Stock Story -
Specialty flooring retailer Floor & Decor (NYSE:FND) reported Q4 FY2023 results exceeding Wall Street analysts' expectations, with revenue flat year on year at $1.05 billion. On the other hand, the company's full-year revenue guidance of $4.69 billion at the midpoint came in slightly below analysts' estimates. It made a GAAP profit of $0.34 per share, down from its profit of $0.64 per share in the same quarter last year.
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Floor And Decor (FND) Q4 FY2023 Highlights:
- Revenue: $1.05 billion vs analyst estimates of $1.01 billion (3.8% beat)
- EPS: $0.34 vs analyst estimates of $0.27 (25.5% beat)
- Management's revenue guidance for the upcoming financial year 2024 is $4.69 billion at the midpoint, missing analyst estimates by 0.9% and implying 6.1% growth (vs 3.6% in FY2023)
- Free Cash Flow was -$29.28 million compared to -$28.65 million in the same quarter last year
- Gross Margin (GAAP): 42.2%, in line with the same quarter last year
- Same-Store Sales were down 9.4% year on year (big beat vs. expectations of down 13.4% year on year)
- Store Locations: 221 at quarter end, increasing by 30 over the last 12 months
- Market Capitalization: $11.65 billion
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 RetailerHome 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 GrowthFloor 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 21.2% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was exceptional as it added more brick-and-mortar locations and increased sales at existing, established stores.
This quarter, Floor And Decor reported decent year-on-year revenue growth of 0%, and its $1.05 billion in revenue topped Wall Street's estimates by 3.8%. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, an acceleration from this quarter.
Same-Store SalesA 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 within its existing stores has been relatively stable over the last eight quarters but fallen behind the broader consumer retail sector. On average, the company's same-store sales have grown by 1.2% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Floor And Decor is reaching more customers and growing sales.
In the latest quarter, Floor And Decor's same-store sales fell 9.4% year on year. This decline was a reversal from the 2.5% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.
Key Takeaways from Floor And Decor's Q4 Results We were impressed by how significantly Floor And Decor blew past analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast missed analysts' expectations and its full-year revenue guidance slightly missed Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. This is especially true given how the interest rate environment has hurt demand for housing-related products and services. The stock is up 8.7% after reporting and currently trades at $123.39 per share.