Specialty flooring retailer Floor & Decor (NYSE: FND) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 5.8% year on year to $1.16 billion. On the other hand, the company’s full-year revenue guidance of $4.73 billion at the midpoint came in 1.8% below analysts’ estimates. Its GAAP profit of $0.45 per share was in line with analysts’ consensus estimates.
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Floor And Decor (FND) Q1 CY2025 Highlights:
- Revenue: $1.16 billion vs analyst estimates of $1.16 billion (5.8% year-on-year growth, in line)
- EPS (GAAP): $0.45 vs analyst estimates of $0.44 (in line)
- Adjusted EBITDA: $129.8 million vs analyst estimates of $129.3 million (11.2% margin, in line)
- The company dropped its revenue guidance for the full year to $4.73 billion at the midpoint from $4.82 billion, a 1.9% decrease
- EBITDA guidance for the full year is $540 million at the midpoint, below analyst estimates of $549.3 million
- Operating Margin: 5.5%, in line with the same quarter last year
- Free Cash Flow Margin: 0.4%, down from 3.3% in the same quarter last year
- Locations: 254 at quarter end, up from 225 in the same quarter last year
- Same-Store Sales fell 1.8% year on year (-11.6% in the same quarter last year)
- Market Capitalization: $7.69 billion
Tom Taylor, Chief Executive Officer, stated, “We are pleased to deliver fiscal 2025 first quarter diluted earnings per share of $0.45, compared to $0.46 in the same period last year. This result exceeded the low end of our first quarter earnings expectations, even though comparable store sales were at the lower end of our forecast. These first quarter results are a testament to our focus on what we can control. Despite the macroeconomic and geopolitical uncertainty, we believe we have a proactive, flexible plan that we are implementing and executing. We successfully managed an increase in tariffs in 2018 and 2019 by pursuing strategies to grow our market share and protect our profitability. Today, we intend to employ similar strategies to achieve these goals in 2025 and beyond.”
Company Overview
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.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $4.52 billion in revenue over the past 12 months, Floor And Decor is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
As you can see below, Floor And Decor grew its sales at an impressive 16.8% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new stores and expanded its reach.
This quarter, Floor And Decor grew its revenue by 5.8% year on year, and its $1.16 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 9.5% over the next 12 months, a deceleration versus the last six years. Still, this projection is admirable and implies the market is forecasting success for its products.
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Store Performance
Number of Stores
Floor And Decor operated 254 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 15.1% annual growth, much faster than the broader consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Floor And Decor’s demand has been shrinking over the last two years as its same-store sales have averaged 6.8% annual declines. This performance is concerning - it shows Floor And Decor artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
In the latest quarter, Floor And Decor’s same-store sales fell by 1.8% year on year. This decrease was an improvement from its historical levels. It’s always great to see a business’s demand trends improve.
Key Takeaways from Floor And Decor’s Q1 Results
It was good to see Floor And Decor narrowly top analysts’ gross margin expectations this quarter. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.6% to $69 immediately after reporting.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
