Gross Margin Outlook
Q: Are margins sustainable above 43%?
A: Management is encouraged by strong margins, noting that supply chain cost savings and efficient pricing support 43.3% margins with prospects for modest further improvement.

2025 Store Openings & EPS
Q: How will 2025 openings affect EPS?
A: They plan to backload 2025 store openings—mostly in the second half—to favor stronger market conditions and improve operating leverage, though details on EPS growth remain early.

Recovery Timeline & Comp Sales
Q: When will comps turn positive?
A: Management expects sequential comp improvement within a 0–3 month lag from rate cuts, with the high end of guidance requiring a more favorable housing environment.

Unit Growth & Cannibalization
Q: Does slower growth reduce cannibalization?
A: Slower expansion (around 10% growth next year) should lessen cannibalization effects, aiding operating leverage by minimizing the drag from new-unprofitable stores.

Competition & Pricing Trends
Q: How are competitors and pricing evolving?
A: While competitors face more pricing pressure in a weak market, Floor & Decor maintains strong price gaps and competitive advantages, keeping its pricing discipline intact.

Store Sales vs 2019
Q: Why are some store sales below 2019 levels?
A: A challenging housing market with lower existing home sales and elevated home prices is compressing volume compared to 2019, though long‐term fundamentals remain intact.

Store Format Strategy
Q: Do smaller formats hurt competitive edge?
A: Management believes smaller, cost-effective stores in less competitive markets preserve advantages such as broad assortments and operating margins comparable to larger formats.

Immature Store Performance
Q: Are newer stores meeting performance expectations?
A: Newer stores, particularly those recently opened, are comping positive, while older cohorts lag; this “waterfall” effect underscores the differing performance across store maturities.

Product Mix & Project Size
Q: Will project sizes return to pre-COVID levels?
A: As existing home sales normalize, management anticipates project sizes and mix improvements—especially in higher-ticket categories—to eventually rebound, boosting average ticket.

Tariffs & Freight Impact
Q: How have tariffs and freight affected margins?
A: Diversification away from China has reduced tariff dependency, and improved freight contract terms have helped recapture margin previously lost, maintaining a healthy gross margin.

Cash Flow & CapEx Impact
Q: How will lower capex and stable inventory affect FCF?
A: Reduced new store openings have lowered capex expenses, and while inventory may rise as growth normalizes, free cash flow is expected to improve as operating efficiencies take hold.

ERP System Investment
Q: What benefits will the ERP upgrade bring?
A: The multi–year ERP upgrade targets core financial and merchandising systems with minimal near-term earnings impact while laying the groundwork for long-term operational improvements.

Pro Customer Trends
Q: Are top pro customers outperforming?
A: The firm sees its top 20% of pro customers continuing to drive stronger sales and higher order frequency, outperforming the general homeowner segment.