FND - Earnings call transcript Q2 2024 | Floor & Decor Holdings, Inc.

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Operator

Greetings, and welcome to the Floor & Decor Holdings, Inc.

Second Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Wayne Hood, Senior Vice President of Investor Relations.

Wayne Hood

Thank you, operator, and good afternoon, everyone. Decor's second & earnings Floor to fiscal quarter XXXX call. Welcome

President are on and Chief Vice Officer. our me Tom Bryan Chief call Executive President; Joining Lang, today Taylor, Financial Trevor Executive Langley, and Officer;

or we of safe language. and the Litigation company's webcast Private Before of forward-looking statements conference a subject during are refers harbor of risks characterizations I Securities uncertainties. remind Comments want Any everyone events, start, and that within financial market the projections Act statement this or to expectations, including contain and made call to to the other future forward-looking Reform meaning of future XXXX projections conditions, statement. is

including & such forward-looking The obligation could expressed materially company's any such those Decor to future its update from differ results SEC filings. listed assumes those in any no Floor forward-looking actual reason, statements. in statements for

also Please future market is of not past guarantee a or note that information results. performance

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

on our website. A recorded Relations available replay of related Investor be this call will and materials

Let to me now the turn call over Tom.

Thomas Taylor

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

second financial for our some will review quarter thoughts our will XXXX provide performance earnings Bryan and discuss then fiscal of During some quarter today's share our of second I in-depth outlook call, a of more updated XXXX. fiscal Trevor highlights, and about our

modestly fiscal quarter store and XX,XXXnd were our sales total below expectations. comparable Our

mitigate management, weak However, expectations, margin coupled sales. our the helped with prudent exceeded of rate of most which, gross expense our impact

earnings per quarter share report the were last with a $X.XX in fiscal period of able same we XXXX compared to result, $X.XX, diluted second As year.

the monetary spending, including the with ongoing We of for and and to have affecting sales our lowest market home existing industry since rate prices. and buyers X.XX In discretionary given readings rates repair June, home affordability hard and seasonally X home Existing adjusted of to record level project high almost one X.X% contend declined for year-over-year hurdle policy years. million, the remains for now years. housing of month soft large demand XX declined XXXX mortgage a surface flooring. sales continue annual in lowest and December a the Housing elevated most remodeling

Therefore, we mortgage are existing home not interest sustained resurgence expected, in believe sales and demand. demand hard seeing we had is needed flooring to relief some flooring the rate improve and surface that

release earnings Our muted reflects environment. press in XXXX market fiscal sales today's provided revised outlook and this

challenges the conditions executing understand to working us and our market sheet. and strategies market continue our that to short-term help strong to We profitability We are while balance diligently expect a share grow committed pose adapting remain current strategies manage to maintaining we our accordingly.

stores and format the in design of ending period warehouse fiscal studios, XXX with second year. X same in warehouse X We last X studios stores XXX the with new opened and stores compared quarter warehouse design XXXX,

now we of expectation fiscal stores, For to prior plan XX XX the full XXXX compared warehouse our year, stores. with open new to XX

is and store warehouse we stores. new slow believe considering it to opening XXXX XX market fiscal prudent to current pace new approximately to our forward Looking conditions,

maximizing in we a existing on our our fiscal larger with warehouse potential We store for In new on highest openings challenging store capital. most where focus awareness return XXXX, are this the increases higher. backdrop. stores success of markets the We brand is successful weak this the to in pivoting thus environment, opening believe to likelihood of intend housing openings

within discuss to environment. opportunity and detail, better the for spending of Bryan align capital sales investment and points. per As growth us These using will XXX projections actions an return capital store we are basis as period current more reduce fiscal XXXX the increase new stores more this this to expected enabled than our class in have by

capital higher. increases store the a the entry costs, into significant lowered past store capital the As to rent, but increase years strategic are which and costs reminder, store where of few most construction number spending self-development growth per projects reflects a new in over decision the spending new raised per our Northeast all industry-wide of in

in by level believe is the our goal of supported influenced will stores of home we historical and line to and States slope XXX existing reaching maximize long-term to our smaller a across the share We open ability time medium stores and United be XXX normal to operating of large, profitability. when return by Our stores market markets sales. single-store

to fit to market feet stores. square are portfolio feet from we ranging that have We sizes fortunate XX,XXX to needs open of a warehouse can XX,XXX store square

Our Once the targeted at to of and we determine ability merchandising micro-merchandise market managers, assortment each from for market is store productivity. this our underpinned merchants executive or sales store scale. we a strategy executing and chief store potential successfully to local inventory optimize a and analogs regional sizes merchants, operate with range size, input by store

peanut spreading country. not the our across butter are assortments We

to further single-store could markets, store opportunities larger assortment drive labor construction able our less be see and our less costly new widen to sales for In where customer markets we decisions per are we segmentation than moat. to store competitive annualized implement fact, smaller models. In

rates or weighted markets compromising generally markets, it's these than expensive believe larger our and Because internal less footprint are our we easier We cost them to operate, we of attractive can the generate reduce making can store merchandising assortments of without that exceed capital, markets. our experience. customer return SKUs average

than we our planned market higher XXXX and to demographics pleased are potential fiscal our incomes when for our for rates further have market strong improve. class. household plan we position open solidify ownership in XXXX Collectively, share We XXXX stores these openings average to fundamentals the us that store growth and higher and industry expect

express Trevor, spending Their Before turning pride and profitability, the our hard service call sustain and manage our in to to during work engagement liquidity, scores to highs, inventory and all-time this challenging over teams. successfully capital us want near customer enables our I are that to period.

currently operating expansion By in as doing our towards stores share growth and we environment. of to to continue growing new United operating growth make long-term strategic in XXX store States. earnings so, and can opening investments position goal margin well generate healthy normalized reaccelerate our ourselves significant warehouse market a as We cadence intend the our

the turn over Trevor. Let to call now me

Trevor Lang

to favorable associates our serving hard have we competitive model their also significant that advantages. we and due want significant investments Tom. my current the express build decade in has a our work business our Thanks, Despite to gratitude made over are to position conditions, I customers. to market for to dedication last

investments These challenges to differentiate market competition. the environment. versus of Many current notice continue competitors may the face our of significant you some in results our that

term centers. we in believe to have balance merchandising, done continue to we sheet distribution cash flow allows grow stores, we for can have both almost years. associates, a and technology in share our Fortunately, and continue make XX long our as that further strong new investments market short Thus, our and we the us to

As and a normal expansion healthy housing earnings growth Tom environment. in mentioned, we margin expect to operating generate

of quarter second to fiscal XXXX. Turning

sales in comparable June. $X,XXX,XXX, period by Our year. store total X.X% and sales from the sales to declined X% in and X.X% in X.X% store Monthly last May same comparable decreased fell April, X.X%

period the store third Our declined comparable quarter-to-date same from sales fiscal last X.X% XXXX year.

West In the second quarter like XXXX, our were in average. than the the fiscal of store quarter, company division sales first better comparable

As West to than in new other division been divisions due XXXX first fewer store was a impacted has by less sales reminder, the to openings. softening our experience cannibalization and

were the divisions. similar East and sales store South Comparable in

X.X% mainly transactions macroeconomic XXXX. and decreased stem Let X.X% to fiscal comparable average In by ticket in the the me projects. less XXXX, fiscal average the purchasing year, smaller challenges XXXX. the comment X.X% period undertaking line second same from X.X%, of Comparable first housing compared our last about declined in our footage of ticket and trends. the quarter store with of transaction to stores and compared trends first square These decline in by quarter a customer quarter decline

fiscal sales decorative materials, Turning were X%. Comparable store all or at merchandise than store installation sales comparable categories, by sales by second our accessories, in categories. trends better and overall tile to the XXXX stone quarter adjacent declined which wood,

offer are pleased our price towards We and that styles trends driving prices. efforts innovation our successfully industry-leading and are sales at low better which everyday points, strategic best merchandising

a higher-margin shift Furthermore, mix our strategies enhancing sales to continue profitability. lead products, these to to

and to origin reducing strategy We strides our China. diversifying are making our of continued of also exposure our products the country of in

XX% approximately approximately for a in compared in XX% fiscal products XXXX. fiscal accounted China XXXX, we As the sold, with reminder, of

in reduction XXXX We meaningful diversification expect strategies. from continuing fiscal our a

Turning growth. Pro my remain our engagement homeowner with connected pleased our connected customer and comments growth drive to strategies continue We and to customers. of pillar our customer that

connected due accounted second period with in sales XX% largely the same connected of for the compared the to quarter in growth Consequently, XX.X% in second by year, XXXX. last year of increased customer X% Our last approximately and same from period sales quarter quarter customer the transactions. first XX.X% sales,

further our Therefore, develop with customers to single-channel stores we we processes that more online As customers. spend engage websites experience. a our reminder, continue seamless a technology continuing substantially in-store our solutions personalized visit and and observe integrate to to who than and are

this We and to the adding and to experience. online a increase achieve and quality are strategies efficiency. customers, our organic on to our for building the website user-generated refining by We of process further content traffic speed driving merchandise our growth customer website and on improving search, search website with inspiring focus optimizing plan these

design our Turning services. to

delivering on following Pro build Our Desk opportunities. second improved to year-over-year on close and them an are to and our size design rates These grow with design selling services. strategies experience basket design teams contractors, with sales an quarter working sales our the from in entire projects elevated to contributed closely relationships high-value growth focused up by

XXXX meaningfully design last sales penetration As a the our result, second quarter from period same increased fiscal year.

Pros. to comments my Turning

sales XX% are sequentially retail of for sales. We pleased approximately Pros improved to and accounting year-over-year, quarter second

As our inactive to prior share CRM and discussed with active new drive market with Pros. in leveraging dashboards growing and we engagement tools are calls, earnings by our Pro Pros

our Pro tools efforts. new added to the Pro managers of have acquisition better sales effectiveness We measure

listening our to our adapting roundtables, learn Pro engagement. quarterly based to in invest Pro drive to tools we better and customers on continue what We

how to our remotely, Pros also payment in invested business removing friction payment to with have rolled-out authorize We allow in our Pros do technology us.

educational XXX We deepen National in to which trade Association We Flooring Contractors educational in quarter posting partnering education with relationship of Wood flooring. Pros. events our Association the National associations XXXX, XX second we fiscal remain events, continue events. believe host XXX is training about X Tower approximately with hosted excited Pros industry-leading to XXXX, by we In and approximately

sales bank's significant advertising we Importantly, and with events. see lift acquisitions. cost-efficient to providing a platforms Pro Furthermore, in digital to channels, attending drive these within successfully way practical native we new from partner continue Pros

managers fiscal fiscal XXXX we of with our account Finally, that the exceeded sales second regional the ended our are of from quarter with of the XX at regional in quarter pleased XX quarter managers, XXXX. our We second compared end account second expectations.

Let's business. now our commercial discuss

XXXX. are Spartan acquisition the since Notably, exceeded our represented second We in quarter pleased sales month and in best Services sales profitability June expectations. our

As in our and to strategies to hospitality. progress in Spartan diversification continues reindexing education health on care, earnings discussed calls, prior its

boosting through plan second XX of XXXX to and ended XXXX, continue organic with and In share growth Spartan drive rep productivity. the growth quarter we sales market fiscal reps. rep to We

we model have environment. macroeconomic right this the closing, to navigate people, business and confident challenging we In that remain strategies

now call turn me the to over Let Bryan.

Bryan Langley

am market Pros, in with how fiscal proud I manage have teams of growing our retail how approximately sales which XXXX. for quarter and our second you, are Thank fiscal profitability, Trevor. XXXX. particularly incredibly and we pleased to the accounted XX% our inventory stepped I'm of in sheet up Tom balance of with share

market our rate, generate flow Additionally, environment. plans expenses, diligently muted we in how margin grow and second quarter to our manage our cash gross continue to execute free results underscore this

remainder the second changes line among year. and I of statement, income quarter me will the discuss of cash outlook our some now the discuss sheet Then Let our statement flows. the items in for of significant balance

period XXXX. XX.X% Our quarter improving from points rate increase margin XX.X% to margin quarter XX by the points year, rate from year-over-year by basis basis and last the increased in primarily favorable XX.X% gross our fiscal is exceeding due supply same fiscal XXX first of in chain expectations to costs. in XX,XXXnd gross The

the growth and additional operating from increased fiscal primarily quarter Our year. an of same $X.X comparable million compared our $XXX.X store XXXX in at expenses period period million increase X.X% is driven Services, million Spartan The $XX.X year to to offset last and operating of stores. million selling warehouse by by and decrease second the operating selling expenses partially last from same at by a stores $XX.X XX store

approximately of the store the a As sales, quarter store by sales primarily percentage points expense year. second XXX support period to to make due X.X% deleverage same comparable and and decline selling growth. last from continue increased basis operating to is our new expenses XX.X% in This to our investments we store

to our to we and due XXXX expense less was The period fiscal $XX.X general expense and to administrative X.X% we Our decline managing million the from same incentive second costs G&A G&A our last support increased the compensation. diligently quarter year. basis than growth growth. primarily expenses by to make in anticipated to comparable and store sales deleveraged store to points XX due continue our in investments X% approximately lower-than-expected X.X%,

fiscal XXXX the X.X% expenses second increase period year. year. $XX.X preopening store primarily prior higher million the quarter to Our by compared same to expenses The increased relocation last reflects from

decrease debt derivative in $X.X reduction in to average from in fiscal borrowings expense a contracts. $X.X by the on offset million interest from expense is an last increases under quarter interest the and The decreased XXXX partially Our same our ABL million interest outstanding net period due second and facility cap rate interest year. in interest XX.X% income interest lower increase capitalized, to

same the year, offset limitations stock-based last to deductions due tax primarily XX.X% compensation for by second quarter XXXX increases related employees. partially to from in in fiscal tax excess decreased XX.X% period to rate to Our compensation benefits awards, effective on certain

adjusted EBITDA to XX.X% million, second Our in store deleverage sales. comparable from the primarily declined due $XXX.X fiscal quarter our to XXXX decline expense

last income $XX.X share and contributing a net per and declining to diluted of the period of year. to million, amortization $X.XX, XX.X% Depreciation from decline XX.X% XX.X%, by earnings increased same

cash flow. our to on and balance Moving sheet

We continue period structure a of available prudently in liquidity second ABL sheet, to million to quarter with borrowing the million contraction. us capital grow ended facility. existing cash of allows consisting continue equivalents maintain cash which million to unrestricted during for of a within $XXX.X our under and $XXX.X the strong and industry balance even We $XXX.X

of and the Our inventory period decreased the as $X.X same XXXX by billion fiscal XX, decreased last X.X% June of by from XX.X% from to year, end XXXX.

recent rise spot Let me ocean briefly rates comment for on the in containers.

strategically contracted into us expected ocean And XXXX. dedicated fiscal us enter material contracts long-term our a on we are in partners, a rates carrier market to As reminder, rate. rising with which with provide capacity not have a spot at impact the

full now about fiscal me we how year. for discuss updated thinking our Let were XXXX outlook

X.X% home store of with the remain the sales relatively year. unchanged XXXX the to decline assumes of Our $X.XXX in X.X%, be to fiscal current to our guidance for X.X%. with billion X% billion. sales range of of expected compared remainder business compared billion, and levels are $X.XXX of to our prior midpoint existing $X.XXX from guidance to billion are guidance The Comparable estimated to $X.XXX prior this down trends sales

the We the improve end sales to expect our guidance, primarily sales XXXX sequentially of on remainder of high and both comparable store low due fiscal to comparisons. easier throughout

XX approximately our we As this sales quarter-to-date of following store demand was offset substantial third wind in sales not Tom were have in an adversely Hurricane and Beryl. third are events flooding. impacted declined impact experienced from our basis other comparable X.X%. estimate primary We quarter-to-date storm increase anticipating damage, by involving The comparable as we mentioned, store storm July points

$XXX rate interest be to XX.X%. expense amortization approximately guidance million $X be approximately XX%. be with prior is expected prior our be and to expected million, million to Depreciation million. compared our with is approximately XX.X% $XXX expected of Tax expense to margin Gross Net is million, compared to $XX guidance is to prior guidance expected $X of $X compared approximately to with XX%, million. of

be our to Adjusted share is XXX million of million, $XXX compared $X.XX with average compared the million of prior $XXX prior Diluted to our XXX approximately $X.XX in compared prior guidance of shares, guidance million. expected $XXX estimated million million shares. $X.XX, per $XXX to weighted range outstanding Diluted to be shares of to EBITDA are of earnings approximately guidance our $X.XX. with with to

to reduction expected store warehouse million in expenditures approximately from XX per prior guidance are million, stores our to to decline $XXX guidance. due $XXX expenditures stores be to with openings $XXX as Capital prior million. our the $XXX The million to capital is to XX compared XX new of in

in open Washington. to planning distribution located center Seattle, in X currently are We XXXX

XXXX of current does We are not Baltimore require our pushing opening to the environment strategically additional the industry capacity. center distribution as

benefiting capacity we quickly inventory our from on this We as Additionally, can are bring optimization improves. demand efforts.

a system In portions our are investment and existing beginning of to fiscal the that half merchandising enterprise we replace our of XXXX, upgrade second systems. planning multiyear resource core financial will

and We to earnings fiscal expect on guidance. minimal incorporated XXXX and into impact have is capital this expenditures our investment earnings a our

believe us market growth We vendor continue that and customers partners dedication our earnings fundamentals improve. associates share, making every day. to prudent position industry accelerated sales strong contributions I serving want investments for our we to and and and when for their thank

Operator, take would now like we questions. to

Operator

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

Zachary Fadem

how and depth advantage large-format historical of given smaller to does pivot would boxes? the So small job quantities, Tom, stores? you with reduce in you in-stocks, edge lot between decision assortment, on go if big this the still then to And forward frame of openings XXXX, the stores hold format

Thomas Taylor

so the Zach, question part of the take first. first I'll

tried and that through are taken we One, look we determine a of expensive. class large 'XX, gone the less of to As stores do and initiative how couple to a things. open we've

over class we the $X.X affect to cost of has on benefits 'XX a of store. will get done that team of able return identifying a million the should be Our good job so better

shooting done. for for we're We're working more, still and that

options we with 'XX 'XX. scrubbed the success. selected had than the More the of in of we class for class in Additionally, that them list larger we we of stores in markets are greatest the of chance XXXX, and of did

So a better, should markets, gives think better chance off bit our is those that little start a in stronger. we bit awareness us larger a stores

question. things other the We're then second have of talk half back 'XX. backloading of I'll small 'XX, purposely opened and the of couple class more year. A the of also the the at about store, stores Those the will on part

Our lower rates better environment time, see we'll more that there's where successful interest category give it, demand that us gives hopes the for be a are those in starting are the better so start. to stores for a that of flexibility, a being we by better think macro and it side chance some and

services Texas are XX,XXX stores in it's small So 'XX presentation, a competitors fair having smaller of there's Texas. Dallas, it's smaller of going markets. that bit in things assortment in are broad square of did of advantages amount is in I was The mean different, environment we smaller but than just intact. in class -- there the foot opening vignettes, we is point, the the store are majority remain in-stock, 'XX. Temple, the less. benefits stores, designers, in approved XXx having The all The class take of approach. did a were markets competitive XXXX, where the We a

store in always those stores, that different. done. smaller small is a we're to where feel landscape hold for small up we opening our we've market, they what advantages, And like historically so competitive even And

have to fleet. they're operating the we we the volume just markets And sales cheaper maybe the thing operating make the same potential of margin. less I'd as smaller should say do but they able They because the markets, and be same it's the make is stores, about margin the last believe to small rest

Zachary Fadem

lag Got of cut time you to your think that. the you order would XXXX? type And see do EHS it. comp comp Appreciate recovery what environment line? could then from latest in improvement, improvement, positive you to in assuming just need to rate And to share

Thomas Taylor

You start... can

Bryan Langley

in. Bryan. is This Trevor then weigh Tom and and can I'll start

assumes that QX. from mean I trends midpoint stay be us, same of to just clear, the the for our So guide

assuming, in easier sequential that majority basis, high half, the and of but improvement back on mainly we're is basically due the So have we'll comparisons. to a end the comp improvement both low throughout

that home it's to somewhere existing impact So to you're there still X rates like comes right, lag we a then X to sales, We interest around that. months. changing feel is to where

is still September, a tight little that. So a whenever it was this we'll year. that But in if a feel there bit of have correlation cut we rate

hit better. would get end the guidance, to to high little have a of So bit things our

incorporated would there. things bit QX. hit exiting To low a in So were where little have to that's we from end, the worse get

Thomas Taylor

add, positive in market. Yes. environment I like home to be where I thing that before, as as existing in it flooring we I'd only think that mean the year-over-year. said turns, an the sales And there'll demand we've more be think we'd are

sales So would a and know existing certainly just been happened down rates don't there'll be yet. interest better lag when to And now, thought I that. home turn. now, hasn't that and thought have I will by by have that would I come

Fed up, rates. says only will to see tell. consumer time We'll and holds going the they're the So how lower

Operator

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

Christopher Horvers

tariffs freight, there refresh question there some can also going you happened? on there is, just first was can was pressure, back I and were -- to when know but there in margin what my us then gross when tickets. a was So rate you give inflation

guess I happened? remind what us you can So

is out it's consumer you do be time? is question really at going how up. like the the and of part this point seems second the It this to And priced different feels elasticity think pretty

could it's know would I speculation, any helpful. there a lot conjecture be but So of you have

Thomas Taylor

less last came we tariffs China. we was When of We've China. further. going were of -- we time we Sure. and down heavily what the number got down over joined on XX% were the were out -- than XX% this That now Chris, taken company, today, to I dependent around, Tom. is is when

dependency there. So we'll have less

into able of moved outside and move of it. prices. where passed to products other buy along price were at to could that absorb we things parts similar And products world they China we we the happened, couldn't to similar then we the move, it When consumer,

What's China. different to the everyone's China. that It's made got in extent, this less. we're to things still luckily in out get maybe China, only have But time, we getting some of are

to with going that to is have deal everyone pressure. So

are Our to to for dependency it. merchants look continuing on ways the lessen

And we'll If out see My how guess to broad a step the is different afford responds. they step our within they'll prices store. consumer go can't and it, they'll product the up the into have else of to assortment. something

Bryan Langley

I'll actually This and one well. cost. difference and Bryan. 'XX between The follow too, time we so XXXX, of a able last in through only this as Since was time into recapture that lot up is too. we've back to and XXXX been margin passed 'XX, the

rate. because the rate we time only protecting margin we're Last went margin the cost down now itself, passed the So through actually so.

Trevor Lang

below The our I'd benefit fairly all prices have competitors. of are our other is last already thing, say we Chris, big is the

think if And we there's feel and that Tom possible into we're competitors be now, will it's change as a XX% what painfully were different lot tariffs we sourcing administration. is of just that lower us. so we mentioned, get a number And the more in buying as than because our to going it so

Christopher Horvers

to on sourcing guess, competitors. what side? mean I And similar presumably I the relative about then freight

the perspective? year. next of be -- an think sort certainly you like, how You've costs recaptured contract think the spot your go gross and about up you margin. And net do do impact this presumably that's rates If again, elasticity margin stay now, from time worse these helping is to going rates here, and

Trevor Lang

Yes.

off, usually X-year First have contracts. we rolling

contracts rates I so feel which are, next we'll come will all X/X, longer it is not have supply a most bit higher would year, when the that And contracts yes, spring, our are will stay call little we'll where is markets because have up. But for whatever -- chain lower mean, come next it spot likely we it the renewal up the little up of bit rates. be, they a of for

be this of get have our We that that again is the to and past competitors your all would along. affects consumer still that see I I point But don't any consumer have the view in decide we'll unless Our our in competitors that different the stretch. that lower expect passed margins, environment. think historically their meaningfully they guess is in which I competitive not to differently, position gross said done.

Operator

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

Michael Lasser

to just basis this under pace per in have you're reported $XX on in sales versus a million year store million $XX So XXXX. on

what stores percent lower chunk So sales, of traffic producing volumes did they your stores And good in of you sales XXXX? were home than very have XXXX? right in why just a think existing now of do than outside are depressed lower in today they your

Thomas Taylor

of Bryan I very are you give the the at mean broad -- I answer. guess I'll I part look count environment. certainly store it. can we housing in a difficult macro

were That to was sales since homes X.X going buy XXXX, home close X they hovering annualized. our buy and above wonderful for and environment through our XXXX, and use a people million, existing to as prior public, homes, we sell So went category, million category.

fast forward COVID. bit look to as had during forward And pull a of today, a you you

forward. the So pull we're COVID digesting

existing where existing macro in -- a home third consecutive year sales. our home got of negative we're You've sales

You've got affordability, which things those market. housing household is pricing XX-year roof, and at through that's store high, the affect and up a every every

as -- it's volume comes things believe we So that improve, back.

it's -- good didn't where pre-COVID. things think realize were how I

has category taken our of certainly, a out, come challenge. more we've As

Bryan Langley

open Yes. store-by-store a we do jump way markets. existing Michael, it Look, in. to analyze this little is basis, it's a because Bryan. hard that in on I'll

pressure stores put own actually cannibalization. do our through we So on

point CAGRs. X-year really would is I [ our ] What GO to

are GO sub basis, CAGRs on basis And so our GO ] if still [ still you from Even look ] X%. against a at that, [ a transaction we're XXXX up just positive.

up in still that when comp total, we we're when the XXXX. look So are in our we total, at transactions in at and from you look at it look markets

a necessarily And on so look at basis. store-by-store I wouldn't it

Michael Lasser

some you comp slow maturity. rates structural some Got you. may a LVT of question the does that are be into & well? the in stores think for rates LVP benefit if normalized technology new less do the interest the changes because from changing it my States. over weakening last the of there coming of several you'll of through of stores, And those down And business category, given is, Floor get effect United could it come waterfall what the home sales, existing follow-up and how macro and there's but inspired a flooring play like that environment, then in cycle as is? rate new that to mean years, been some you a less ramping down interest has just Especially the been Decor as And

Trevor Lang

was going there Michael, Trevor. likely at are to We of lot take happened XX XX% Tom million in their demand and them that this a to old, XXX old. want crack want housing I'll they're are of to of XX or people eventually, are States. as over years to -- that. during said, have units over going average, COVID. forward United But on the still pull a upgrade And is years they're going to move want houses. to

sell Or want they'll know their they usually it they'll research X if that invest they make people because will moving of for seen the because new they top in is price. into they're -- things home invest look home, is a good. to help Most the the they're we've in flooring before it want to to X

average, X%, flooring kind were we were backdrop, at the when I you know. of the existing home last But XX So think, if decent sales I X% a look on we good at per year. years, don't and X%, think grew sales

I would grow think rate. our hopefully most stores that at even mature same

as X% a pick just So number.

think new stores, still we'll that benefit, You're on. I that we right, opening will so some do going less but have have of of waterfall less we're

hope mid-single-digit comp, going more a it'd out would I think proven, So get because has better last in environment, to be good normalized we feel you'd year than the XX in on a to we've a years that most believe, what's there. a in model and like got single-digit still just we a high do comp of

wear that and people home don't be will a know is to will with an or invest because to fortunate very change. but of existing going thing or either just in just I what's flooring So because aged in housing we're will a out trends top sales flooring happen, industry

Thomas Taylor

that pretty the years the in a of too We've Those X that the other we've XX% the I add opened if should we've the the I unit are for we're market accelerate open down of open, only continued -- thing depending you're going at rate on to event while of to things nicely a in stores to us, I'd think starts the turn. slope not stores market. opened couple benefit. that in recovery, think is historically, last have, lot

Operator

ask Ladies X due of that the to and only. limit interest you we gentlemen, time, question yourselves to

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

Simeon Gutman

maybe question, a I'll X-parter. ask X

look something you they immature X, the Or they else the not environment same? where And that can are is weakness at is I'm is those X industry the the within that for maybe there because performing about where of X, of if and adjust the should? And macro, performance you if is, First, cohorts? the so is to stores, years they're weak. assuming spread,

healthier Is it California in the still maybe second that because were there country? Are weakest part, trend uniform now? first in. that right mentioned examples of was that the then last are across the was And markets that Trevor

Trevor Lang

is Texas, and the us raw numbers. for are for and mid-Atlantic, that starting over that. I are Florida, in are the On just particularly out got some or mid-Atlantic what the saw meaningful now to has of the more second come yes, Washington, overall previous and we've Florida on markets why feel and markets comp mean the that's quarters, volume like places part, D.C., like we West, X that big us, down Texas X much

out comps housing started as the to So the of moved West and that same our seen East, you've sort weakness yes, follow trend.

And better for example, closer our store the you comping, positive. the you comps get we then the they're that through we on are where, then get still new to XXXX have newer in stores now that actually opened a And waterfall, comping the as up stores. walk the cohort, waterfall

are a that just still as opened, mentioned, And most stores opened, yes, there's that comping them, negative. that we the just positive. a older stores the So stores handful that but then only store comping are we of have comp we waterfall I that the the

Operator

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

Charles Grom

nice do good forward other into investing real about about north here price margins, or demand? improvement back level fiscal second 'XX? Gross some think Is the going to beyond Or that this you quarter, in of a stimulate XX%. think to of areas

Thomas Taylor

the I'll we're take the Yes, the execution that. gross business. and margin This executing Yes, is side on with Tom. pleased of how we're

movement in in some where invested better. have makes categories We price back price

tried we've rest we improvement and lower materials, the in price we do to the that across So sharp product see that the Pro all that buys time, going we where store. be when installation the a certainly of unit

do, Our going about continue affect competition. single down feel like still landscape. prices up we good the every good them. depending competitive week are up we'll to We we what's and And prices always -- versus on on the

almost we do for I that I've here every lots grown gross -- can we've of been believe margin that reasons. year

terrific it merchants job as our they a getting I better are at think a doing move margin. product,

within is -- category that negotiate vendors things itself able is existing to being able so better think because the to are under better. as our we're we're much buy with tough, so flooring I because pressure,

designers designers, bit emphasis, mix. got in when they we We've little our designers when higher XXX-plus margin rates. a sell and from good designer ticket Getting with those a have stores, benefit a are our customers, of better

margin goal. think into continue That's expansion our XXXX. I So certainly can

Operator

of with The Seth Sigman will line the next from come question Barclays.

Seth Sigman

therefore, sense the thinking the some I drive about what the thinking issue to just an QX. recovery anything turnover bad guess few you there transactions actually, project to any back size at in that? was And and, could your Just on go over less sizes you've seeing Are improvement that point. seen ticket. suggest years? context average don't the last transactions I'm project makes housing relationship about opportunity, Is decline that in

I'll tie with then in well. product question it as the And

do teens bit. looks XX-Q. the like about based the underperforming high be categories, It quite thinking on laminate and seem a Just to down LVP

that, perspective So any ties on more project why size? maybe in those the categories are with and underperforming,

Thomas Taylor

Yes.

is can shot in then take so if this at Tom. a choose. I'll that weigh others they and So

that home it they would better higher for go, sales, opinion, So is the my I say existing categories. the those in

if category comes doing home they're jobs, that into are to, and and market which as basements, I improve, they're itself doing project projects, they're larger the help flippers where bigger existing in the lends homes, think of size. back, they're sales business doing portion doing think would I whole that that

when if within elect a do in, their they I one kitchen, it. to size. a are a they that or do house, projects someone They're to buying not powder once. doing doing I at that and and for portion, bath a they live they're someone house that's think time, people elect at keeps the be doing think just whole that larger it vacant lends a house, And to house house a a selling job and

size think existing when to time, our was I normalize, where back in So do it home pre-COVID. that sales that project comes

easier it think The extent laminate other affected certain laminate, an thing installation that's It's laminate process. a to was an -- but not and I it's is that easier -- vinyl.

be them. at their little that people into COVID during work that more bit home having they're in lended homes, a easy and reinvesting to to for category go So I were and think when not and

own get to they a So they a bedroom not their pro on do buy have could could do and it. and to

sucked business try COVID, So of not vinyl a a will lot some were going tile as to installation, people installation. to but out forward coming of probably a on versus do everyone's we take people

little those category I And which So I the better, more. benefited, things a the think gets get better. as affected bit X category things think

Operator

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

Steven Forbes

while leaning more specific sort hoping year around current XXXX like on to you also, to is what was EPS the sales be for way it generate cadence any profile investment growth into or if extract the what does next next like store of plan. the business? to I plans mean? a Tom, opening What growth little still frame needed level could Like, year? ability know there. And or would higher you sort I EPS don't mean more the comp backloading provide detail there of does could the the of get growth based of investment profile be

Thomas Taylor

lots maybe on Bryan get it's about part that the trying We're on thinking and the that. class way first to thoughts take can of XXXX of of about about second. in to kind I'll weigh too we're first of headline you questions give I'll the we XXXX. with talk how our mean I Yes, first, early stores,

things today. how today. it you but it change, see So we wanted this And to give could how thinking we're about is we

half means back-end in the loaded are reason of that second will And happen back-end I when a year. bit stores The say purposeful. loaded, is the the it

more some but half, that open up of have stores will We back in have the the first half. we'll open in that

And is to it's the part start. And better the of that the will better. going think is the a to demand we market take better category, for that get in minute the stores that new

So we year, better. in think will be later the

in also push stores year. them to the of that select half -- us we second we're gives if why that's the it the we flexibility So

that. the And on answer, that's the answer So EPS I I guess answered.

Bryan Langley

got kind do as Yes. take. lot and get going through planning XXXX to to We've we We're growth EPS what comment it's of to and year. on a ready not more the

on come to that we year. as next more provide So guidance

Operator

of the Citi. comes Steven line question next The with from Zaccone

Steven Zaccone

the bit to understand impact slowing the to do a more unit want Great. I growth model. of

unit to if start towards operating if to expenses? is conversely, comps? some you're slowing you year, slightly in on on get opening and can more then next you're more of it markets, existing back leverage those weight leverage costs does markets it somewhat that Like or business? positive little So there's existing the bit the threshold the growth, we comp bottom the lower do fair assume more if is line, just fixed a cannibalization to a And for

Trevor Lang

to markets, as more cannibalization. percentage Yes. I have little yes, cannibalization do stores the will fewer we just going because in have probably it a existing stores think would down total, say, if slightly goes more we're we open a But bit. of

more new So example, growth. XX% going stores to we're the this -- XX XX% year, estimated on next for And stores. XX tom think like I year, the open mentioned, based it's

that would the would of be probably cannibalization And lower. so be math that

stores as Tom and margin more guys are that cost all point, leverage the mentioned, got seen, on think has I a you much number gross have And minimum our mean we've hours. up. on I operating come of Yes.

high. have we happen where much to to when flow-through back year, don't if go margin, should flow-through positive, higher hopefully So as stores we up and yes, at be but be operating next because then will that so a the number which on think higher pretty know, gross a shouldn't does, get the should cost we the of we start comp it we're

Bryan Langley

that mind delever. in our Keep new Yes. drag. They a add stores are actually

combination. we open lever allow got quicker you've approximately because fewer into actually year, to that as stores so new stores that fewer coming will it's us if next And XX,

Operator

David And with question the Bellinger line of the Mizuho comes from next Securities.

David Bellinger

the Thanks for the enterprise planning system. question. the It's ERP, on resource

Just help there. us a little more detail

there Just why you're today? that's system now? needed or looking Is that lacking the anything to improve in is something

whether of limit And about side just you just there safeguards guys any you this then And place second merchandising part, just multiyear on this? are How thinking about? or Can something any going of rollout. any are the else? on safeguards to sort all disruption, help should the just us frame, into think we type

Trevor Lang

of been got $XXX we'll and in Trevor. we year. And after XX we had portion an that do years. technology I've some million billion shortly is I had incredible think the $X.X knew to business invest business we This to we this to here us here, help Yes. this grow from

CRM so best-of-breed that with majority guys supply technologies companies are whether companies really XX what do years. HR that really And in vast putting chain. public or would that big over the companies And you we know, of for been companies, it's are are SaaS-based we've systems our or good

our to of AS old kind systems. XXX the last is and core technology systems financial our move invest X to off we that in And need off-prem merchandising

or to And you they're so all sexy business. core the what pretty, not -- but but that to run do

of systems. new experience a in got lot in And putting so we've

over And we've earlier, old or mentioned sitting forward. we that that are on a done last lot to of move so years. I last technology As the that X are these XX need the just

what doing. strong, again, team that's and that know been large very we here we player. So time, we've like a We incredibly feel got, we're entire good an picked

upgraded in stores sense last we've And just same because so in because when that rest word a small hear that -- the the don't our be that the going of us our you ERP, best-of-breed for the are and systems piece to already be we're are of to in. putting technologies think X the these of put

Bryan Langley

comments of and I'll you Bryan. alluded the is XXXX. question. just as too, bit impact have in because full little actually weigh I earlier, But the in a for a have jump not the This I'm sure in to year expected guys material it's to

the So as it call out a of one minimal. modest is it will half. pressure back that reasons be sequential I we But on expect do G&A that want of in should to percent sales the

just of pressure. little bit it will add So a

above expect year. to X% slightly And so we full for the be

year, a QX. just put will again, of that bit the but in and little bit full for of minimal little pressure So then QX pressure, in a

Operator

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

Gregory Melich

I down is I year's the CapEx is side, the inventory Or stores? wanted fewer cash decline from opening we this openings? year CapEx inventory, on can of or flat follow level flow, the guess decline year's come keep from the see to What's next next we'll on both still sort how up there? if about and will then openings? And CapEx, where that right we're long

Bryan Langley

and this take I'll Tom in Bryan. is Trevor need This weigh to. they and if let

the asked our you year. exit distribution this centers and has our inventory, us of inventory to it lot inventory also a on of we when optimizing to with be flat kind expect inventory supply that just a -- we remember, as expect do year we costs. So But year-over-year flow, reduction chain could free our cash within in comes

at continue into do point, rate move up think we see hopefully to this but I grow year inventory the that exit will we of in as should sales. and think you I with line So that, it XXXX, stores, as add pick

we stores. a see just will add there as up you So pick

kind get will growth then exit over XXXX. the we So be and kind we of XXXX think as as I inventory into reductions of normalized just

us has of this the XX year original of And XX XX. the really majority that then the stores of guide to do with question, on drop portion CapEx to opening the versus

do a So reduction of of of class little has it's timing that XXXX the to the stores. mainly with stores, most spend then but and bit the X for of it of

Our average of class is for million new around store $XX CapEx XXXX million. the $XX to

X if majority that's reduction you of So end. the those drop stores, in high the the

[indiscernible] be then that our above that facilities self-development obviously, be would and would average. projects So our below average,

Operator

Matt the line the Cowen. And Rakhlenko of comes TD from next with question

Maksim Rakhlenko

peers competition rational do you And the increasingly see to to points peers speak and what environment to seeing expect closures lower? smaller you're move you if starting current if out price? Or then price are being you there? persists? And with see Can are struggling? so, Are

Thomas Taylor

part first the can needed. in and take I'll Tom. is Ersan This if weigh

we more peers. pressure. the competition are meet We quarterly more and a last years with So down, publicly turned today basis the markets shops our hearing small on X where do a come traded they than of field we distributors in hearing then and weekly teams and heard during we've as on basis. We're of struggling independents

we're board. is So pressure. it hearing Everyone more under across the

it, things was going I and great last competition recession, turn, into less In be was true hard when the there thing than housing surface cycle. same in there the did will during flooring suspect the

no months change independent it's different to than it's price, markets yes, in are standpoint, same pricing not some and aggressive ago. they're We're a it. from but X was competitors say, a in ago seeing year wouldn't the much I decent -- it

have we've and overall, of X more the I aggressive would that. too that, and than But handful things within to price in year. certainly, a got it's to attention the away, it they're not last across to We country that was giving a months competitors much say pay different

versus against our and improvement we independent like-for-like terrific the measure home it gaps And and as well. network gaps way the on centers product, -- the distributor our remain against

Operator

from with next Keith Piper The Sandler. the line of Peter comes question

Peter Keith

Just quickly on the gross margin.

so, and DC efficiencies? pretty efficiencies, lower is there there? that then up Could you guided chain a us nicely. performance that supply nice is of like help transportation So benefits just the freight, you've or Is for really the understand And costs? QX, function if full year the purely

Bryan Langley

and I'll let jump Bryan. if in in to. this Yes, jump Tom is they Trevor need and

increase QX XXX a So the was QX. The QX -- we primarily QX really to sequential couple up costs. supply year-over-year, points basis versus improvement That actually, start, sequentially to from due of due to chain was items. were I'll

we than bridge collapse first, less so had And Baltimore. from in the impact anticipated

damage and us operations that better for, planned through with price savings which to markdowns. we'll us much third, have low as lower also supply that. not then we and had and maintain the chain overall strategy, Second, expand always shrink, of having everyday than to rate, our reductions allowed kind to in pass And gaps execution margin retail but maintain price allowed we

gives So improvement exit really be in the back conviction QX that XX.X% of XX.X% kind that to in the for or us full with moderate to line should that rate half achieve year. the

QX. conviction better on we those have we again, things versus that and in So based saw visibility today QX

Operator

Jonathan from Matuszewski come will of line question Jefferies. the last the with And

Jonathan Matuszewski

past, some In the Great. you shared valuable most your regarding pro insights customers.

trends I think demand pros pros top category. XX% that your behaving broader frequency if would Maybe said the how challenged on increasing were and to relative despite historically, overall you XX% you're order the be of your base, your with of refresh customer top us seeing helpful. you've the could they're for

Trevor Lang

our are Pro our don't specific but XX% have the I to continues outperform business. business our overall how doing, top

we we're that business. perform to than Yes. continue call. continue that business next better yes, the for to But outperform, Pro our we'll have continues maybe see yes, Pro So pleased to our and business our homeowner

Thomas Taylor

in thank everyone interest everyone's call. look appreciate you we company. We quarter. to next Well, We our joining forward the Okay. the on updating for

Operator

conference. concludes This today's

lines day. the at time. may You rest your disconnect now of this your Enjoy

Floor & Decor (FND) 1 Aug 242024 Q2 Earnings call transcript