Floor & Decor Holdings, Inc. Q3 FY2024 earnings call

Bullet points:

• Tom mentioned comparable transactions were affected by hurricanes, but merchandising efforts drove sales to better and best price points, shifting sales to higher-margin products.
• Trevor discussed cost management in stores and store support center, high customer service scores, connected customer sales growth, design services growth, Pro sales growth, new store processes, and Spartan Services growth.
• Bryan talked about income statement items like gross margin increase, selling and store operating expenses growth, general and administrative expenses growth, preopening expenses decrease, net interest expense decrease, effective tax rate increase, adjusted EBITDA decline, and balance sheet details including liquidity and inventory.

Comparable transactions declined by 4.1% due to hurricane impact. Connected customer sales increased by 3.4% and accounted for approximately 19% of sales. Design services saw sequential growth in total and comparable store sales. Pro total sales accounted for approximately 48% of retail sales and continued to grow. Spartan Services sales in fiscal 2024 third quarter grew faster than the company average.

Bullet points:

• Sales expected to be approximately $4.4 billion to $4.43 billion vs prior guidance of $4.4 billion to $4.49 billion.
• Variable store sales estimated to decline 7.5% to 8.5% vs prior guidance of down 6.5% to 8.5%.
• Gross margin expected to be approximately 43.2% to 43.3%, unchanged from prior guidance.
• Selling and store operating expenses as a percentage of sales expected to be approximately 31%.
• Fourth quarter expense rate expected to be most pressured due to new store openings timing.
• Adjusted EBITDA expected to be approximately $490 million to $500 million vs prior guidance of $480 million to $505 million.
• Diluted earnings per share estimated to be in the range of $1.65 to $1.75 vs prior guidance of $1.55 to $1.75.

Bullet points:

• Macroeconomic conditions and interest rates impacting sales and margins.
• Hurricane impacts on specific markets and potential drag on results.
• Competitive landscape with potential store closures of competitors affecting market share.
• Store openings affecting selling and store operating expenses and margins.

Q: Simeon Gutman asked about store openings and macro environment impact on Floor & Decor.

A: Tom said 25 stores planned for next year, prepared for market turns, and Trevor mentioned taking costs out of CapEx of stores.

Q: Christopher Horvers asked about West Coast stores comping and hurricane impact.

A: Bryan said West Coast stores are meaningfully outperforming, Trevor mentioned potential benefit from recent hurricanes but it's early.

Q: Zach Fadem asked about operating margin and new stores.

A: Bryan said heavy pressure from new stores, and Tom and Trevor added on sales rebound and earnings power.