Floor And Decor (NYSE:FND) Reports Sales Below Analyst Estimates In Q1 Earnings

Jabin Bastian /
2024/05/02 4:28 pm EDT

Specialty flooring retailer Floor & Decor (NYSE:FND) missed analysts' expectations in Q1 CY2024, with revenue down 2.2% year on year to $1.10 billion. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $4.69 billion at the midpoint. It made a GAAP profit of $0.46 per share, down from its profit of $0.66 per share in the same quarter last year.

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Floor And Decor (FND) Q1 CY2024 Highlights:

  • Revenue: $1.10 billion vs analyst estimates of $1.11 billion (1.5% miss)
  • EPS: $0.46 vs analyst estimates of $0.44 (5.1% beat)
  • The company reconfirmed its revenue guidance for the full year of $4.69 billion at the midpoint
  • Gross Margin (GAAP): 42.8%, up from 42.4% in the same quarter last year
  • Free Cash Flow of $35.82 million, down 67.7% from the same quarter last year
  • Same-Store Sales were down 11.6% year on year (miss vs. expectations of down 10.9% year on year)
  • Store Locations: 225 at quarter end, increasing by 31 over the last 12 months
  • Market Capitalization: $11.7 billion

Tom Taylor, Chief Executive Officer, stated, “We are pleased to report better-than-expected fiscal 2024 first quarter diluted earnings per share of $0.46. We take pride 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. We are focused on continuing to grow our market share by opening new warehouse-format stores, capitalizing on our everyday low prices and value-driven options, trend-right product assortments, in-stock job lot quantities, and exceptional customer service.”

Operating large, warehouse-style stores, Floor & Decor (NYSE:FND) is a specialty retailer that specializes in hard flooring surfaces for the home such as tiles, hardwood, stone, and laminates.

Home Improvement Retailer

Home improvement retailers serve the maintenance and repair needs of do-it-yourself homeowners as well as professional contractors. Home is where the heart is, so any homeowner will want to keep that home in good shape by maintaining the yard, fixing leaks, or improving lighting fixtures, for example. Home improvement stores win with depth and breadth of product, in-store consultations for customers who need help, and services that cater to professionals. It is hard for non-focused retailers and e-commerce competitors to match these. However, the research, convenience, and prices of online platforms means they can’t be fully written off, either.

Sales Growth

Floor And Decor is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.

As you can see below, the company's annualized revenue growth rate of 19.7% over the last five years was excellent as it added more brick-and-mortar locations and expanded its reach.

Floor And Decor Total Revenue

This quarter, Floor And Decor missed Wall Street's estimates and reported a rather uninspiring 2.2% year-on-year revenue decline, generating $1.10 billion in revenue. Looking ahead, Wall Street expects sales to grow 10.8% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

A company's same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.

Floor And Decor's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 2% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

Floor And Decor Year On Year Same Store Sales Growth

In the latest quarter, Floor And Decor's same-store sales fell 11.6% year on year. This decrease was a further deceleration from the 3.3% year-on-year decline it posted 12 months ago. We hope the business can get back on track.

Key Takeaways from Floor And Decor's Q1 Results

It was encouraging to see Floor And Decor slightly top analysts' EPS expectations this quarter. We were also happy its gross margin narrowly outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations on worse-than-expected same store sales declines. Also, its full-year earnings guidance missed Wall Street's estimates. Overall, this was a mediocre quarter for Floor And Decor. The company is down 2.5% on the results and currently trades at $110 per share.

So should you invest in Floor And Decor right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.