Floor And Decor (NYSE:FND) Exceeds Q4 Expectations, Stock Soars

Specialty flooring retailer Floor & Decor (NYSE:FND) reported Q4 FY2023 results exceeding Wall Street analysts' expectations, with revenue flat year on year at $1.05 billion. On the other hand, the company's full-year revenue guidance of $4.69 billion at the midpoint came in slightly below analysts' estimates. It made a GAAP profit of $0.34 per share, down from its profit of $0.64 per share in the same quarter last year.

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Tom Taylor, Chief Executive Officer, stated, “We are pleased to deliver better-than-expected fiscal 2023 fourth-quarter diluted earnings per share of $0.34, primarily due to comparable store sales that were better than anticipated. We are proud of how our teams are collaborating to successfully execute our sales-driving initiatives, prudently manage expenses without sacrificing customer service, and strategically grow our gross margin rate. We are particularly proud of accomplishing these results when existing home sales are at record lows, and flooring industry sales continue to contract. As we look to 2024, we remain focused on growing our market share by continuing to capitalize on our everyday low prices and value-driven options, trend-right product assortments, in-stock job lot quantities, and the exceptional customer service provided by our store associates.”

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 21.2% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was exceptional as it added more brick-and-mortar locations and increased sales at existing, established stores.

This quarter, Floor And Decor reported decent year-on-year revenue growth of 0%, and its $1.05 billion in revenue topped Wall Street's estimates by 3.8%. Looking ahead, Wall Street expects sales to grow 7.1% 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 within its existing stores has been relatively stable over the last eight quarters but fallen behind the broader consumer retail sector. On average, the company's same-store sales have grown by 1.2% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Floor And Decor is reaching more customers and growing sales.

In the latest quarter, Floor And Decor's same-store sales fell 9.4% year on year. This decline was a reversal from the 2.5% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.

Key Takeaways from Floor And Decor's Q4 Results

We were impressed by how significantly Floor And Decor blew past analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast missed analysts' expectations and its full-year revenue guidance slightly missed Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. This is especially true given how the interest rate environment has hurt demand for housing-related products and services. The stock is up 8.7% after reporting and currently trades at $123.39 per share.

So should you invest in Floor And Decor 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.