• Revenue: Fiscal 2024 4th quarter total sales increased by 5.7% year-over-year; full year total sales increased by 0.9% to $4,456 million.
• Comparable Store Sales: 4th quarter decreased by 0.8%; full year declined by 7.1%.
• Diluted Earnings Per Share (EPS): 4th quarter EPS of $0.44; full year EPS of $1.90, including a $0.05 benefit from a litigation settlement.
• Gross Margin: 4th quarter gross margin rate increased by 130 basis points to 43.5%; full year gross margin rate increased by 120 basis points to 43.3%.
• Store Openings: Opened 30 new warehouse format stores in 2024, reaching a total of 251 warehouse format stores and 5 design studios by year-end.
• Operating Cash Flow: Better than expected for the 4th quarter.
• Adjusted EBITDA: 4th quarter increased by 11.1% to $119.8 million; full year declined by 7.0% to $512.5 million.
• Capital Expenditures: Fiscal 2024 capital expenditures were $376.3 million, down from $566.3 million in the previous year.
• Interest Expense: Fiscal 2024 full year interest expense net declined 72.0% to $2.8 million.
• Effective Tax Rate: 4th quarter increased to 19.9%; full year declined to 18.8%.
• Inventory: Increased by 2.4% to $1.1 billion as of December 26, 2024.
• Pro Sales: Accounted for approximately 50% of total sales in the 4th quarter.
• Spartan Surfaces Sales: Fiscal 2024 sales grew by 10.1% to $215.2 million, but EBIT declined by 25.4%.

• Warning! GuruFocus has detected 3 Warning Sign with FND.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Floor & Decor Holdings Inc (NYSE:FND) reported better than expected comparable store sales, earnings flow through, operating cash flow, and earnings per share for the 4th quarter of fiscal 2024.
• The company opened its 250th store, marking a significant milestone towards its goal of operating 500 warehouse format stores across the United States.
• Despite industry contraction, FND grew its market share by investing in new stores, innovative merchandise, technology, and associate training.
• The company reported a strong financial position, allowing it to continue investing in long-term growth opportunities despite short-term cyclical pressures.
• FND's gross margin rate increased by approximately 130 basis points in the 4th quarter, driven by lower supply chain costs and effective expense management.

Negative Points

• Comparable store sales for fiscal 2024 declined by 7.1%, although there was sequential improvement each quarter.
• The commercial segment, Spartan Services, experienced a 17.9% decline in 4th quarter sales due to weakness in the multi-family residential market and pricing pressures.
• The company faces potential challenges from new tariffs on products from China, which could impact costs and pricing strategies.
• FND's fiscal 2024 full year adjusted EBITDA declined by 7.0%, reflecting pressures from the contracting flooring industry.
• The company anticipates geopolitical and policy uncertainties in fiscal 2025, which could impact economic conditions and the flooring industry.

Q & A Highlights

Q: Given the slightly weaker performance quarter-to-date, what do you think is driving that, and how have you factored in potential changes from the new administration, such as tighter immigration policy, into your outlook for the year? A: Thomas Taylor, CEO: The slight slowdown in comp from quarter-to-date versus Q4 is partly due to weather disruptions, which we expect to recover over time. Regarding immigration policy changes, it's too early to tell their impact on demand, but we will communicate more as we learn.

Q: You saw much greater flow-through in the 4th quarter than your normal rule of thumb would suggest. How telling is that experience moving forward? A: Thomas Taylor, CEO: The 4th quarter demonstrated that when sales exceed expectations, we have strong flow-through. If sales grow to 5%, we would flow through well. Bryan Langley, CFO: Excluding a $6.8 million benefit from a legal settlement, our natural flow-through was in the low 40s. We expect high 30s flow-through if sales exceed our 3% comp expectation.

Q: The business is levering on negative comps. What are you doing to manage SG&A so that expenses don't need to come back when the top line returns? A: Bryan Langley, CFO: We flex our hours around transactions, with about 55% fixed and 45% variable costs. We can adjust labor and discretionary spending as needed. Thomas Taylor, CEO: We've been investing through the downturn, so we don't have to catch up on investments, allowing for good flow-through when sales increase.

Q: How are you thinking about new store productivity and the impact of DC costs on gross margin? A: Bryan Langley, CFO: New store productivity should be similar to the past two years, below historical targets. The 60 to 70 basis points impact from DC costs is for the full year, starting at 30 basis points in Q1 and growing throughout the year.

Q: With small peers struggling, are you gaining market share from competitive closings? A: Thomas Taylor, CEO: We are hearing about competitor closings and believe we are gaining market share. Our stores are in great shape, with strong inventory levels and new products, positioning us well competitively.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.