Floor & Decor Q1 Earnings Call Highlights

Key Points

• Floor & Decor reported a softer-than-expected Q1 with diluted EPS of $0.37, comps down 3.7% and total sales of $1.152 billion, and management widened fiscal 2026 guidance to $4.77B–$4.99B in sales and EPS $1.83–$2.08 amid weak big-ticket demand.
• The board authorized a discretionary $400 million share repurchase program (no incremental debt expected) with buybacks to start in Q2, while CFO emphasized maintaining roughly $500 million minimum liquidity.
• Growth and cost actions include opening six stores in Q1 and a target of 20 new stores in 2026 with a smaller ~55,000 sq ft format to lower average store cost (~$7.5M–$8M), alongside investments in digital, pro/commercial platforms and a new pro loyalty program.

Floor & Decor NYSE: FND reported a softer-than-expected start to fiscal 2026 as macro pressures weighed on big-ticket discretionary demand, prompting management to widen its full-year guidance range while emphasizing cost discipline, continued store expansion, and a newly authorized share repurchase program.

Share repurchase authorization and capital allocation priorities

Chief Executive Officer Bradley Paulsen said the company’s board authorized a share repurchase program of up to $400 million, describing it as consistent with Floor & Decor’s capital allocation framework and supported by “the durability of our cash flows” and “the increasing efficiency of our new store investment.”

Paulsen said the company does not expect to use incremental debt to fund buybacks and noted there is “no defined timeline” for completion. He framed the authorization as an opportunistic response to what management views as a disconnect between the company’s long-term intrinsic value and its share price amid uncertainty in home improvement demand.

CFO Bryan Langley reiterated that repurchases are discretionary and will be executed “through both programmatic and opportunistic purchases.” Langley said the company expects to begin executing in the second quarter, but he did not commit to a specific pace. On liquidity guardrails, Langley said he thinks about maintaining a minimum of around $500 million in liquidity (cash plus availability under the asset-based lending facility) as “an absolute minimum,” adding he does not expect the company to get near that floor.

First-quarter results: comps decline, EPS falls, weather and demand pressures

Paulsen said first-quarter performance was pressured by a “challenging demand environment for big-ticket discretionary purchases,” citing adverse weather mid-quarter, elevated 30-year mortgage rates, higher gas prices tied to geopolitical tensions in the Middle East, and weaker consumer sentiment. “These dynamics resulted in first quarter earnings coming in weaker than we anticipated,” he said.

For the quarter, Floor & Decor posted diluted EPS of $0.37, down from $0.45 a year earlier. Total sales decreased 0.7% to $1.152 billion, while comparable store sales declined 3.7%.

Management provided monthly comp trends, with comps up 0.4% in January, down 6.9% in February, and down 4.0% in March. Paulsen said second-quarter-to-date comparable store sales were down 4.5%.

Paulsen attributed the first-quarter comp decline primarily to a 5.5% decrease in transactions, noting adverse weather accounted for about 150 to 200 basis points of pressure. Average ticket rose 1.9%, partially offsetting the transaction decline, though Paulsen said ticket was negatively affected by a weaker laminate and vinyl mix and “meaningfully lower square footage purchases” as customers took on smaller projects. He also highlighted “strong sales growth when the designer was involved,” pointing to the company’s free design service as a driver of higher-quality engagements and ticket.

Category and regional commentary: vinyl pressure, tile strength, pro sales growth

Paulsen said regional performance was mixed. The west region “continued to outperform the company” and delivered positive comps excluding new store cannibalization. The east region was the weakest, followed by the south, which he said reflected adverse weather and broader softening demand. He also reminded investors the south region lapped hurricane-related sales benefits in the prior year (about 100 basis points in last year’s first quarter).

From a merchandise standpoint, Paulsen said four departments outperformed company comps:

• Installation materials
• Tile
• Decorative accessories
• Wood

Installation materials delivered year-over-year growth as the company expanded share of wallet with professionals, helping drive a 1.4% increase in first-quarter pro sales. Tile remained “a consistently strong performer,” which Paulsen tied to the continued success of the Vetta collection.

Laminate and vinyl remained a key area of weakness, and in Q&A Paulsen said the primary challenge is vinyl. He described a shift in customer preference toward lower-quality specifications and lower price points, particularly products priced under $2 per square foot. In response, he said the company introduced value-driven offers, special buys, and in-store displays featuring more than 20 in-stock styles under $2 per square foot, alongside refinements to price bands.

Paulsen said early results from price band refinements were “encouraging,” citing positive elasticity and improving square footage purchase trends, with plans to expand the initiative to more stores in the second quarter. However, he said the company expects the vinyl category to remain under pressure for the rest of 2026, describing it as becoming “a math problem” as average selling prices decline without a meaningful square footage lift.

Growth initiatives: connected customer, store expansion, and commercial platforms

Paulsen said “connected customer” sales grew 5.4% year-over-year and represented about 19% of total sales. He said the company continues to invest in talent, technology, and process improvements, and noted a “new digital leader” has been brought in to help build a more personalized online experience intended to complement stores and drive engagement and conversion.

On store growth, Floor & Decor opened six new warehouse-format stores in the first quarter (versus four last year): Staten Island, New York; Dallas, Texas; Detroit, Michigan; Pittsburgh, Pennsylvania; Vacaville, California; and Fayetteville, North Carolina. Management reiterated it remains on track to open 20 new stores in fiscal 2026, with development focused primarily in Tier I and Tier II markets where the company already has a presence. Paulsen said about 50% of 2026 openings are expected in the first half, compared with 35% last year, adding operating weeks and supporting first-year productivity.

Paulsen and Langley also discussed a smaller average store size for the 2026 class—about 55,000 square feet. Langley said the company expects average store cost of roughly $7.5 million to $8 million in 2026, down from as high as $11.7 million in 2023. Paulsen said the smaller format supports entry into denser urban markets where larger boxes are less available and more expensive, and he said the company does not believe it is sacrificing the customer experience or assortment.

Commercial initiatives also remained a focus. Paulsen said the company is developing a new pro loyalty program and remains on track to launch it in the first quarter of 2027. He also said Floor & Decor is building a scalable, strategic account-driven B2B platform and is expanding its regional commercial account managers, which totaled 76 in the first quarter.

Regarding Spartan Surfaces, Paulsen said first-quarter sales and earnings were weaker than expected amid difficult commercial market conditions, particularly softness in multifamily. However, he pointed to solid customer engagement, “rising quoting activity,” stable sample volume, and a “solid backlog” as indicators that position the business for gradual improvement in coming quarters.

Margins, costs, liquidity, and updated 2026 guidance

Langley said first-quarter gross margin came in better than expected, with gross margin up 20 basis points year-over-year to 44.0%. He attributed the expansion to timing benefits from strategic pricing initiatives, partially offset by higher supply chain costs. He also said distribution center growth in Seattle and Baltimore was a year-over-year headwind to gross margin of about 60 basis points.

SG&A rose 2.5% to $11.1 million above last year, driven primarily by costs from 22 new stores opened since the first quarter of 2025. As a percentage of sales, SG&A deleveraged about 120 basis points to 39.5%. Operating income fell 18.4% to $52.4 million, while adjusted EBITDA declined 6.4% to $121.5 million, with adjusted EBITDA margin at 10.5%.

Langley also said the company completed portions of its ERP implementation and is live with financial systems and some merchandising components, with additional implementation continuing through 2026.

On cash flow and liquidity, Langley said the company generated $109.2 million in operating cash flow, up from $71.2 million a year earlier, driven primarily by changes in inventory and trade accounts payable. Floor & Decor ended the quarter with $1.007 billion in unrestricted liquidity, including $293.6 million in cash and $713.6 million available under its ABL facility. Inventory increased 1.4% to $1.1 billion versus the prior quarter, and the company ended the quarter with $198 million of term loan debt.

For fiscal 2026, management updated guidance to reflect a wider range of outcomes amid uncertainty in existing home sales and consumer demand. The company expects:

• Sales of $4.77 billion to $4.99 billion (up 1.8% to 6.5%), including about $65 million from a 53rd week
• Comparable store sales flat to down 4%
• Gross margin of about 43.6% to 43.8%, with Langley calling Q1’s 44.0% “likely” the high point for the year
• SG&A at about 38.0% of sales
• Adjusted EBITDA of about $545 million to $580 million, including about $11 million from the 53rd week
• Diluted EPS of about $1.83 to $2.08, including about $0.08 from the 53rd week (implying 52-week diluted EPS of about $1.75 to $2.00)
• CapEx of about $250 million to $300 million (unchanged)

Langley said guidance reflects expectations that transactions will decline low- to mid-single digits, while average ticket is expected to be flat to up low single digits. He also discussed cost pressures, including higher energy and logistics expenses, and said the company is working to mitigate increases through negotiations, cost controls, and disciplined spending.

About Floor & Decor NYSE: FND

Founded in 2000 and headquartered in Atlanta, Floor & Decor Holdings Inc is a specialty retailer focused on hard surface flooring and related accessories in the United States. The company serves both professional installers and do-it-yourself customers through a growing network of warehouse-format stores and a comprehensive e-commerce platform.

Floor & Decor’s product offering spans ceramic and porcelain tile, engineered and solid hardwood, laminate, luxury vinyl plank and tile, natural stone and a full suite of installation materials such as grout, mortars and underlayment.

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