What Happened:
Shares of specialty flooring retailer Floor & Decor (NYSE:FND) fell 7% in the morning session after the company reported third quarter results missing Wall Street's expectations for same store sales and revenue. Floor and Decor also lowered full year guidance across the board, showing that the weakness is continuing. During the earnings call, management noted that the company faced greater-than-expected challenges due to the Federal Reserve's interest rate policies, which negatively impacted existing home sales and, consequently, the company's sales performance. As a result, the company observed an unexpected decline in comparable store sales in the early part of Q4 and is taking steps to manage expenses more rigorously and be cautious with growth investments for fiscal 2024. Overall, this was a weaker quarter for Floor And Decor.
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What is the market telling us:
Floor And Decor's shares are very volatile and over the last year have had 15 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was three months ago, when the stock dropped 9.34% on the news that the company reported second-quarter earnings which missed analysts' revenue estimates. The company's full-year revenue, same-store sales, and adjusted EBITDA guidance were lowered and missed analysts' expectations. On the other hand, the company continued to open new store locations, which is supportive of revenue growth. Also, the company realized positive cash flow in the quarter. Overall, this was a mediocre quarter for Floor & Decor, but the investments in new stores should give investors reasons to be optimistic.
Floor And Decor is up 8% since the beginning of the year, but at $78.29 per share it is still trading 32% below its 52-week high of $115.06 from July 2023. Investors who bought $1,000 worth of Floor And Decor's shares 5 years ago would now be looking at an investment worth $2,470.
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