Stock Story -
Specialty flooring retailer Floor & Decor (NYSE:FND) fell short of analysts' expectations in Q2 CY2024, with revenue flat year on year at $1.13 billion. The company's full-year revenue guidance of $4.45 billion at the midpoint also came in 2.8% below analysts' estimates. It made a GAAP profit of $0.52 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) Q2 CY2024 Highlights:
- Revenue: $1.13 billion vs analyst estimates of $1.15 billion (1.7% miss)
- EPS: $0.52 vs analyst expectations of $0.52 (in line)
- The company dropped its revenue guidance for the full year from $4.69 billion to $4.45 billion at the midpoint, a 5.1% decrease
- EPS (GAAP) Guidance for the full year is $1.65 at the midpoint, missing analysts' estimates by 9.9%
- Gross Margin (GAAP): 43.3%, up from 42.7% in the same quarter last year
- Free Cash Flow of $80.04 million, similar to the same quarter last year
- Locations: 230 at quarter end, up from 203 in the same quarter last year
- Same-Store Sales rose 9% year on year (-6% in the same quarter last year)
- Market Capitalization: $10.49 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 18.6% over the last five years was excellent as it added more brick-and-mortar locations and expanded its reach.
This quarter, Floor And Decor missed Wall Street's estimates and reported a rather uninspiring 0.2% year-on-year revenue decline, generating $1.13 billion in revenue. Looking ahead, Wall Street expects sales to grow 11.9% 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 has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 2.1% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
In the latest quarter, Floor And Decor's same-store sales rose 9% year on year. This growth was a well-appreciated turnaround from the 6% year-on-year decline it posted 12 months ago, showing the business is regaining momentum.
Key Takeaways from Floor And Decor's Q2 ResultsIt was good to see Floor And Decor beat analysts' gross margin expectations this quarter. On the other hand, its full-year earnings forecast missed analysts' expectations and its full-year revenue guidance missed Wall Street's estimates. Overall, this quarter could have been better. The stock traded down 1.1% to $93.01 immediately following the results.
