Floor & Decor Reports Strong Q1 Earnings Amid Macroeconomic Challenges

Floor & Decor Holdings, Inc. (NYSE:FND) announced better-than-expected results for the first quarter of fiscal 2024, with diluted earnings per share of $0.46 surpassing analysts' estimates. The company reported net sales of $1,097.3 million, representing a 2.2% decrease from the first quarter of fiscal 2023. Despite the decline in revenue, Floor & Decor remains focused on its growth strategy and plans to expand its footprint across the United States.

Why this matters: The company's ability to overcome macroeconomic challenges and report strong earnings has implications for the retail industry as a whole, particularly in thehome improvement sector. As Floor & Decor continues to expand its presence, it may influence consumer spending habits and shape the competitive landscape for other retailers.

During the first quarter, Floor & Decor opened four new warehouse stores, bringing its total to 225 warehouse stores and five design studios as of March 28, 2024. The company's long-term goal is to operate 500 warehouse format stores nationwide, solidifying its position as a leading specialty retailer of hard flooring surfaces for both DIY homeowners and professional contractors.

Tom Taylor, Chief Executive Officer of Floor & Decor, expressed satisfaction with the company's performance, stating,"We are pleased to report better-than-expected fiscal 2024 first quarter diluted earnings per share of $0.46. We take satisfaction in these first quarter results as they demonstrate how our teams continue to work to strategically grow our gross margin rate and prudently manage expenses without sacrificing customer service amid the near-term uncertain macroeconomic challenges.

The company's financial results for the quarter showed an operating income of $59.3 million, a 37.9% decrease from the first quarter of fiscal 2023. The operating margin was 5.4%, a 310 basis point decrease from the same period last year. Net income stood at $50.0 million, a 30.0% decrease from the first quarter of fiscal 2023. Adjusted EBITDA was $123.0 million, a 17.8% decrease from the previous year.

Floor & Decor experienced a significant slowdown in same-store sales, which fell 11.6% compared to the same quarter last year. This marks a further deceleration from the 3.3% year-on-year decline reported 12 months ago. However, the company remains optimistic about its future prospects, with Wall Street analysts projecting a 10.8% sales growth over the next 12 months, signaling a potential acceleration from the current quarter.

Looking ahead, Floor & Decor provided guidance for the full fiscal year 2024. The company expects net sales to range between $4.60 billion and $4.77 billion, with comparable store sales growth of approximately 2.0% to 5.5%. Diluted earnings per share are projected to be in the range of $1.75 to $2.05, while adjusted EBITDA is anticipated to fall between $520 million and $560 million. The company plans to open 30 to 35 new warehouse stores and invest approximately $400 million to $475 million in capital expenditures during fiscal 2024.

Floor & Decor's growth strategy has been driven by the addition of new brick-and-mortar locations and the expansion of its reach. Over the past five years, the company has achieved an impressive annualized revenue growth rate of 19.7%. As Floor & Decor continues to operate effectively within the challenging macroeconomic environment, its focus on offering everyday low prices, value-driven options, trend-right product assortments, and exceptional customer service positions the company well for long-term success.

Key Takeaways

• Floor & Decor reports Q1 2024 EPS of $0.46, beating analyst estimates.
• Net sales decline 2.2% to $1.097 billion, but company remains focused on growth.
• Floor & Decor opens 4 new warehouse stores, plans to reach 500 locations nationwide.
• Same-store sales fall 11.6%, but company expects 2.0-5.5% growth in FY 2024.
• Floor & Decor projects FY 2024 net sales of $4.60-4.77 billion, EPS of $1.75-2.05.