store support to decrease store quarter period. million, due growth, to the $XX.X the to The administrative leverage

was period by ABL last and in million on interest facility capitalized rate an our increase the same net in primarily in debt Third quarter or outstanding our expense year. expense interest due partially to XXX.X% offset interest. The increased increases increase interest borrowings, increase from $X.X an

quarter sales last to cost basis cost year, third XX% face. inflationary EBITDA managing due margin well. million adjusted primarily better-than-expected performance XX.X% by XX.X% quarter $XXX.X the we a Our year, declined XX that and our pleased million We EBITDA were $XXX.X given increased from to structure from our points to our last a less-than-expected third pressures

GAAP X% increased net $XX.X and to increased per earnings per quarter X.X% income to share. million diluted $X.XX Third share

to quarter to net per adjusted XX.X% share. $XX.X adjusted increased Third diluted $X.XX income XX.X% increased and million earnings

complete earnings weighted Our million, XXX.X share can year. diluted quarter average GAAP found today's same last of unchanged to was be in third period the earnings non-GAAP A count from release. reconciliation our

of XXXX. XXXX, inventory to flow. and sheet addition and of our balance from the an sheet, the our same growth $X.X balance our We new and innovative in-stock and been was reflected increase inflation with improve Moving line a have of end our ended inventory, fiscal period new of year on investments fiscal increase inventory on the XX% The we third XX.X% making with SKUs. growth, in the quarter our last from to intentional in billion expectations store cash

to due As our expect second our to growth XXXX, fiscal year-end we above earnings primarily inflation. inventory quarter be fiscal discussed growth XXXX in call, moderately annual fiscal XXXX sales

million year. For XX% in receipts third with inventory of end equivalents by same million The and ended and and XX, of ended our timing $XXX.X the $XXX.X September operating of last was XXXX, well in XX provided decrease ABL quarter as in the $XXX.X in unrestricted the our under to and including activities At we inventory payments. a borrowings $X.X the liquidity a net cash the as fiscal of million was growth cash weeks, available of XXXX, $X.X cash period primarily, for facility. flow million operating compared result that million

we X% you now to million to I for about million, new turn We our $XXX XXXX. unprecedented delays this direct broader lag our primarily impact XXXX. The approximate prior to openings expenditures update me of approximate a to from million year $XXX economic to, growth down housing market interest we're $XXX the are increases fiscal and Federal inflation We Let expenditure now thinking having the Open have Committee's on million. the rate guidance Market will a prior our construction slower store plans. effect and Therefore, on the XXXX to low double-digit expenditures my will due quarter well capital in fiscal capital range XXXX. into estimated fiscal quarter to XXXX XXXX how about comments in in fourth XXXX, expecting from $XXX prudently our expectations. expect fiscal of on decline continue to fourth previously our now unchanged single transactions capital are high to

to range XX%. increase X% of We our comparable XXXX a store expect to sales fiscal annual within

fiscal to a guidance $X.XXX plans can lowering with to $X.XX target in the XX% difficult billion sales our of Our supply experiencing to of due of internal XXXX. expected chain billion improvement compared product XXXX new store slight to a the costs store timing the more our expectations gross we of annual our now we confidence to achieve The openings. and margin associated environment, prior and more relative that margin us quarter favorable primarily our approximate from gives of $X.XXX total rate approaching $X.XXX in are fourth billion billion macroeconomic sales comparable a are our

our $XXX compared annual now $XXX to EBITDA with be million million. is of adjusted $XXX prior guidance Our $XXX million to to million expected

and stock tax approximate Net primarily guidance. per unchanged be guidance earnings of prior average diluted amortization $XXX to $X.XX we $X.X XX%, guidance guidance. from expense guidance. approximately to vesting restricted are the from higher benefits to expected now of to with and with $X.XX be annual interest our million restricted to outstanding of resulting We stock $XXX,XXX,XXX compared our adjusted from due expense Diluted unchanged share units option million tax our a $XX unchanged XXXX our expect excludes the and of $X.XX interest to prior range prior fiscal compared prior $X.XX. weighted in depreciation of expect also our million rate prior shares from exercises stock And of which rates,

our navigate. will we and each me Let proud and our of your commitment, acknowledge take our to saying I like serving has to close, by customers questions. been the the our how have we vendor executive also performance every to for partners day. of team given Operator, now challenges our external associates business, would their

Operator

Thank you.

our now be will from question Gordon Please Instructions] will go First [Operator Haskett. Chuck begin We Grom question-and-answer with session. ahead.

Chuck Grom

Curious business planning on you good how you're a store I'm for is look both leading samples. searches of the Congrats from years growth product for your Thanks. Okay. the at assumptions what a earliest perspective? and indicators that's next website early and whether of when couple influencing that comp quarter. the curious, seeing

Trevor Lang

I you've X% up think deceleration we Hi, has Chuck, I And comp. a Tom so environment guidance gotten were bit far. the as the year macro just in this we gave, Based said is double-digit think through us have comps, we I difficult. deceleration on in quarter-to-date Trevor. a the mean transactions we more a up our move were seen little as

deceleration So almost going and as we're to of transactions. our driven comp all view that tougher, see is things a by get

Charles Grom

expect any quarter. by new four XX% growth of inventory sales inflation you to get to in-stocks to then on to fourth and SKUs. is the And the that the that close increase you the the new gave, end And enough. build, improving way Fair correct? that remind there stores buckets to Is unpack Okay. Trevor, us across back just

Trevor Lang

first, grow to we're a the the our that the expect rate sales which will inflation. to as is of most inventory to due that is answer expectation the end a to going growth that. than above And and I'll second growth at slightly year, be we would higher one mid-XX% sales of yeah Yeah. the our get you have

and Our inflation the in the driver that went just of SKUs we actual just I think increase going inventory is be number the growth categories. units it. that more sales not for those don't the up of Probably growth through new inventory inflationary ended. we impact will in largest our across than be third quarter to of reconciled

Chuck Grom

you. Thank great. Okay,

Operator

come Steven from go Zaccone you. Please next And will question from our Citigroup. Thank ahead.

Steven Zaccone

everyone. ask big afternoon, to what taking Good my X%. Are differences there out? business? month-over-month talk commentary to deceleration region Great. I Maybe Thanks regarding a up wanted you for little you're any the seeing question. the around bit more Could that quarter-to-date what's driving call in by a basis? on about

Tom Taylor

a of say couple I'd things.

October XX.X% last was in last of our last off, the September a difficult was month was versus of First year where compare October year comp XX.X% year.

we're more So little October. difficult lapping bit a

and we the the mentioned within or effects macroeconomic environment the continue Trevor we're as to As transactions not decelerate of that. on what's said immune going to

So a I not historical. the bit some different, little Coast be were in -- thought but the this with than of a sure month to bit so a a the October. we it'd other about we're different be than States little United It's we're year. thoughtful we it's during say the what little a the just prudent there's little would parts And if a to standpoint, of across regional faster country. enough. the if rest deceleration of prudent maybe of make thought West we're bit little the we a bit that of be From seeing materially we But that. is some little consistent -- slowing, pretty we're would thought below bit of

Operator

question The with Zack will Fargo. Please you. Fadem Thank ahead. be go Wells next from

Zach Fadem

transaction initiatives drivers afternoon. little versus and out the trend? ticket of called the Hey, the us Pro. ticket QX you forward such more should think good versus perhaps and we through innovation of pricing you new out Could in carve XXXX, as to as incremental average we Design the bit how detail walk your the And impact average into a look SKU then about and impact

Trevor Lang

Yeah, this is Trevor.

of the a The that of strong coming more of first we from ticket, our the half was we've year our had initiatives ticket year. ticket More were because driving. all

heard our You exceptionally strong. higher us guys last say be calls, Pro That's the two to business on probably continues a ticket.

strong. That's are materially businesses design a ticket. and e-commerce higher Our

picking continues That's to one As be our have core best. And highest consumers still of still we to in tickets vinyl and are rigid better business the the strong. company. this point

for inflationary retail increases. projected increases. we've and our supply the half cost had becoming The so the retail some And back of first chain with on more weighted increases of push do to that fruition probably do the through year, had inflationary those average to working year half of coming less those lot because of the more to passing initiatives and it environment. with we're through those the of system is along the is retail A of costs higher to was more

ticket So component I that mention is retail a the by although increases, Pro, the as ticket. e-commerce high and to XXXX, continue driven you four Design of be of of all those our better, big half will think best initiatives about good, part being a of back bigger

have call that we year. our high would about this digits a digits lot that said are same, in meaning single we're that to going of year, the exit think think next going I I to low as on we as transactions I the expect double be down the if expect we would to

pretty QX have hardest into Our compares compare are we probably get the as It's difficult. we XXXX.

early part expect year. mentioned to in those perspective continue. material we earlier, From have I didn't a the of transaction trends ticket -- ticket a lot the increase as a would in though very I So

should increases end was Where pretty start with higher. some be we're to pricing So because with we started we upside next increases going as we where to going year modest. ticket is have still pricing

by the least year, be the So transactions be I expect easier the the are up first half started a against until to XXXX year think come offset I continue but half of we to higher somewhat at the would similar second through year, most this when of of the retail the than seen at we in negative XXXX. to because of end you've higher ticket increases our of in comparisons going trends to

Zach Fadem

store is second, Got we of store what relative And through it. the first well That's could trending helpful. business ago backdrop time you expect comp much since particular should model year to latest fundamentals were metrics your a as more new new or things And impact? seen this where then the talk this of when extent in class new were robust. housing as we've store the housing to the terms to waterfall moderate XXXX in productivity, two

Trevor Lang

Yeah.

basically at doing year. I much doing If of and close $XX anniversaried, look EBITDA first those million are the fully class of They're anniversaried over sales -- is class mean the in well class they're million in pretty XXXX the to the you $X stores in four-wall XXXX XXXX XXXX the great. of and

exceptionally they're well. doing So

of XX XXXX we XX class think of We're the to a I this got quarter. lot stores the open. opening

So sales we, mean just those. low how But on million going the $X volume maybe is. the those be it and $XX to hopefully that I'm four-wall range keeping what plays to around a EBITDA. because in obviously, million still stores think they're somewhere that weight $XX million have hopeful is in a are going be I high that little But similar. is we'll I see bit out. lower to backdrop The lot to

that class had is be markets to stores to open So this the really well. good like we quarter, going we good. And to that looks it know very how they're operate the

we're XXXX a macro look forma class from basis, feeling good about it And forma pro But environment. also into of class we we'll at we the as on a tougher class of basis a good And so the looks XXXX. stores. like we're pro but of XXXX realize at I a class feel see from walking

Zach Fadem

Got it. time. the Appreciate

Trevor Lang

Yeah.

Operator

Horvers from go from JPMorgan. Please And next the ahead. question is Christopher

Christopher Horvers

Thanks. Good evening guys.

approaching You and upside first do was you quarter. third the structural the was and So my of about back talked XXXX, is gross If there business? XX% it the question some XXXX think to how was went we margin XX.X%. long-term it XX.X% in about

And a they're guess arriving there to of takes independents become housing especially, puts slow that? effect more of, what that that's now less any, the and concern category are sort that as, if freight? So sourcing is with down back promotional, the some to I sort causes getting maybe if around product the of,

Tom Taylor

I'll is start the Chris, this historical saw lot back not margin Hi, that about still can but a said question. There's think year to over nice time, rate. I a there. We're we on we next yet, Tom. our the get talking what to in year. up this Trevor and We've this been year we year to last achieve wanted able -- the achieve X.X% improvement to in coming range getting margins going from XX. as ended approaching we end we're

some we'll costs. benefit year of you at As that get the that. continue anticipated, we what get to get some to supply look chain we We're year-over-year from see some now but get to as the we're you next versus the of half year, as we get to part to when the of going seeing comparison middle back

have some initiatives the -- designers in doing our of the early I So we that we're about with have And margin still talked things give that us how the going on stores. it We think designers. we side. the innings should XXX That's we're help we're still where in we well. to get continues push margins. better initiative. on sales. got do continue involved We'll the me best and get I a to that. do We've serve they margin will mean, customers those When better better on to help gross our excuse That -- with a design average

rates. and get back have they look now. XXXX I will -- independents and a publicly get certainly some in traded perform look We're like back and working our environment about competitive closer we they're we'll getting supply So us as start chain there. then we some to you a internal around is our should getting we've can me to a long to like got them feel talk of And competitors bit mean it. benefit But I of what a time kind can our help performing. then publicly independents we're mark. question way I The of the peers. of initiatives it how it, back traded on historical which at still margin standpoint, often getting difficult traded every intention From publicly excuse like

environment think, that some that us I Chris a but they're alarm. of difficult and promotional, seeing in now, they're any nothing if we're it's So gives

Our is better. significantly price spread still

worried that? else. less to margin gross to want I'm anything than you that do So anything about our add affecting Trevor

Trevor Lang

but probably a where certainly because that's there better have ourselves the get our mean, job nature I our is which I think that XX% are very I compete the products. team brands lot just of difficult make that for and proprietary a for smaller best the well industry, the better those of we than products. we're some of that categories very of and the done will you the emulate. the hard performing products thing, also to independents assortment credit. it our and mean, competitors of only difficult be to it categories those in I'll in some just the best technologies own just think, it's more much I will and that for of sourcing We have give and the with

Christopher Horvers

price has So past been on given the turn. I should then inventory gaps mean, your know relative passed lag to you've of in the months. independents, widened lot this a the price the as follow-up. how a I have just with asked But you few

year? you how price about you over widened Just Tom's comment. how see have your to gaps talk maybe context So earlier put into the past can

Tom Taylor

the to spreads chime in very mean, at about look is check good we as opinion independents. our this in, price. as but if spreads a I versus We weekly and and in compare to difficult the you our a And category we on we I Yes. historically. basis. world than today chime competition see feel Ersan are -- But the better I been they've it want feel our

around the So moat good we really pricing. feel about

Christopher Horvers

of Got Thanks it. luck. very Best guys. much,

Operator

from question The Please ahead. UBS. from next is Michael go Lasser

Michael Lasser

if P&L how do your your down in do. we So to macro like that do operating for my going of more might next year Understanding you you don't evening. you taking to more your comp than into into type sensitivity Good a margin But sales look what question. insight lot Thanks would have what the that the were X% think insight for into respond? have XXXX is outcome? any you of bring

Trevor Lang

You're actually question, negative saying our comps to just if next Michael. year X% were understand the

Michael Lasser

exactly That's right, Trevor.

Trevor Lang

first I the operating But don't There's my if going our would are going But to We think to happen, yes expect our mean, that guess, margins through that. be to as answer. have that's I of would model. do down. I go were literally margins you a happen, variables would would down. run that lot to to be operating

Tom Taylor

a grow XXX it's potential And the just is long right? playing -- valley, not XX stores we've we're over would And and this and I valley. to We're next a stores to opening that game. in still way We're got for commercial a to too year we're a get big the looking business. XX comment going long to

going that overreact not to more in we're anything that and do our difficult. jeopardizes event the much that strategies long-term stupid So

Trevor Lang

slight I from guess if we mid-XXs a thing flow-through kind a maybe model the happen to on a one just think think too just helping a I downside on I scenario of were said that higher hopefully mid-XX do perspective. to

use to flow-through mid-XX somebody that above negative if you of to So comp like. a wanted a could that on look would mid-XXs really math whatever model a

Michael Lasser

some that at change of recapture the and gross all you've given margin that to gross that you your the drivers some Would margin have just of lost? ability

Trevor Lang

through that's year. the for bad if Supply what those abundant things. like for to things lot of that be that -- be Yes. get coming be going we don't negativity to But, is are more case us all worse. the being currently likely they're we that's to the more. exactly labor need I There lot run I see especially down are a that and doesn't to which again mean, level yes, don't model next that to costs we going industry why why would chain a in probably than

hopefully So that. we hopefully do better would that bit we that would be could something a possibly do that than

Michael Lasser

my then fourth the outlook. is quarter outlook And question follow-up the on comp

or change that transaction transaction So not your did you your said you guidance assumption.

your assumption. you means that lowered ticket inevitably So

any And based had you case? that if could like there come So experience a, fourth start quarter you a few to arc what the be outlook of that And the to b, see looks comp way there the upside is the through? be that would why inform the Houston to hurricane-related in spending ago? on back years

Trevor Lang

a had stores. On to do new the first part reduction the would the big question say sales with of I

that stores mentioned, the later opened we we into cascaded been new and than fewer quarter. thought As Tom

due the quarter -- about the was So in fourth reduction of in what the where new the Street just before that of to timing half sales stores. versus

we we on pass those increases. raise The of partly would main have have back and is those going some have piece created much August yes, we it along the are we to because when don't a done thought reasons. two cost our in as guidance And job teams other our not are retails of as July retail good so to

as -- we one different Hurricane Houston take we in saw off than case had parked Houston it came business that Ian just and over our Harvey hurricane in Hurricane far immediately. back and very As and rain that's in hurricane hurricane the poured just in a it the XXXX,

as a size times of little were through market as well. bit three was to a Central up of well. know get also much Ian really all in Orlando Central a destroyed. through only going more lot Northern But up the got destructive small Hurricane then and bit it's about as we're stuff our we well. company a little Florida of it's it As maybe Florida portion the We're And stores benefit we Southwest affecting a as

it less So be much will impactful.

than It's to than going long lot less XX be more because to running going benefit it's a think But can little a less it October. points I destruction was it's I again Harvey. benefit. us tail was -- the basis So in to think worse a currently it's give than have as Tom detail

pretty benefit it's So but currently for time period modest of a a there'll be small

Michael Lasser

Thanks very much.

Operator

Thank you. go The ahead. next question is from Steven Forbes Please from Guggenheim.

Steven Forbes

Good to morning, the Pros. want focus Tom, Trevor. I on

of maybe number high-level – give high-level any on you on if curious terms just that update Is are platform sort Any comment engaging? are you have they sort can Pro us then seeing speaking on or the cetera? from they from members indications in how behavior you're thoughts pipeline insight And So the the how of today. to different your an helpful. et their of jobs, there of it – any would be

Trevor Lang

Yes. are and define us program a Pros I of active who's months. the loyalty think I sort as but our that someone of from last active the we an part don't Pro XX% specific within have of number purchased XX

historically, now. talked majority PPR the So the vast XX% again Pros I are our program. about of it's our transactions think PPR on of the We've members

quote number this where they in three as us transacting is to business they our but our of over spend credit Pro number much the have is historically, their is So quoted past. with the a as Pro hard card XX% actually times Tom with this sales.

a XX%, year that XX%. Just ago over was like

from it. the it's why buy So us. of the we've the the your return of quality nature Pro from a free liberal the of product website, services, product, buy It's with us, the design team. It's solutions they many Premier quality meaningful inspirational store it's increase. things quantities, one it's they in-stock of There's policies. the sales is had why

program And thing performing important Pros. loyalty did strategy service other home that's those well, many only that's for a of a to up the received. install part that of example. grow so the Pros like sales continue to after of this large I'll training one been And on how is and year gives detailed see while We run an we products those one is give retailers exceptionally is format very we holistic well to huge tile tremendously we're been solutions is mention those it's the trainings a lot. One

Tom Taylor

think of were did year So Trevor our more to X% to add of couple ago. was up they members during the the PPR is good. than transactions XX% which a And quarter, I things XX% pro a top spent

we the That's with longer the last So more that program signed XX,XXX the the is up an sign. they And encouraging new then they thing pros. us. in get spend

sign to up about that think you in long to XX,XXX difficult that's Pros quarter, for the XXX able be good stores term. another during macro If the a that's really all

going So consumers in and with Pro Pros get the it. business, to difficult got environment. they're to we're have to to to to find We're businesses that business. a they're macro it lower pleased their going because eat fortunate prices

us can So Pro, a help through be the better difficult off can they muscle we the with the better macro.

Steven Forbes

with they just to because to their maybe have that on and then have they stimulate do right And could demand obviously labor. a follow-up eat

and strategically think loyalty macro you be there can shoring cycle? loyalty you what a as here that Pro wallet do challenging your up partners the really So drive dynamic really next as for we head to share during in about

Tom Taylor

Pros. I'll teach classes Trevor helps one That they how with things their our like to few. them a install haven't mentioned doing grow do a mention we're to training training before. installed business. – of professionals We our them

grow has their how business XX them program loyalty to service Our components out figure over help better. that different

whatever So they to can them get business. grow is access to website, it to help a with payroll, help build the help

can they price at inventory than better come of in so can are prices access best the they everybody, market. Our and the

help things those our grow Pros of their All business.

know because is sending We and They our about partner. the don't they worry customers install. we've going stores the that So into their process them to someone treated and always have product. our don't to – customer offer install losing

think So help grow I a I think shows our the efforts we business to lot do in them and our it results.

Steven Forbes

you. Thank

Operator

the is Simeon Morgan question Please Stanley. ahead. next Gutman And from from go

Simeon Gutman

stand support where concept, we're rates. there anything A And time a mortgage This with better Hey, the macro? you high homes staying Tom, of because hey, that macro think consumers struggling in Is I'm Trevor. about different curious theoretical Because do it? empirical on why this? you guys argument question. this could is how

Trevor Lang

more in can't little if that less I you business XXXX mean you're value a continues prices likely growing, kind invest four-bedroom have being but of your appreciation about some going people piece afford then And lot ready that's the likely that existing is be down up a of home to some those to got being know a to strong that's since trillion I think you in as homes to with competitors as I up in bit you XX%, family right. to more talked because have have. why sold. But and a think slows mortgage get homes I of that $X value. the rates larger And are were home their our of think I well. come threeX-bedroom

reduction thing the be view other the higher the our really the of people housing. But you income have in that, income much of a existing if are you wasn't moderate this home got yes, us less a it, value So an the money. we lower sales details much have home for have And the to average $XXX,XXX. of would housing. data income when the look dig in for tougher you big it And environment. at reductions into is equity when the And consumer

better that us. then today. So to feels looked some And data I at

of net those we sales so are have over look meaning – If a the amount at good some where Carolinas and have disproportionate our states from of our Georgia, in of Texas, well. Arizona, XX%, we migration Florida, coming XX% you our sales as stakes, I of from, come the sales think Nevada, majority

assortment listen, better long, what looks what where us for our going that most. others environment in who position macro a will can't a than our I for and it's positioned to we be but how do tough Pros can think put are, we're knows well that So from like stores

Tom Taylor

staying just to thing cycle add point I'd their one in is flooring, a to homes moving about different Trevor. this deciding us. be and The going and to not for that within their people invest

bastions so that better the like innovation different Just much is changes. flooring years you if within and today five much the that so ago, options innovation there's bought products

standpoint. a flooring your parent just So older from feels quicker

again hopefully of can demand So help offset stimulate some that some macro the presents. and challenges the

Simeon Gutman

I if you the at but think Within I happening on I price people much you or into question. transactions don't is maybe topic units, know this Is priced, XXXX? prepared carry guess Thinking a know it? projects? with frame how buying if covered look are at And are And business And flattening Can you an big much and way. you that not was stabilizing. right said I number are look either the how – as XXXX out. exact that's meaning do in of that remarks units what's if to actually way

Trevor Lang

doing of was a our the Pros being that business, square reason that fact transaction footage but the watch that closely. seven were footage especially as our bit well. We doing square it's better months Yes. as is for last in a of was year. pretty a were people our the first of well. better of doing we've – transactions. with a overall months the stronger ticket square our per recently of actually But our foot a decelerated bigger similar a here deceleration has And the bit But We piece to trend kind seen of part three bit as the

Simeon Gutman

luck. Good Thanks.

Operator

in one time, this ahead. to Bellinger ask of from the MKM move David our which question, limit question. time, next gentlemen, just you Ladies Partners. we'll to Please is we At and yourself go interest with please that

David Bellinger

the for Hey guys. Thanks question.

deceleration tougher meaningful appreciate here. I on quarter-to-date. comp last a on out. stacked one still pretty three-year geometric it's that called But year's a October Another you in the basis

to QX in the quick QX there or So, that period that pretty into DIY? on constructive price, anything comps? Pro in from all the deceleration different Is are call your And that it comments seem was to downshift date. early late led in

Trevor Lang

did just I math geometrics, I'm I I my think assuming my right. looking -- three-year at own mean,

QX QX. I a -- lower that below yes, quarter. it it to had definitely or a and little be XX.X% going in in bit we XX.X% we're a pretty probably -- basis, number a in was that On in mid-single-digit previous QX, QX, than was a think XX comp was XX%

going this The up is of other most in to weren't take mind increases. for thing year, we retail against

increases. started cost chain year, As but started having in we kind of August started price so last modestly, QX and we into we seeing September, some supply increases those got price we having increases heavy

when going last against So retails. now raising actually we're up we were year,

But where we're won't just a it, component at of So portion deceleration this last in the single quarter, And ticket just high low the X%. we just much with do going I has versus the because into of that, prices double there's ticket year. to as transactions finished, bigger raising have negative point quite over as digits transaction we said just our down digits. think were the we

David Bellinger

And with DIY to the Pro. correct? that has versus mostly do Is that

Tom Taylor

Sure.

Trevor Lang

XXX%.

is business actually Pro Our positive.

David Bellinger

Appreciate it. Got Thank you, it. guys.

Operator

question Capital. is Loop Chukumba go with next The ahead. Please from Anthony

Anthony Chukumba

my Thanks question. Good for taking afternoon.

would store Anything call you associate that in a terms wages? Just real turnover out one. and/or quick of

Trevor Lang

Yes.

like wage Our we investing most rate, into rate. continue retailers are wage

rate continues go wage to up. Our

continued the For investments. make need, we top us that and retain to hire talent to we've

initiative We for has become designer also bigger us. a

last expect Tom or designers I I pay mention designer. have we stores higher we XXX this as in our you'd think quarter quarter over think a

gross margin, they return a interaction, Now, on better you a ticket, customer investments. get those so better have much higher good

And so to wage our average increase. rate continues

is it's but been higher than we've upon improve turnover historically. historically. how at than can run higher we We're hard we're Our working that, rate to see, definitely running a turnover

Anthony Chukumba

helpful. Thank you. That’s

Operator

will And ahead. Feldman question next the Advisory. Please from Joe Telsey go be with

Joe Feldman

it's guys. the Good everybody. I a not part ask about to afternoon Hi. know, commercial a Wanted and business minute. as for big

of on just seems lot on. a commercial share business, the the the the a could a hoping But side consumer and the off there going is the but growth, side. small more something given of I significant? was kind side You've that Is like color you more was what it us was pretty base, with mean, just it of on driving it pro I info little

Tom Taylor

mean I things. a few Yes.

-- access of So to we Spartan mainly they're -- starting have on Spartan began get on meaningful. that growth chain acquisitions to over them, couple to more Spartan but a side, initially the our that supply we've was quarter, small has working business last them of we products. we more our made were the helping -- had bolt-on has bought

also they're able in outside We've invest to sell have salespeople, has encouraged to done broader that assortment. they So which to be contributed. getting Spartan a quicker out and

we're of think commercial in through commercial in the during in segments those homeowner I some that was of side, demand So, a Spartan, seeing commercial are COVID, aftermarket. the than on kind two on benefit the there And the pent-up slowed. bit different

performed we So so far about how how anticipate looking it and it's to good about feel feel we we good perform forward.

Joe Feldman

All right. Thanks, guys.

Operator

final go come Jefferies. Matuszewski ahead. Jonathan our question with from today And Please will

Jonathan Matuszewski

Great. squeezing in. Thanks for me

in Any of update Just where of question in-stock stocks Tom improvement inventory and on there a may any Trevor. quick much. so Thanks seeing be you or out categories terms where levels persist?

Tom Taylor

it's categories. Service all we've Our good. all Stores across our No are best recoveries nice levels look in-stock been is good. categories, the year. seen

scores about are with So the we the service really good been. really they've what's I prepared highest our in-stock feel and ever with combined going in my centers mentioned the it comments, on service

So, to in a level capture at difficult this like high we're feel market. really we share executing

Tom Taylor

Okay.

So questions. that's concludes that the --

in have no questions more queue. We the

the be close on is the -- going anticipate all will do have we we I want he call. we this So but a asked final CFO. calls, guarantee bit Trevor's the call will this but not to little anticipate participate I that say He's less. that that he may the forward, that that calls as to -- in talk to

President, and appreciate on and comment today. more to we to it. of forward the as all on he what we're as but to transitions. all recognize CFO company next I announce CFO do ready We'll us your So, to a announcement as to he's as efforts our look his to certainly getting call. it to public want our hear soon have definitely you going on appreciate you'll Talk interest. when We

Operator

joining now Thank concluded. presentation. conference The has sir. for you, you Thank today's

You may now disconnect.

Floor & Decor (FND) 6 Nov 222022 Q3 Earnings call transcript