Specialty flooring retailer Floor & Decor (NYSE: FND) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 7.1% year on year to $1.21 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $4.71 billion at the midpoint. Its GAAP profit of $0.58 per share was in line with analysts’ consensus estimates.
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Floor And Decor (FND) Q2 CY2025 Highlights:
- Revenue: $1.21 billion vs analyst estimates of $1.21 billion (7.1% year-on-year growth, in line)
- EPS (GAAP): $0.58 vs analyst estimates of $0.57 (in line)
- Adjusted EBITDA: $150.2 million vs analyst estimates of $146.9 million (12.4% margin, 2.2% beat)
- The company dropped its revenue guidance for the full year to $4.71 billion at the midpoint from $4.73 billion, a 0.5% decrease
- EPS (GAAP) guidance for the full year is $1.88 at the midpoint, beating analyst estimates by 5%
- EBITDA guidance for the full year is $535 million at the midpoint, in line with analyst expectations
- Operating Margin: 6.7%, in line with the same quarter last year
- Free Cash Flow was -$9.99 million, down from $80.04 million in the same quarter last year
- Locations: 257 at quarter end, up from 230 in the same quarter last year
- Same-Store Sales were flat year on year (-9% in the same quarter last year)
- Market Capitalization: $8.43 billion
Tom Taylor, Chief Executive Officer, stated, “We are pleased to report that for the second quarter of fiscal 2025, our diluted earnings per share increased by 11.5% to $0.58, compared to $0.52 in the same period last year, reaching the high end of our expectations. Our second quarter comparable store sales increased by 0.4%, marking the first quarterly increase since the fourth quarter of fiscal 2022. We believe our second quarter earnings performance clearly reflects the disciplined execution of our agile growth strategies and the prudent management of expenses and profitability by our associates.”
Company Overview
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.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $4.6 billion in revenue over the past 12 months, Floor And Decor is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
As you can see below, Floor And Decor’s sales grew at an impressive 16.2% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new stores and expanded its reach.
This quarter, Floor And Decor grew its revenue by 7.1% year on year, and its $1.21 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 7.4% over the next 12 months, a deceleration versus the last six years. Despite the slowdown, this projection is healthy and indicates the market is forecasting success for its products.
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Store Performance
Number of Stores
Floor And Decor operated 257 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 14.5% annual growth, much faster than the broader consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Floor And Decor’s demand has been shrinking over the last two years as its same-store sales have averaged 6% annual declines. This performance is concerning - it shows Floor And Decor artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
In the latest quarter, Floor And Decor’s year on year same-store sales were flat. This performance was a well-appreciated turnaround from its historical levels, showing the business is improving.
Key Takeaways from Floor And Decor’s Q2 Results
It was encouraging to see Floor And Decor beat analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. Zooming out, we think this was a decent quarter. The stock traded up 2.3% to $78.50 immediately after reporting.
So should you invest in Floor And Decor right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
