Yahoo Finance Floor And Decor (NYSE:FND) Reports Sales Below Analyst Estimates In Q2 Earnings
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.
Is now the time to buy Floor And Decor? Find out in our full research report.
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
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.”
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 Retailer
Home 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 Growth
Floor 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.
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Same-Store Sales
A 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 Results
It 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.
Floor And Decor may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
