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Floor & Decor Holdings, Inc. (FND)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales rose 5.7% YoY to $1.107B, comps fell 0.8%, and diluted EPS was $0.44, including a $0.05 benefit from a derivative litigation settlement; adjusted EBITDA was $119.8M and gross margin expanded ~130 bps to 43.5% .
  • FY2025 guidance introduced: net sales $4.74–$4.90B, comps flat to +3%, EPS $1.80–$2.10, adjusted EBITDA $540–$575M, gross margin ~43.4–43.7%, capex $330–$400M, and 25 store openings; tax rate ~21–22%, D&A ~$245M, interest expense net ~$3M .
  • Sequential trends improved: Q4 comps (-0.8%) improved from Q3 (-6.4%) and Q2 (-9.0%); average ticket turned positive (+1.3%); West division modestly positive; QTD Q1’25 comps are down ~1.7% amid weather impacts .
  • Catalysts and risks: margin tailwind from lower supply chain costs; tariff uncertainty (China exposure down to ~16% in Q4/18% FY) and DC ramp driving 60–70 bps gross margin drag in FY2025; hurricane rebuild tailwinds estimated ~110 bps to Q4 comps .

What Went Well and What Went Wrong

What Went Well

  • Gross margin rate expanded ~130 bps to 43.5% in Q4 (and ~120 bps to 43.3% for FY), driven by lower supply chain costs; adjusted EBITDA in Q4 grew 11.1% YoY to $119.8M .
  • Sequential comp improvement and average ticket turn: Q4 comps (-0.8%) improved from Q3 (-6.4%) and Q2 (-9.0%); average ticket +1.3% on favorable mix and training; West division comps modestly positive .
  • Design services and Pro momentum: design services NPS at highest since measured; Pro sales ~50% of total with sequential improvement; 144 pro education events in 2024 (target 155 in 2025) .
    Quote: “We are extremely proud of our store and store support teams… better‑than‑expected… earnings per share” .

What Went Wrong

  • Spartan Surfaces commercial weakness: Q4 Spartan sales -17.9% YoY; FY EBIT down 25.4% to $14.3M on margin pressure; FY2025 EBIT rate expected flat vs 2024 .
  • QTD softness and weather: Q1’25 quarter‑to‑date comps down ~1.7%, with widespread weather‑related store closures dragging sales .
  • FY2025 margin headwind: two new DCs to pressure gross margin by ~60–70 bps; new tariffs (additional 10% announced Feb 1) may necessitate pricing actions despite diversified sourcing (China 16% in Q4/18% FY, U.S. now ~27%) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$1,133.1 $1,117.9 $1,107.4
Diluted EPS ($USD)$0.52 $0.48 $0.44 (incl. $0.05 settlement)
Gross Margin Rate (%)43.3% 43.5% 43.5%
Operating Margin (%)6.3% 5.9% 5.4%
Adjusted EBITDA ($USD Millions)$136.9 $132.9 $119.8
Comparable Store Sales (%)-9.0% -6.4% -0.8%
Q4 YoY ComparisonQ4 2023Q4 2024Change
Revenue ($USD Millions)$1,048.1 $1,107.4 +5.7%
Diluted EPS ($USD)$0.34 $0.44 +29.4%
Gross Margin Rate (%)42.2% 43.5% +130 bps
Operating Margin (%)4.4% 5.4% +100 bps
Adjusted EBITDA ($USD Millions)$107.8 $119.8 +11.1%

KPIs and Mix

KPIQ4 2024
Average Ticket Comp (%)+1.3%
Transaction Comp (%)-2.1%
Connected Customer Penetration (% of sales)~18% (Q4); ~19% FY
Pro Sales Mix (% of total sales)~50%
Stores (end of Q4)251 warehouse stores; 5 design studios
Q4 Store Openings10
Comp benefit from hurricanes~110 bps (Q4)

Segment/Commercial Snapshot (Spartan Surfaces)

MetricQ4 2024FY 2024
Sales growth (%)-17.9% YoY +10.1% to $215.2M
EBIT ($USD Millions)—$14.3 (−25.4% YoY)
FY2025 outlook (EBIT rate)—~flat vs FY2024

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)FY2024$4.40–$4.49 $4.40–$4.43 Lowered upper end
Comparable Store Sales (%)FY2024(8.5) to (6.5) (8.5) to (7.5) Narrowed/Lowered high end
Diluted EPS ($)FY2024$1.55–$1.75 $1.65–$1.75 Raised low end
Adjusted EBITDA ($M)FY2024$480–$505 $490–$500 Narrowed to mid‑range
Interest Expense, net ($M)FY2024~$6–$7 ~$4 Lowered
Tax Rate (%)FY2024~18 ~18 Maintained
Diluted Shares (M)FY2024~108 ~108 Maintained
Capex ($M)FY2024$360–$410 $360–$390 Lowered upper end
New Store Openings (#)FY202430 30 Maintained
Net Sales ($B)FY2025—$4.74–$4.90 New
Comparable Store Sales (%)FY2025—~flat to +3% New
Diluted EPS ($)FY2025—$1.80–$2.10 New
Adjusted EBITDA ($M)FY2025—$540–$575 New
Gross Margin Rate (%)FY2025—~43.4–43.7 (incl. ~60–70 bps DC drag) New
Selling & Store OpEx (% of sales)FY2025—~31.0–31.5 New
G&A (% of sales)FY2025—~6 (incl. ~$9M ERP) New
Pre‑opening (% of sales)FY2025—~0.7 New
D&A ($M)FY2025—~$245 New
Interest Expense, net ($M)FY2025—~$3 New
Tax Rate (%)FY2025—~21–22 New
Diluted Shares (M)FY2025—~109 New
New Store Openings (#)FY2025—25 New
Capex ($M)FY2025—$330–$400 New

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Technology/ERPERP investment starting; minimal FY24 EPS impact; G&A slight pressure Reinforced ERP ramp ~$9M ERP in FY25 G&A; confirm‑to‑pay adoption aiding pros Ongoing investment, execution progressing
Supply chain costsGross margin up; contracted ocean rates mitigate spot spikes GM ~43.5%; supply chain tailwind; less pass-through than planned GM 43.5% in Q4; FY 43.3%; DC drag 60–70 bps in FY25 Tailwind in FY24; measured headwind FY25
Tariffs/macroDiscussed potential freight/tariff impacts; rate-cut lag to comps Tariffs manageable; sourcing diversification Additional 10% China tariff noted; China exposure down to 16% Q4/18% FY; price gaps intact Risk rising; mitigated via sourcing/pricing
Product performanceBetter/best mix, installation materials strength GM aided by mix; categories mixed Wood/stone/installation/decor above avg; LVT/laminate below avg but improving Improving mix; category normalization
Regional trendsWest outperforming company avg West “well above company” though not yet positive West modestly positive in Q4 Improving West
Regulatory/legal——$6.8M litigation settlement benefited Q4 EPS by ~$0.05 One‑time tailwind
CommercialSpartan strong in June; diversification to health care/education/hospitality —Q4 Spartan sales −17.9% YoY; FY EBIT −25.4%; FY25 EBIT rate ~flat Near‑term pressure; long‑term investments

Management Commentary

  • Strategic posture: “Their hard work enabled us to report… earnings per share that were better‑than‑expected despite the macroeconomic challenges” (Tom Taylor) .
  • Store growth: “We opened 10 stores during the fourth quarter, ending fiscal 2024 operating 251 stores… intend to open 25 stores in fiscal 2025” .
  • Comps drivers: “Average ticket comp increased by 1.3%… benefited from favorable product mix and the positive impacts of hurricanes Helene and Milton” .
  • Tariffs and sourcing: “China accounted for ~18% of products sold in FY2024 (~16% in Q4); U.S. now ~27%; if needed we will increase retail pricing while maintaining price gaps” .
  • FY2025 framework: “Gross margin rate expected ~43.4–43.7% with ~60–70 bps drag from two new distribution centers… adjusted EBITDA $540–$575M, EPS $1.80–$2.10” (Bryan Langley) .

Q&A Highlights

  • Incremental flow‑through: Normal flow‑through low‑30s to mid‑30s; Q4 natural flow‑through low‑40s excluding settlement; high‑30s expected in FY2025 if comps >3% .
  • Pricing vs tariffs: Diversification plus vendor negotiations; price gaps vs peers intact; pricing actions if needed to offset new tariffs .
  • New store productivity and DC impact: FY2025 new store productivity similar to past two years (below historical); DC gross margin drag starts ~30 bps in Q1 and grows through the year .
  • Hurricane impact: Q4 comps benefit ~110 bps; rebuild arcs typically 16–20 months; Q1 impact similar to Q4; near‑term weather closures pressured QTD .
  • Cohort “waterfall”: 55% of stores still maturing; mature stores doing ~$22–$22.5M sales with low‑20s EBITDA margins in current macro; ecosystem levers at ~5% comp .

Estimates Context

  • Wall Street consensus (S&P Global/Capital IQ) for Q4 2024 could not be retrieved due to rate‑limit errors at time of request; therefore, explicit “vs. estimates” comparisons are unavailable. Management noted Q4 EPS and flow‑through were better‑than‑expected, aided by a $0.05 litigation settlement benefit .
  • Where estimates become available, we would align to S&P Global consensus to quantify beats/misses and assess revision implications.

Key Takeaways for Investors

  • Q4 delivered a clean margin beat with EPS support from settlement; underlying gross margin strength and expense control indicate resilient earnings power into recovery .
  • Sequential demand indicators improved (comps, ticket, West division); near‑term weather noise and macro uncertainty persist (QTD comps −1.7%) .
  • FY2025 guide embeds DC start‑up drag (60–70 bps) and a wide EPS range ($1.80–$2.10), reflecting macro/tariff uncertainty; gross margin still targeted ~43.4–43.7% .
  • Tariff exposure continues to decline (China 16% Q4/18% FY), with multi‑country sourcing plus pricing levers protecting price gaps; monitor further tariff actions .
  • Spartan commercial near‑term pressured; long‑term investments target higher‑spec sectors and nationwide scale; plan for FY2025 EBIT rate ~flat vs FY2024 .
  • Store growth remains measured (25 openings FY2025, first‑half 7), with back‑half flexibility; maturing cohorts and minimum‑hour stores should amplify flow‑through when comps inflect .
  • Trading setup: watch existing home sales trajectory, tariff headlines, DC ramp impacts, and hurricane rebuild tailwinds; improving comp momentum or tariff clarity could be catalysts .