Net sales of $1,133.1 million decreased 0.2%
from the second quarter of fiscal 2023
Comparable store sales decreased
9.0%
Diluted earnings per share of $0.52
Opened five new warehouse stores
Floor & Decor Holdings, Inc. (NYSE: FND) (“We,” “Our,” the
“Company,” or “Floor & Decor”) announces its financial results
for the second quarter of fiscal 2024, which ended June 27,
2024.
Tom Taylor, Chief Executive Officer, stated, “We and our
industry continue to contend with monetary policy affecting the
housing market and repair and remodeling spending, including
ongoing soft demand for large project discretionary hard surface
flooring. Consequently, our second quarter total and comparable
store sales were modestly below our expectations. However, our
gross margin rate exceeded our expectations, which, coupled with
prudent expense management, helped mitigate most of the impact from
weak sales. This dynamic enabled us to report fiscal 2024 second
quarter diluted earnings per share of $0.52, compared with $0.66 in
the same period last year. We continue to implement strategies
designed to grow our market share while working prudently to manage
our profitability and maintain a strong balance sheet in this
challenging period.”
Mr. Taylor continued, “We opened five new warehouse stores in
the second quarter and plan to open 30 in 2024, in line with our
prior expectation of 30 to 35 stores. Looking forward to 2025, we
believe it is prudent to open approximately 25 new warehouse stores
in this muted market environment. These planned openings are
long-term growth investments toward our plan to operate 500
warehouse-format stores in the United States over time and should
further solidify our market share and position us for strong growth
when industry fundamentals improve.”
Please see “Comparable Store Sales” below for information on how
the Company calculates period-over-period changes in comparable
store sales.
For the Thirteen Weeks Ended June 27, 2024
- Net sales of $1,133.1 million decreased 0.2% from $1,135.9
million in the second quarter of fiscal 2023.
- Comparable store sales decreased 9.0%.
- We opened five new warehouse stores, ending the quarter with
230 warehouse stores and five design studios.
- Operating income of $71.3 million decreased 24.9% from $95.0
million in the second quarter of fiscal 2023. Operating margin of
6.3% decreased 210 basis points from the second quarter of fiscal
2023.
- Net income of $56.7 million decreased 20.7% from $71.5 million
in the second quarter of fiscal 2023. Diluted earnings per share
("EPS") of $0.52 decreased 21.2% from $0.66 in the second quarter
of fiscal 2023.
- Adjusted EBITDA* of $136.9 million decreased 10.4% from $152.8
million in the second quarter of fiscal 2023.
For the Twenty-six Weeks Ended June 27, 2024
- Net sales of $2,230.4 million decreased 1.2% from $2,258.0
million in the same period of fiscal 2023.
- Comparable store sales decreased 10.3%.
- We opened nine new warehouse stores.
- Operating income of $130.6 million decreased 31.4% from $190.5
million in the same period of fiscal 2023. Operating margin of 5.9%
decreased 250 basis points from the same period of fiscal
2023.
- Net income of $106.7 million decreased 25.4% from $143.0
million in the same period of fiscal 2023. Diluted EPS of $0.99
decreased 25.6% from $1.33 in the same period of fiscal 2023.
- Adjusted EBITDA* of $259.9 million decreased 14.1% from $302.4
million in the same period of fiscal 2023.
*Non-GAAP financial measure. Please see “Non-GAAP Financial
Measures” and “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for more information.
Updated Outlook for the Fiscal Year Ending December 26,
2024:
- Net sales of approximately $4,400 million to $4,490
million
- Comparable store sales of approximately (8.5)% to (6.5)%
- Diluted EPS of approximately $1.55 to $1.75
- Adjusted EBITDA* of approximately $480 million to $505
million
- Depreciation and amortization expense of approximately $235
million
- Interest expense, net of approximately $6 million to $7
million
- Tax rate of approximately 18%
- Diluted weighted average shares outstanding of approximately
108 million shares
- Open 30 new warehouse stores
- Capital expenditures of approximately $360 million to $410
million
*Non-GAAP financial measure. Please see “Non-GAAP Financial
Measures” and “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for more information.
Conference Call Details
A conference call to discuss the second quarter fiscal 2024
financial results is scheduled for today, August 1, 2024, at 5:00
p.m. Eastern Time. A live audio webcast of the conference call,
together with related materials, will be available online at
ir.flooranddecor.com.
A recorded replay of the conference call is expected to be
available approximately three hours after the conclusion of the
call and can be accessed both online at ir.flooranddecor.com and by
dialing 844-512-2921 (international callers please dial
412-317-6671). The pin number to access the telephone replay is
13747153. The replay will be available until August 8, 2024.
About Floor & Decor Holdings, Inc.
Floor & Decor is a multi-channel specialty retailer and
commercial flooring distributor operating 230 warehouse-format
stores and five design studios across 36 states as of June 27,
2024. The Company offers a broad assortment of in-stock
hard-surface flooring, including tile, wood, laminate and vinyl,
and natural stone along with decorative accessories and wall tile,
installation materials, and adjacent categories at everyday low
prices. The Company was founded in 2000 and is headquartered in
Atlanta, Georgia.
Comparable Store Sales
Comparable store sales refer to period-over-period comparisons
of our net sales among the comparable store base and are based on
when the customer obtains control of the product, which is
typically at the time of sale. A store is included in the
comparable store sales calculation on the first day of the
thirteenth full fiscal month following a store’s opening, which is
when we believe comparability has been achieved. Changes in our
comparable store sales between two periods are based on net sales
for stores that were in operation during both of the two periods.
Any change in the square footage of an existing comparable store,
including for remodels and relocations within the same primary
trade area of the existing store being relocated, does not
eliminate that store from inclusion in the calculation of
comparable store sales. Stores that are closed for a full fiscal
month or longer are excluded from the comparable store sales
calculation for each full fiscal month that they are closed. Since
our e-commerce, regional account manager, and design studio sales
are fulfilled by individual stores, they are included in comparable
store sales only to the extent the fulfilling store meets the above
mentioned store criteria. Sales through our Spartan Surfaces, LLC
("Spartan") subsidiary do not involve our stores and are therefore
excluded from the comparable store sales calculation.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA (which are shown in the
reconciliation below) are presented as supplemental measures of
financial performance that are not required by, or presented in
accordance with, accounting principles generally accepted in the
United States ("GAAP"). We define EBITDA as net income before
interest, taxes, depreciation and amortization. We define Adjusted
EBITDA as net income before interest, taxes, depreciation and
amortization, adjusted to eliminate the impact of non-cash
stock-based compensation expense and certain items that we do not
consider indicative of our core operating performance.
Reconciliations of these measures to the most directly comparable
GAAP financial measure are set forth in the table below.
EBITDA and Adjusted EBITDA are key metrics used by management
and our board of directors to assess our financial performance and
enterprise value. We believe that EBITDA and Adjusted EBITDA are
useful measures, as they eliminate certain items that are not
indicative of our core operating performance and facilitate a
comparison of our core operating performance on a consistent basis
from period to period. We also use Adjusted EBITDA as a basis to
determine covenant compliance with respect to our credit
facilities, to supplement GAAP measures of performance to evaluate
the effectiveness of our business strategies, to make budgeting
decisions, and to compare our performance against that of other
peer companies using similar measures. EBITDA and Adjusted EBITDA
are also frequently used by analysts, investors and other
interested parties to evaluate companies in our industry.
EBITDA and Adjusted EBITDA are non-GAAP measures of our
financial performance and should not be considered as alternatives
to net income as a measure of financial performance, or any other
performance measure derived in accordance with GAAP and they should
not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Additionally, EBITDA
and Adjusted EBITDA are not intended to be measures of liquidity or
free cash flow for management's discretionary use. In addition,
these non-GAAP measures exclude certain non-recurring and other
charges. Each of these non-GAAP measures has its limitations as an
analytical tool, and you should not consider them in isolation or
as a substitute for analysis of our results as reported under GAAP.
In evaluating EBITDA and Adjusted EBITDA, you should be aware that
in the future we may incur expenses that are the same as or similar
to some of the items eliminated in the adjustments made to
determine EBITDA and Adjusted EBITDA, such as stock-based
compensation expense, fair value adjustments related to contingent
earn-out liabilities, and other adjustments. Our presentation of
EBITDA and Adjusted EBITDA should not be construed to imply that
our future results will be unaffected by any such adjustments.
Definitions and calculations of EBITDA and Adjusted EBITDA differ
among companies in the retail industry, and therefore EBITDA and
Adjusted EBITDA disclosed by us may not be comparable to the
metrics disclosed by other companies.
Please see “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for reconciliations of non-GAAP financial measures
used in this release to their most directly comparable GAAP
financial measures.
Floor & Decor Holdings,
Inc.
Condensed Consolidated Statements of
Income
(In thousands, except for per share
data)
(Unaudited)
Thirteen Weeks Ended
June 27, 2024
June 29, 2023
% Increase
(Decrease)
Amount
% of Net Sales
Amount
% of Net Sales
Net sales
$
1,133,139
100.0
%
$
1,135,899
100.0
%
(0.2
)%
Cost of sales
642,105
56.7
656,266
57.8
(2.2
)%
Gross profit
491,034
43.3
479,633
42.2
2.4
%
Operating expenses:
Selling and store operating
341,408
30.1
311,406
27.4
9.6
%
General and administrative
67,671
6.0
63,279
5.5
6.9
%
Pre-opening
10,627
0.9
9,974
0.9
6.5
%
Total operating expenses
419,706
37.0
384,659
33.8
9.1
%
Operating income
71,328
6.3
94,974
8.4
(24.9
)%
Interest expense, net
663
0.1
2,898
0.3
(77.1
)%
Income before income taxes
70,665
6.2
92,076
8.1
(23.3
)%
Income tax expense
13,999
1.2
20,624
1.8
(32.1
)%
Net income
$
56,666
5.0
%
$
71,452
6.3
%
(20.7
)%
Basic weighted average shares
outstanding
107,046
106,206
Diluted weighted average shares
outstanding
108,274
107,805
Basic earnings per share
$
0.53
$
0.67
(20.9
)%
Diluted earnings per share
$
0.52
$
0.66
(21.2
)%
Twenty-six Weeks Ended
June 27, 2024
June 29, 2023
% Increase
(Decrease)
Amount
% of Net Sales
Amount
% of Net Sales
Net sales
$
2,230,428
100.0
%
$
2,257,951
100.0
%
(1.2
)%
Cost of sales
1,269,368
56.9
1,309,200
58.0
(3.0
)%
Gross profit
961,060
43.1
948,751
42.0
1.3
%
Operating expenses:
Selling and store operating
675,753
30.3
615,077
27.3
9.9
%
General and administrative
134,448
6.0
125,190
5.5
7.4
%
Pre-opening
20,220
0.9
17,994
0.8
12.4
%
Total operating expenses
830,421
37.2
758,261
33.6
9.5
%
Operating income
130,639
5.9
190,490
8.4
(31.4
)%
Interest expense, net
2,618
0.2
7,760
0.3
(66.3
)%
Income before income taxes
128,021
5.7
182,730
8.1
(29.9
)%
Income tax expense
21,323
0.9
39,754
1.8
(46.4
)%
Net income
$
106,698
4.8
%
$
142,976
6.3
%
(25.4
)%
Basic weighted average shares
outstanding
106,908
106,084
Diluted weighted average shares
outstanding
108,266
107,764
Basic earnings per share
$
1.00
$
1.35
(25.9
)%
Diluted earnings per share
$
0.99
$
1.33
(25.6
)%
Condensed Consolidated Balance
Sheets
(In thousands, except for share and per
share data)
(Unaudited)
As of June 27,
2024
As of December 28,
2023
Assets
Current assets:
Cash and cash equivalents
$
138,063
$
34,382
Income taxes receivable
4,109
27,870
Receivables, net
109,334
99,513
Inventories, net
1,037,284
1,106,150
Prepaid expenses and other current
assets
53,415
48,725
Total current assets
1,342,205
1,316,640
Fixed assets, net
1,700,787
1,629,917
Right-of-use assets
1,342,345
1,282,625
Intangible assets, net
152,036
153,869
Goodwill
257,940
257,940
Deferred income tax assets, net
15,239
14,227
Other assets
7,510
7,332
Total long-term assets
3,475,857
3,345,910
Total assets
$
4,818,062
$
4,662,550
Liabilities and stockholders’
equity
Current liabilities:
Current portion of term loan
$
2,103
$
2,103
Current portion of lease liabilities
132,770
126,428
Trade accounts payable
698,716
679,265
Accrued expenses and other current
liabilities
302,275
332,940
Deferred revenue
13,322
11,277
Total current liabilities
1,149,186
1,152,013
Term loan
194,733
194,939
Lease liabilities
1,362,140
1,301,754
Deferred income tax liabilities, net
53,974
67,188
Other liabilities
11,435
15,666
Total long-term liabilities
1,622,282
1,579,547
Total liabilities
2,771,468
2,731,560
Stockholders’ equity
Capital stock:
Preferred stock, $0.001 par value;
10,000,000 shares authorized; 0 shares issued and outstanding at
June 27, 2024 and December 28, 2023
—
—
Common stock Class A, $0.001 par value;
450,000,000 shares authorized; 107,132,849 shares issued and
outstanding at June 27, 2024 and 106,737,532 issued and outstanding
at December 28, 2023
107
107
Common stock Class B, $0.001 par value;
10,000,000 shares authorized; 0 shares issued and outstanding at
June 27, 2024 and December 28, 2023
—
—
Common stock Class C, $0.001 par value;
30,000,000 shares authorized; 0 shares issued and outstanding at
June 27, 2024 and December 28, 2023
—
—
Additional paid-in capital
523,282
513,060
Accumulated other comprehensive income,
net
106
1,422
Retained earnings
1,523,099
1,416,401
Total stockholders’ equity
2,046,594
1,930,990
Total liabilities and stockholders’
equity
$
4,818,062
$
4,662,550
Condensed Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Twenty-six Weeks Ended
June 27, 2024
June 29, 2023
Operating activities
Net income
$
106,698
$
142,976
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
114,807
96,028
Stock-based compensation expense
15,587
15,047
Deferred income taxes
(13,770
)
(13,480
)
Loss on asset impairments and disposals,
net
1,511
765
Change in fair value of contingent
earn-out liabilities
(87
)
1,787
Interest cap derivative contracts
85
57
Changes in operating assets and
liabilities, net of effects of acquisition:
Receivables, net
(9,821
)
12,595
Inventories, net
68,866
128,554
Trade accounts payable
19,136
84,885
Accrued expenses and other current
liabilities
18,969
6,579
Income taxes
24,390
(6,755
)
Deferred revenue
2,045
4,324
Other, net
(6,936
)
3,283
Net cash provided by operating
activities
341,480
476,645
Investing activities
Purchases of fixed assets
(225,614
)
(279,175
)
Acquisition, net of cash acquired
—
(17,156
)
Net cash used in investing activities
(225,614
)
(296,331
)
Financing activities
Payments on term loan
(1,051
)
(1,051
)
Borrowings on revolving line of credit
258,600
384,200
Payments on revolving line of credit
(258,600
)
(559,400
)
Payments of contingent earn-out
liabilities
(5,769
)
(5,241
)
Proceeds from exercise of stock
options
5,442
4,858
Proceeds from employee stock purchase
plan
2,720
2,558
Tax payments for stock-based compensation
awards
(13,527
)
(11,861
)
Net cash used in financing activities
(12,185
)
(185,937
)
Net increase (decrease) in cash and cash
equivalents
103,681
(5,623
)
Cash and cash equivalents, beginning of
the period
34,382
9,794
Cash and cash equivalents, end of the
period
$
138,063
$
4,171
Supplemental disclosures of cash flow
information
Buildings and equipment acquired under
operating leases
$
128,008
$
112,554
Cash paid for interest, net of capitalized
interest
$
2,121
$
7,455
Cash paid for income taxes, net of
refunds
$
10,699
$
60,792
Fixed assets accrued at the end of the
period
$
93,506
$
116,555
Reconciliation of GAAP to Non-GAAP
Financial Measures
(In thousands)
(Unaudited)
EBITDA and Adjusted EBITDA
Thirteen Weeks Ended
June 27, 2024
June 29, 2023
Net income (GAAP):
$
56,666
$
71,452
Depreciation and amortization (a)
57,837
49,177
Interest expense, net
663
2,898
Income tax expense
13,999
20,624
EBITDA
129,165
144,151
Stock-based compensation expense (b)
8,355
8,306
Other (c)
(663
)
353
Adjusted EBITDA
$
136,857
$
152,810
Twenty-six Weeks Ended
June 27, 2024
June 29, 2023
Net income (GAAP):
$
106,698
$
142,976
Depreciation and amortization (a)
113,716
95,103
Interest expense, net
2,618
7,760
Income tax expense
21,323
39,754
EBITDA
244,355
285,593
Stock-based compensation expense (b)
15,587
15,047
Other (c)
(87
)
1,787
Adjusted EBITDA
$
259,855
$
302,427
(a)
Excludes amortization of deferred
financing costs, which is included as part of interest expense, net
in the table above.
(b)
Non-cash charges related to stock-based
compensation programs, which vary from period to period depending
on the timing of awards and forfeitures.
(c)
Other adjustments include amounts
management does not consider indicative of our core operating
performance. Amounts for both the thirteen and twenty-six weeks
ended June 27, 2024 and June 29, 2023 relate to changes in the fair
value of contingent earn-out liabilities.
Forward-Looking Statements
This release and the associated webcast/conference call contain
forward-looking statements within the meaning of the federal
securities laws. All statements other than statements of historical
fact contained in this release and the associated
webcast/conference call, including statements regarding the
Company’s future operating results and financial position, business
strategy and plans, and objectives of management for future
operations, are forward-looking statements. These statements are
based on our current expectations, assumptions, estimates, and
projections. These statements involve known and unknown risks,
uncertainties, and other important factors that may cause the
Company’s actual results, performance, or achievements to be
materially different from any future results, performance, or
achievements expressed or implied by the forward-looking
statements. Forward-looking statements are based on management’s
current expectations and assumptions regarding the Company’s
business, the economy, and other future conditions, including the
impact of natural disasters on sales.
In some cases, you can identify forward-looking statements by
terms such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “could,” “seeks,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “budget,”
“potential,” or “continue” or the negative of these terms or other
similar expressions. The forward-looking statements contained in
this release are only predictions. Although the Company believes
that the expectations reflected in the forward-looking statements
in this release and the associated webcast/conference call are
reasonable, the Company cannot guarantee future events, results,
performance or achievements. A number of important factors could
cause actual results to differ materially from those indicated by
the forward-looking statements in this release or the associated
webcast/conference call, including, without limitation, (1) an
overall decline in the health of the economy, the hard surface
flooring industry, consumer confidence and discretionary spending,
and the housing market, including as a result of persistently high
or rising inflation or interest rates, (2) our failure to
successfully manage the challenges that our planned new store
growth poses or the impact of unexpected difficulties or higher
costs during our expansion, (3) our inability to enter into leases
for additional stores on acceptable terms or renew or replace our
current store leases, (4) our failure to successfully anticipate
and manage trends, consumer preferences, and demand, (5) our
inability to successfully manage increased competition, (6) our
inability to manage our inventory, including the impact of
inventory obsolescence, shrinkage, and damage, (7) political and
regulatory conditions that contribute to uncertainty and market
volatility, including the upcoming U.S. presidential election and
legislative, regulatory, trade and policies associated with a new
administration, (8) any disruption in our distribution
capabilities, supply chain, and our related planning and control
processes, including carrier capacity constraints, port congestion
or shut down, transportation costs, and other supply chain costs or
product shortages, (9) any increases in wholesale prices of
products, materials, and transportation costs beyond our control,
including increases in costs due to inflation, (10) the
resignation, incapacitation, or death of any key personnel,
including our executive officers, (11) our inability to attract,
hire, train, and retain highly qualified managers and staff, (12)
the impact of any labor activities, (13) our dependence on foreign
imports for the products we sell, including risks associated with
obtaining products from abroad, (14) geopolitical risks, such as
the conflict in the Middle East, the ongoing war in Ukraine, and
U.S. policies related to global trade and tariffs, such as import
restrictions under the Uyghur Forced Labor Prevention Act, or any
antidumping and countervailing duties, any of which could impact
our ability to import from foreign suppliers or raise our costs,
(15) our ability to manage our comparable store sales, (16) any
failure by any of our suppliers to supply us with quality products
on attractive terms and prices, (17) any failure by our suppliers
to adhere to the quality standards that we set for our products,
(18) our inability to locate sufficient suitable natural products,
particularly products made of more exotic species or unique stone,
(19) the effects of weather conditions, natural disasters, or other
unexpected events, including public health crises that may disrupt
our operations, (20) our inability to maintain sufficient levels of
cash flow or liquidity to fund our expanding business and service
our existing indebtedness, (21) restrictions imposed by our
indebtedness on our current and future operations, including risks
related to our variable rate debt, (22) any allegations,
investigations, lawsuits, or violations of laws and regulations
applicable to us, our products, or our suppliers, (23) our
inability to adequately protect the privacy and security of
information related to our customers, us, our associates, our
suppliers, and other third parties, (24) any material disruption in
our information systems, including our website, (25) new or
changing laws or regulations, including tax laws and trade policies
and regulations, (26) any failure to protect our intellectual
property rights or disputes regarding our intellectual property or
the intellectual property of third parties, (27) the impact of any
future strategic transactions, and (28) our ability to manage risks
related to corporate social responsibility. Additional information
concerning these and other factors are described in
“Forward-Looking Statements,” Item 1, “Business,” Item 1A, “Risk
Factors,” and Item 1C "Cybersecurity" of Part I and Item 7,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and Item 9A, “Controls and Procedures” of
Part II of the Company’s Annual Report for fiscal 2023 filed with
the Securities and Exchange Commission (the “SEC”) on February 22,
2024 (the “Annual Report”) and elsewhere in the Annual Report, and
those described in Item 2, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended June
27, 2024 (the “10-Q”) and elsewhere in the 10-Q, and those
described in the Company’s other filings with the SEC.
Because forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on these forward-looking statements
as predictions of future events. The forward-looking statements
contained in this release or the associated webcast/conference call
speak only as of the date hereof. New risks and uncertainties arise
over time, and it is not possible for the Company to predict those
events or how they may affect the Company. If a change to the
events and circumstances reflected in the Company’s forward-looking
statements occurs, the Company’s business, financial condition, and
operating results may vary materially from those expressed in the
Company’s forward-looking statements. Except as required by
applicable law, the Company does not plan to publicly update or
revise any forward-looking statements contained herein or in the
associated webcast/conference call, whether as a result of any new
information, future events, or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240801314106/en/
Investor Contacts:
Wayne Hood Senior Vice President of Investor Relations
678-505-4415 wayne.hood@flooranddecor.com
or
Matt McConnell Senior Manager of Investor Relations 770-257-1374
matthew.mcconnell@flooranddecor.com
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Floor and Decor (NYSE:FND)
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