The specialty retailer of hard surface flooring and related accessories is not letting a weaker-than-expected quarter get in the way of its growth plans.
The company opened six warehouse stores during its first quarter, with plans to open a total of 20 locations for the full fiscal year. Floor & Décor said it continues to see a long-term opportunity of operating 500 warehouse stores in the United States.
On the earnings call, CEO Brad Paulson said the new stores opening this year are expected to average approximately 55,000sq ft, which is a “much smaller footprint than we’ve done in the past”.
“We believe this format allows us to enter more dense markets without sacrificing sales productivity,” he told analysts. “Are we sacrificing the assortment in a store that’s 60,000sq ft or less? We feel like the answer is no.”
The smaller format is also more effective. Floor & Decor expects its average store cost this year to be approximately $7.5M to $8M.
“If you rewind the clock just a couple of years, we were as high as $11.7M in 2023,” CFO Bryan Langley said on the call.
In the earnings statement, Paulson said the company’s first-quarter earnings were weaker than it expected, resulting from a “challenging demand environment for big-ticket discretionary purchases, against a backdrop of elevated 30-year mortgage rates and heightened geopolitical tensions in the Middle East that contributed to higher gas prices and a decline in consumer sentiment.”
The company said that, consistent with its disciplined capital-allocation framework, the board authorised a share repurchase program for up to $400M of outstanding common stock.
“This action reflects the continued long-term strength of our operating model and cash flows,” Paulson stated. “We believe today’s uncertain economic environment has created a disconnect between our long-term intrinsic value and our share price. We remain focused on opening new warehouse stores, reinvesting in our existing footprint and investing in our commercial flooring platforms and other new growth initiatives.”
