Net sales of $1,107.8 million increased 0.9%
from the third quarter of fiscal 2022
Comparable store sales decreased
9.3%
Diluted earnings per share of $0.61
Opened five new warehouse stores
Floor & Decor Holdings, Inc. (NYSE: FND) (“We,” “Our,” the
“Company,” or “Floor & Decor”) announces its financial results
for the third quarter of fiscal 2023, which ended September 28,
2023.
Tom Taylor, Chief Executive Officer, stated, “Amidst the
continuing economic challenges posed by rising mortgage interest
rates, near-record-low existing home sales, ongoing pressure on
housing affordability, and slowing sales of large ticket
discretionary products, we are pleased to deliver third-quarter
diluted earnings per share of $0.61. Our fiscal 2023 third-quarter
results are a testament to our company’s agility and unwavering
commitment to executing our key growth and customer engagement
strategies at an exceptional level. We remain focused on continuing
to grow our market share by capitalizing 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. We believe that our execution and new
warehouse store openings will position us for accelerating sales
and earnings growth when industry growth returns.”
Mr. Taylor continued, “In the third quarter of fiscal 2023, we
opened five new warehouse stores. We continue to open new warehouse
stores and intend to open 15 in the fourth quarter of fiscal 2023
toward achieving our 32 new store opening plan for fiscal
2023.”
Please see “Comparable Store Sales” below for information on how
the Company calculates period-over-period changes in comparable
store sales.
For the Thirteen Weeks Ended September 28, 2023
- Net sales of $1,107.8 million increased 0.9% from $1,097.8
million in the third quarter of fiscal 2022.
- Comparable store sales decreased 9.3%.
- We opened five new warehouse stores and closed one warehouse
store, ending the quarter with 207 warehouse stores and five design
studios.
- Operating income of $84.8 million decreased 16.6% from $101.7
million in the third quarter of fiscal 2022. Operating margin of
7.7% decreased 160 basis points from the third quarter of fiscal
2022.
- Net income of $65.9 million decreased 13.5% from $76.2 million
in the third quarter of fiscal 2022. Diluted earnings per share
("EPS") of $0.61 decreased 14.1% from $0.71 in the third quarter of
fiscal 2022.
- Adjusted EBITDA* of $140.9 million decreased 4.7% from $147.9
million in the third quarter of fiscal 2022.
For the Thirty-nine Weeks Ended September 28, 2023
- Net sales of $3,365.8 million increased 4.6% from $3,216.4
million in the same period of fiscal 2022.
- Comparable store sales decreased 6.3%.
- We opened 17 new warehouse stores and closed one warehouse
store.
- Operating income of $275.3 million decreased 8.9% from $302.0
million in the same period of fiscal 2022. Operating margin of 8.2%
decreased 120 basis points from the same period of fiscal
2022.
- Net income of $208.9 million decreased 8.8% from $229.0 million
in the same period of fiscal 2022. Diluted EPS of $1.94 decreased
8.9% from $2.13 in the same period of fiscal 2022.
- Adjusted EBITDA* of $443.4 million increased 2.2% from $434.0
million in the same period of fiscal 2022.
*Non-GAAP financial measure. Please see “Non-GAAP Financial
Measures” and “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for more information.
Outlook for the Fiscal Year Ending December 28, 2023:
- Net sales of approximately $4,345 million to $4,385
million
- Comparable store sales of approximately (8.5)% to (7.8)%
- Diluted EPS of approximately $2.14 to $2.24
- Adjusted EBITDA* of approximately $535 million to $550
million
- Depreciation and amortization expense of approximately $200
million
- Interest expense, net of approximately $11.5 million
- Tax rate of approximately 21.5%
- Diluted weighted average shares outstanding of approximately
108 million shares
- Open 32 new warehouse stores
- Capital expenditures of approximately $550 million to $575
million
*Non-GAAP financial measure. Please see “Non-GAAP Financial
Measures” and “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for more information.
Conference Call Details
A conference call to discuss the third quarter fiscal 2023
financial results is scheduled for today, November 2, 2023, at 5:00
p.m. Eastern Time. A live audio webcast of the conference call,
together with related materials, will be available online at
ir.flooranddecor.com.
A recorded replay of the conference call is expected to be
available within two hours of the conclusion of the call and can be
accessed both online at ir.flooranddecor.com and by dialing
844-512-2921 (international callers please dial 412-317-6671). The
pin number to access the telephone replay is 13741530. The replay
will be available until November 9, 2023.
About Floor & Decor Holdings, Inc.
Floor & Decor is a multi-channel specialty retailer and
commercial flooring distributor operating 207 warehouse-format
stores and five design studios across 36 states as of September 28,
2023. The Company offers a broad assortment of in-stock
hard-surface flooring, including tile, wood, laminate, vinyl, and
natural stone along with decorative accessories and wall tile,
installation materials, and adjacent categories at everyday low
prices. The Company was founded in 2000 and is headquartered in
Atlanta, Georgia.
Comparable Store Sales
Comparable store sales refer to period-over-period comparisons
of our net sales among the comparable store base and are based on
when the customer obtains control of the product, which is
typically at the time of sale. A store is included in the
comparable store sales calculation on the first day of the
thirteenth full fiscal month following a store’s opening, which is
when we believe comparability has been achieved. Changes in our
comparable store sales between two periods are based on net sales
for stores that were in operation during both of the two periods.
Any change in the square footage of an existing comparable store,
including for remodels and relocations within the same primary
trade area of the existing store being relocated, does not
eliminate that store from inclusion in the calculation of
comparable store sales. Stores that are closed for a full fiscal
month or longer are excluded from the comparable store sales
calculation for each full fiscal month that they are closed. Since
our e-commerce, regional account manager, and design studio sales
are fulfilled by individual stores, they are included in comparable
store sales only to the extent the fulfilling store meets the above
mentioned store criteria. Sales through our Spartan Surfaces, LLC
("Spartan") subsidiary do not involve our stores and are therefore
excluded from the comparable store sales calculation.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA (which are shown in the
reconciliation below) are presented as supplemental measures of
financial performance that are not required by, or presented in
accordance with, accounting principles generally accepted in the
United States ("GAAP"). We define EBITDA as net income before
interest, taxes, depreciation and amortization. We define Adjusted
EBITDA as net income before interest, taxes, depreciation and
amortization, adjusted to eliminate the impact of non-cash
stock-based compensation expense and certain items that we do not
consider indicative of our core operating performance.
Reconciliations of these measures to the most directly comparable
GAAP financial measure are set forth in the table below.
EBITDA and Adjusted EBITDA are key metrics used by management
and our board of directors to assess our financial performance and
enterprise value. We believe that EBITDA and Adjusted EBITDA are
useful measures, as they eliminate certain items that are not
indicative of our core operating performance and facilitate a
comparison of our core operating performance on a consistent basis
from period to period. We also use Adjusted EBITDA as a basis to
determine covenant compliance with respect to our credit
facilities, to supplement GAAP measures of performance to evaluate
the effectiveness of our business strategies, to make budgeting
decisions, and to compare our performance against that of other
peer companies using similar measures. EBITDA and Adjusted EBITDA
are also frequently used by analysts, investors and other
interested parties as performance measures to evaluate companies in
our industry.
EBITDA and Adjusted EBITDA are non-GAAP measures of our
financial performance and should not be considered as alternatives
to net income as a measure of financial performance, or any other
performance measure derived in accordance with GAAP and they should
not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Additionally, EBITDA
and Adjusted EBITDA are not intended to be measures of liquidity or
free cash flow for management's discretionary use. In addition,
these non-GAAP measures exclude certain non-recurring and other
charges. Each of these non-GAAP measures has its limitations as an
analytical tool, and you should not consider them in isolation or
as a substitute for analysis of our results as reported under GAAP.
In evaluating EBITDA and Adjusted EBITDA, you should be aware that
in the future we may incur expenses that are the same as or similar
to some of the items eliminated in the adjustments made to
determine EBITDA and Adjusted EBITDA, such as stock-based
compensation expense, distribution center relocation expenses, fair
value adjustments related to contingent earn-out liabilities, and
other adjustments. Our presentation of EBITDA and Adjusted EBITDA
should not be construed to imply that our future results will be
unaffected by any such adjustments. Definitions and calculations of
EBITDA and Adjusted EBITDA differ among companies in the retail
industry, and therefore EBITDA and Adjusted EBITDA disclosed by us
may not be comparable to the metrics disclosed by other
companies.
Please see “Reconciliation of GAAP to Non-GAAP Financial
Measures” below for reconciliations of non-GAAP financial measures
used in this release to their most directly comparable GAAP
financial measures.
Floor & Decor Holdings, Inc. Condensed
Consolidated Statements of Income (In thousands, except for per
share data) (Unaudited)
Thirteen Weeks Ended
September 28, 2023
September 29, 2022
% Increase
(Decrease)
Amount
% of Net Sales
Amount
% of Net Sales
Net sales
$
1,107,812
100.0
%
$
1,097,824
100.0
%
0.9
%
Cost of sales
640,357
57.8
650,349
59.2
(1.5
)%
Gross profit
467,455
42.2
447,475
40.8
4.5
%
Operating expenses:
Selling and store operating
308,581
27.9
280,735
25.6
9.9
%
General and administrative
59,870
5.3
54,697
5.0
9.5
%
Pre-opening
14,232
1.3
10,386
0.9
37.0
%
Total operating expenses
382,683
34.5
345,818
31.5
10.7
%
Operating income
84,772
7.7
101,657
9.3
(16.6
)%
Interest expense, net
1,246
0.2
3,032
0.3
(58.9
)%
Income before income taxes
83,526
7.5
98,625
9.0
(15.3
)%
Income tax expense
17,603
1.5
22,450
2.0
(21.6
)%
Net income
$
65,923
6.0
%
$
76,175
6.9
%
(13.5
)%
Basic weighted average shares
outstanding
106,393
105,754
Diluted weighted average shares
outstanding
108,002
107,470
Basic earnings per share
$
0.62
$
0.72
(13.9
)%
Diluted earnings per share
$
0.61
$
0.71
(14.1
)%
Thirty-nine Weeks
Ended
September 28, 2023
September 29, 2022
% Increase
(Decrease)
Amount
% of Net Sales
Amount
% of Net Sales
Net sales
$
3,365,763
100.0
%
$
3,216,404
100.0
%
4.6
%
Cost of sales
1,949,557
57.9
1,924,589
59.8
1.3
%
Gross profit
1,416,206
42.1
1,291,815
40.2
9.6
%
Operating expenses:
Selling and store operating
923,658
27.4
798,437
24.8
15.7
%
General and administrative
185,060
5.5
162,449
5.1
13.9
%
Pre-opening
32,226
1.0
28,890
0.9
11.5
%
Total operating expenses
1,140,944
33.9
989,776
30.8
15.3
%
Operating income
275,262
8.2
302,039
9.4
(8.9
)%
Interest expense, net
9,006
0.3
5,866
0.2
53.5
%
Income before income taxes
266,256
7.9
296,173
9.2
(10.1
)%
Income tax expense
57,357
1.7
67,215
2.1
(14.7
)%
Net income
$
208,899
6.2
%
$
228,958
7.1
%
(8.8
)%
Basic weighted average shares
outstanding
106,187
105,565
Diluted weighted average shares
outstanding
107,850
107,444
Basic earnings per share
$
1.97
$
2.17
(9.2
)%
Diluted earnings per share
$
1.94
$
2.13
(8.9
)%
Condensed Consolidated Balance Sheets (In thousands,
except for share and per share data) (Unaudited)
As of September 28,
2023
As of December 29,
2022
Assets
Current assets:
Cash and cash equivalents
$
61,628
$
9,794
Income taxes receivable
16,157
7,325
Receivables, net
97,733
94,732
Inventories, net
1,105,450
1,292,336
Prepaid expenses and other current
assets
55,134
53,298
Total current assets
1,336,102
1,457,485
Fixed assets, net
1,562,616
1,258,056
Right-of-use assets
1,306,475
1,205,636
Intangible assets, net
154,786
152,353
Goodwill
257,940
255,473
Deferred income tax assets, net
12,446
11,265
Other assets
7,717
10,974
Total long-term assets
3,301,980
2,893,757
Total assets
$
4,638,082
$
4,351,242
Liabilities and stockholders’
equity
Current liabilities:
Current portion of term loan
$
2,103
$
2,103
Current portion of lease liabilities
125,348
105,693
Trade accounts payable
706,325
590,883
Accrued expenses and other current
liabilities
327,224
298,019
Deferred revenue
13,383
10,060
Total current liabilities
1,174,383
1,006,758
Term loan
195,042
195,351
Revolving line of credit
—
210,200
Lease liabilities
1,325,226
1,227,507
Deferred income tax liabilities, net
46,917
41,520
Other liabilities
11,038
12,730
Total long-term liabilities
1,578,223
1,687,308
Total liabilities
2,752,606
2,694,066
Stockholders’ equity
Capital stock:
Preferred stock, $0.001 par value;
10,000,000 shares authorized; 0 shares issued and outstanding at
September 28, 2023 and December 29, 2022
—
—
Common stock Class A, $0.001 par value;
450,000,000 shares authorized; 106,569,892 shares issued and
outstanding at September 28, 2023 and 106,150,661 issued and
outstanding at December 29, 2022
107
106
Common stock Class B, $0.001 par value;
10,000,000 shares authorized; 0 shares issued and outstanding at
September 28, 2023 and December 29, 2022
—
—
Common stock Class C, $0.001 par value;
30,000,000 shares authorized; 0 shares issued and outstanding at
September 28, 2023 and December 29, 2022
—
—
Additional paid-in capital
503,594
482,312
Accumulated other comprehensive income,
net
2,455
4,337
Retained earnings
1,379,320
1,170,421
Total stockholders’ equity
1,885,476
1,657,176
Total liabilities and stockholders’
equity
$
4,638,082
$
4,351,242
Condensed Consolidated Statements of Cash Flows (In
thousands) (Unaudited)
Thirty-nine Weeks
Ended
September 28, 2023
September 29, 2022
Operating activities
Net income
$
208,899
$
228,958
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
146,947
112,691
Stock-based compensation expense
20,336
17,229
Deferred income taxes
4,953
1,747
Change in fair value of contingent
earn-out liabilities
2,329
1,530
Loss on asset impairments and disposals,
net
858
—
Interest cap derivative contracts
85
85
Changes in operating assets and
liabilities, net of effects of acquisitions:
Receivables, net
2,931
(21,014
)
Inventories, net
195,590
(312,288
)
Trade accounts payable
109,338
(25,761
)
Accrued expenses and other current
liabilities
2,950
27,796
Income taxes
(8,912
)
(6,360
)
Deferred revenue
3,323
1,415
Other, net
9,348
(18,703
)
Net cash provided by operating
activities
698,975
7,325
Investing activities
Purchases of fixed assets
(413,717
)
(322,825
)
Acquisitions, net of cash acquired
(17,353
)
(1,121
)
Proceeds from sales of property
—
4,773
Net cash used in investing activities
(431,070
)
(319,173
)
Financing activities
Payments on term loan
(1,577
)
(1,577
)
Borrowings on revolving line of credit
518,900
663,200
Payments on revolving line of credit
(729,100
)
(486,800
)
Payments of contingent earn-out
liabilities
(5,241
)
(2,571
)
Proceeds from exercise of stock
options
7,909
7,100
Proceeds from employee stock purchase
plan
5,159
4,379
Debt issuance costs
—
(1,505
)
Tax payments for stock-based compensation
awards
(12,121
)
(2,135
)
Net cash (used in) provided by financing
activities
(216,071
)
180,091
Net increase (decrease) in cash and cash
equivalents
51,834
(131,757
)
Cash and cash equivalents, beginning of
the period
9,794
139,444
Cash and cash equivalents, end of the
period
$
61,628
$
7,687
Supplemental disclosures of cash flow
information
Buildings and equipment acquired under
operating leases
$
192,906
$
148,665
Cash paid for interest, net of capitalized
interest
$
8,871
$
3,437
Cash paid for income taxes, net of
refunds
$
62,105
$
71,800
Fixed assets accrued at the end of the
period
$
150,111
$
118,453
Reconciliation of GAAP to Non-GAAP Financial Measures (In
thousands) (Unaudited)
EBITDA and Adjusted EBITDA
Thirteen Weeks Ended
September 28, 2023
September 29, 2022
Net income (GAAP):
$
65,923
$
76,175
Depreciation and amortization (a)
50,336
39,600
Interest expense, net
1,246
3,032
Income tax expense
17,603
22,450
EBITDA
135,108
141,257
Stock-based compensation expense (b)
5,289
6,360
Other (c)
542
292
Adjusted EBITDA
$
140,939
$
147,909
Thirty-nine Weeks
Ended
September 28, 2023
September 29, 2022
Net income (GAAP):
$
208,899
$
228,958
Depreciation and amortization (a)
145,439
111,237
Interest expense, net
9,006
5,866
Income tax expense
57,357
67,215
EBITDA
420,701
413,276
Stock-based compensation expense (b)
20,336
17,229
Other (c)
2,329
3,478
Adjusted EBITDA
$
443,366
$
433,983
(a) Excludes amortization of deferred
financing costs, which is included as part of interest expense, net
in the table above.
(b) Non-cash charges related to stock-based
compensation programs, which vary from period to period depending
on the timing of awards and forfeitures.
(c) Other adjustments include amounts
management does not consider indicative of our core operating
performance. Amounts for the thirteen and thirty-nine weeks ended
September 28, 2023 relate to changes in the fair value of
contingent earn-out liabilities. Amounts for the thirteen and
thirty-nine weeks ended September 29, 2022 primarily relate to
relocation expenses for our Houston distribution center and changes
in the fair value of contingent earn-out liabilities.
Forward-Looking Statements
This release and the associated webcast/conference call contain
forward-looking statements within the meaning of the federal
securities laws. All statements other than statements of historical
fact contained in this release and the associated
webcast/conference call, including statements regarding the
Company’s future operating results and financial position,
expectations related to our acquisition of Spartan, business
strategy and plans, and objectives of management for future
operations, are forward-looking statements. These statements are
based on our current expectations, assumptions, estimates and
projections. These statements involve known and unknown risks,
uncertainties and other important factors that may cause the
Company’s actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Forward-looking statements are based on management’s
current expectations and assumptions regarding the Company’s
business, the economy, and other future conditions, including the
impact of natural disasters on sales.
In some cases, you can identify forward-looking statements by
terms such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “could,” “seeks,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “budget,”
“potential,” “focused on” or “continue” or the negative of these
terms or other similar expressions. The forward-looking statements
contained in this release are only predictions. Although the
Company believes that the expectations reflected in the
forward-looking statements in this release and the associated
webcast/conference call are reasonable, the Company cannot
guarantee future events, results, performance or achievements. A
number of important factors could cause actual results to differ
materially from those indicated by the forward-looking statements
in this release or the associated webcast/conference call,
including, without limitation, (1) an overall decline in the health
of the economy, the hard surface flooring industry, consumer
confidence and spending and the housing market, including as a
result of rising inflation or interest rates, (2) demand
fluctuations in the housing industry, and demand for our products
and services may be adversely affected by unfavorable economic
conditions, including rising interest rates, inflation, a decline
in disposable income levels and recession fears, (3) an economic
recession or depression, (4) global inflationary pressures on raw
materials, energy, commodity, transportation, and other costs could
cause our vendors to seek further price increases on the products
we sell, (5) any disruption in our supply chain, including carrier
capacity constraints, port congestion, higher shipping, rail, and
trucking prices and other supply chain costs or product shortages,
(6) our failure to successfully anticipate consumer preferences and
demand, (7), our inability to pass along cost increases at rates
consumers are willing to pay, or reduced demand due to pricing
increases, (8) our inability to manage our growth, (9) our
inability to manage costs and risks relating to new store openings,
(10) our inability to find available locations for our stores on
terms acceptable to us, (11) demand for our products and services
may be adversely affected by unfavorable economic conditions, (12)
any disruption in our distribution capabilities, including from
difficulties operating our distribution centers, (13) our failure
to execute our business strategy effectively and deliver value to
our customers, (14) our inability to find, train and retain key
personnel, (15) the resignation, incapacitation or death of any key
personnel, (16) the inability to staff our stores and distribution
centers sufficiently, (17) the effects of weather conditions,
natural disasters or other unexpected events, including global
health crises, such as the COVID-19 pandemic, may disrupt our
operations, (18) our dependence on foreign imports for the products
we sell, which may include the impact of tariffs and other duties,
(19) geopolitical risks, such as the conflict in the Middle East,
the ongoing war in Ukraine, or import restrictions under the Uyghur
Forced Labor Prevention Act, that impact our ability to import from
foreign suppliers or raise our costs, (20) if the use of “cookie”
tracking technologies is further restricted, the amount of internet
user information we collect would decrease, which could require
additional marketing efforts and harm our business and operating
results, (21) violations of laws and regulations applicable to us
or our suppliers, (22) our failure to adequately protect against
security breaches involving our information technology systems and
customer information, (23) suppliers may sell similar or identical
products to our competitors, (24) competition from other stores and
internet-based competition, (25) impact of acquired companies,
including Spartan, (26) our inability to manage our inventory
obsolescence, shrinkage and damage, (27) our inability to maintain
sufficient levels of cash flow or liquidity to meet growth
expectations, (28) our inability to obtain merchandise on a timely
basis at prices acceptable to us, (29) restrictions imposed by our
indebtedness on our current and future operations, and (30) our
variable rate debt subjects us to interest rate risk that could
cause our debt service obligations to increase significantly.
Additional information concerning these and other factors are
described in “Forward-Looking Statements,” Item 1, “Business” and
Item 1A, “Risk Factors” of Part I and Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and Item 9A, “Controls and Procedures” of Part II of
the Company’s Annual Report for fiscal 2022 filed with the
Securities and Exchange Commission (the “SEC”) on February 23, 2023
(the “Annual Report”) and elsewhere in the Annual Report, and those
described in Item 2, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and Item 1A, “Risk
Factors” of the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 2023 (the “10-Q”) and
elsewhere in the 10-Q, and those described in the Company’s other
filings with the SEC.
Because forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on these forward-looking statements
as predictions of future events. The forward-looking statements
contained in this release or the associated webcast/conference call
speak only as of the date hereof. New risks and uncertainties arise
over time, and it is not possible for the Company to predict those
events or how they may affect the Company. If a change to the
events and circumstances reflected in the Company’s forward-looking
statements occurs, the Company’s business, financial condition and
operating results may vary materially from those expressed in the
Company’s forward-looking statements. Except as required by
applicable law, the Company does not plan to publicly update or
revise any forward-looking statements contained herein or in the
associated webcast/conference call, whether as a result of any new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102101336/en/
Investor Contacts: Wayne Hood Vice President of Investor
Relations 678-505-4415 wayne.hood@flooranddecor.com or Matt
McConnell Senior Manager of Investor Relations 770-257-1374
matthew.mcconnell@flooranddecor.com
Floor and Decor (NYSE:FND)
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