Floor & Decor Holdings ((FND)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Floor & Decor Holdings recently held its earnings call, revealing a mixed sentiment in its financial performance. While the company showcased strong earnings per share growth and successful store expansion, it also faced challenges such as declining comparable store sales and regional sales pressures, highlighting significant industry headwinds.
Double-Digit EPS Growth
Floor & Decor reported a notable increase in its fiscal 2025 third-quarter diluted earnings per share, which rose by 10.4% to $0.53. This performance exceeded the high end of the company’s guidance, underscoring its operational strength despite market challenges.
Total Sales Growth
The company achieved a total sales growth of 5.5%, reaching $1.180 billion. This growth was realized despite a challenging market environment, reflecting Floor & Decor’s ability to navigate industry headwinds effectively.
Store Expansion
Floor & Decor continued its expansion strategy by opening five new stores in the third quarter, including a reentry into the Charlotte market and a new presence in Myrtle Beach, SC. Year-to-date, the company has opened 12 new locations, marking a 9% increase in store count from the previous year.
Highest Net Promoter Scores
In September, Floor & Decor achieved its highest Net Promoter Scores ever, indicating exceptional service delivery and customer satisfaction, which are critical for sustaining growth.
Spartan Surfaces Growth
Spartan Surfaces, a division of Floor & Decor, delivered an impressive 13.3% year-over-year sales growth in the third quarter, contributing positively to the company’s overall performance.
Product Margin Improvement
Despite external pressures, Floor & Decor improved its product margin by 80 basis points year-over-year in the third quarter of fiscal 2025, showcasing effective cost management.
Comparable Store Sales Decline
The company faced a decline in comparable store sales, which fell by 1.2% in Q3 and 2% in early Q4. This reflects ongoing pressure from high mortgage rates and a weak housing market, which are affecting consumer spending.
Lower New Store Sales Performance
New store classes from 2023 to 2025 have reported first-year sales below long-term targets, averaging $11 million. This indicates the industry headwinds impacting new store performance.
Gross Margin Pressure
Floor & Decor experienced a slight decrease in its gross margin rate by approximately 10 basis points due to increased distribution center costs, highlighting the challenges in maintaining profitability.
Regional Sales Challenges
Existing home sales pressure in high-concentration markets like Texas and Florida has impacted Floor & Decor’s overall performance, reflecting regional sales challenges.
Forward-Looking Guidance
Looking ahead, Floor & Decor provided guidance for fiscal 2025, expecting total sales to range between $4.660 billion and $4.710 billion. Comparable store sales are estimated to decline by 1% to 2%, while the gross margin rate is anticipated to be approximately 43.6% to 43.7%. The company plans to open 20 new stores in fiscal 2025, maintaining this pace for fiscal 2026, with capital expenditures projected between $280 million and $300 million.
In summary, Floor & Decor Holdings’ earnings call highlighted a blend of strong financial performance and operational challenges. The company demonstrated resilience through EPS growth and store expansion, yet faced significant industry headwinds affecting comparable store sales and regional performance. Looking forward, Floor & Decor remains committed to its growth strategy while navigating the complexities of the current market environment.