Floor Decor Holdings Inc
For the period ended Jun 27, 2024. Filed Aug 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 27, 2024 · Filed Aug 1, 2024
FND$51.25-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-28; filed 2024-05-02.
0001507079-24-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-27; filed 2024-08-01.
0001507079-24-000023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 69 previous paragraphs and 83 current paragraphs.
45 unchanged; 22 reworded; 12 added; 2 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
We believe the decreases in comparable transactions for the thirteen and twenty-six weeks ended June 27, 2024 were largely driven by the impact of lower existing home sales. The decreases in comparable average ticket during the thirteen and twenty-six weeks ended June 27, 2024, were primarily due to smaller average transaction sizes.
Current report
We estimate that retail sales during the thirteen weeks ended June 27, 2024 were approximately 52% from homeowners and 48% from Pros compared to approximately 57% from homeowners and 43% from Pros during the thirteen weeks ended June 29, 2023. We estimate that retail sales during the twenty-six weeks ended June 27, 2024 were approximately 53% from homeowners and 47% from Pros compared to approximately 57% from homeowners and 43% from Pros during the twenty-six weeks ended June 29, 2023.
Current report
The increases in gross margin during the thirteen and twenty-six weeks ended June 27, 2024 were primarily driven by a decrease in supply chain costs.
Current report
Selling and store operating expenses during the twenty-six weeks ended June 27, 2024 increased $60.7 million, or 9.9%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $78.5 million for new stores and $5.3 million at Spartan, partially offset by a decrease of $23.1 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 300 basis points to 30.3% from 27.3% in the corresponding prior year period.
Current report
General and administrative expenses during the twenty-six weeks ended June 27, 2024 increased $9.3 million, or 7.4%, compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales increased by approximately 50 basis points to 6.0% from 5.5% in the corresponding prior year period.
Current report
The increases in general and administrative expenses in total and as a percentage of net sales for the thirteen and twenty-six weeks ended June 27, 2024 were primarily comprised of additional staffing costs to support store growth of approximately $2.2 million and $4.9 million, respectively, and, to a lesser extent, incentive compensation and other operating expenses.
Current report
Pre-opening expenses during the thirteen weeks ended June 27, 2024 increased $0.7 million, or 6.5%, compared to the corresponding prior year period.
Current report
Pre-opening expenses during the twenty-six weeks ended June 27, 2024 increased $2.2 million, or 12.4%, compared to the corresponding prior year period.
Current report
The increases in pre-opening expenses during the thirteen and twenty-six weeks ended June 27, 2024 primarily resulted from higher store relocation expenses compared to the corresponding prior year period.
Current report
Net interest expense during the thirteen weeks ended June 27, 2024 decreased $2.2 million, or 77.1%, compared to the corresponding prior year period.
Current report
Net interest expense during the twenty-six weeks ended June 27, 2024 decreased $5.1 million, or 66.3%, compared to the corresponding prior year period.
Current report
Income tax expense was $21.3 million during the twenty-six weeks ended June 27, 2024 compared to $39.8 million during the twenty-six weeks ended June 29, 2023. The effective tax rate was 16.7% for the twenty-six weeks ended June 27, 2024 compared to 21.8% in the corresponding prior year period.
Removed paragraphs (2)
Previous report
We estimate that retail sales during both the thirteen weeks ended March 28, 2024 and March 30, 2023 were approximately 55% from homeowners and 45% from Pros.
Previous report
Pre-opening expenses during the thirteen weeks ended March 28, 2024 increased $1.6 million, or 19.6%, compared to the corresponding prior year period. The increase primarily resulted from the timing of expenses incurred for new store openings compared to the corresponding prior year period.
Reworded paragraphs (22)
Previous wording
The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Floor & Decor Holdings, Inc. and Subsidiaries included in Item 1 of this quarterly report on Form 10-Q (this “Quarterly Report”) and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2023 and filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (the “Annual Report”). As used in this Quarterly Report, except where the context otherwise requires or where otherwise indicated, the terms “Floor & Decor,” “Company,” “we,” “our,” or “us” refer to Floor & Decor Holdings, Inc. and its subsidiaries.
Current wording
The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Floor & Decor Holdings, Inc. and Subsidiaries included in Item 1 of this quarterly report on Form 10-Q (this “Quarterly Report”) and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2023 and filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (the “Annual Report”). As used in this Quarterly Report, except where the context otherwise requires or where otherwise indicated, the terms “Floor & Decor,” “Company,” “we,” “our,” or “us” refer to Floor & Decor Holdings, Inc. and its subsidiaries, and “Spartan” refers to our subsidiary Spartan Surfaces, LLC.
Previous wording
Founded in 2000, Floor & Decor is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces with 225 warehouse-format stores across 36 states as of March 28, 2024. We believe our unique approach to selling hard surface flooring and our consistent and disciplined culture of innovation and reinvestment create a differentiated business model in the hard surface flooring category. We believe that we offer the industry’s broadest in-stock assortment of tile, wood, laminate and vinyl, and natural stone flooring along with decorative and installation accessories and adjacent categories at everyday low prices, positioning us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including professional installers and commercial businesses (“Pro”) and homeowners, which are comprised of do it yourself customers (“DIY”) and buy it yourself customers, who buy the products for professional installation (“BIY”).
Current wording
Founded in 2000, Floor & Decor is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces with 230 warehouse-format stores across 36 states as of June 27, 2024. We believe our unique approach to selling hard surface flooring and our consistent and disciplined culture of innovation and reinvestment create a differentiated business model in the hard surface flooring category. We believe that we offer the industry’s broadest in-stock assortment of tile, wood, laminate and vinyl, and natural stone flooring along with decorative and installation accessories and adjacent categories at everyday low prices, positioning us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including professional installers and commercial businesses (“Pro”) and homeowners, which are comprised of do it yourself customers (“DIY”) and buy it yourself customers, who buy the products for professional installation (“BIY”).
Previous wording
We operate on a 52- or 53-week fiscal year ending the Thursday on or preceding December 31. The following discussion contains references to the thirteen weeks ended March 28, 2024 and March 30, 2023, respectively.
Current wording
We operate on a 52- or 53-week fiscal year ending the Thursday on or preceding December 31. The following discussion contains references to the thirteen and twenty-six weeks ended June 27, 2024 and June 29, 2023, respectively.
Previous wording
During the thirteen weeks ended March 28, 2024, we continued to make key long-term strategic investments, including:
Current wording
During the twenty-six weeks ended June 27, 2024, we continued to make key long-term strategic investments, including:
Previous wording
•opening four new warehouse-format stores, ending the quarter with 225 warehouse-format stores and five design studios;
Current wording
•opening nine new warehouse-format stores, ending the quarter with 230 warehouse-format stores and five design studios;
Previous wording
The following table summarizes key components of our results of operations for the periods indicated (certain numbers may not sum due to rounding):
Current wording
The following table summarizes key components of our results of operations for the periods indicated:
Previous wording
Net sales during the thirteen weeks ended March 28, 2024 decreased $24.8 million, or 2.2%, compared to the corresponding prior year period primarily due to a decrease in comparable store sales of 11.6%, partially offset by sales from the 32 new warehouse-format stores that we opened since March 30, 2023 and growth in our commercial business. The comparable store sales decline during the period of 11.6%, or $125.8 million, was due to a 7.7% decrease in comparable transactions, which we believe was largely driven by the impact in existing home sales, and a 4.2% decrease in comparable average ticket, which was primarily due to smaller average transaction sizes. Non-comparable store sales of $101.0 million during the same period were primarily driven by new stores and revenue from Spartan.
Current wording
Net sales during the thirteen weeks ended June 27, 2024 decreased $2.8 million, or 0.2%, compared to the corresponding prior year period primarily due to a decrease in comparable store sales of 9.0%, partially offset by sales from the 28 new warehouse-format stores that we opened since June 29, 2023 and growth in our commercial business. The comparable store sales decline during the period of 9.0%, or $98.1 million, was due to a 4.9% decrease in comparable transactions and a 4.3% decrease in comparable average ticket. Non-comparable store sales of $95.3 million during the same period were primarily driven by new stores and revenue from Spartan.
Previous wording
Gross profit during the thirteen weeks ended March 28, 2024 increased $0.9 million, or 0.2%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by an increase in gross margin to 42.8%, up approximately 100 basis points from 41.8% in the same period a year ago primarily due to a decrease in supply chain costs.
Current wording
Gross profit during the thirteen weeks ended June 27, 2024 increased $11.4 million, or 2.4%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by an increase in gross margin to 43.3%, up approximately 110 basis points from 42.2% in the same period a year ago.
Previous wording
Selling and store operating expenses during the thirteen weeks ended March 28, 2024 increased $30.7 million, or 10.1%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $39.6 million for new stores and $3.5 million at Spartan, partially offset by a decrease of $12.4 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 340 basis points to 30.5% from 27.1% in the corresponding prior year period. This increase was primarily attributable to deleverage from a decrease in comparable store sales and the addition of new stores.
Current wording
Selling and store operating expenses during the thirteen weeks ended June 27, 2024 increased $30.0 million, or 9.6%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $39.1 million for new stores and $1.8 million at Spartan, partially offset by a decrease of $10.9 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 270 basis points to 30.1% from 27.4% in the corresponding prior year period.
Previous wording
General and administrative expenses during the thirteen weeks ended March 28, 2024 increased $4.9 million, or 7.9%, compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales increased by approximately 60 basis points to 6.1% from 5.5% in the corresponding prior year period. The increase in general and administrative expenses in total and as a percentage of net sales was primarily comprised of costs to support store growth, including approximately $4.9 million for personnel expenses related to additional staff and, to a lesser extent, incentive compensation.
Current wording
General and administrative expenses during the thirteen weeks ended June 27, 2024 increased $4.4 million, or 6.9%, compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales increased by approximately 50 basis points to 6.0% from 5.5% in the corresponding prior year period.
Previous wording
Net interest expense during the thirteen weeks ended March 28, 2024 decreased $2.9 million, or 59.8%, compared to the thirteen weeks ended March 30, 2023 due to a decrease in average amounts outstanding under our ABL Facility, higher interest income from our interest cap derivative contracts, and an increase in interest capitalized, partially offset by interest rate increases on outstanding debt.
Current wording
The decreases in net interest expense for the thirteen and twenty-six weeks ended June 27, 2024 were primarily due to a decrease in average amounts outstanding under our ABL Facility and an increase in interest capitalized, partially offset by interest rate increases on outstanding debt and lower interest income from our interest cap derivative contracts.
Previous wording
Income tax expense was $7.3 million during the thirteen weeks ended March 28, 2024 compared to $19.1 million during the thirteen weeks ended March 30, 2023. The effective tax rate was 12.8% for the thirteen weeks ended March 28, 2024 compared to 21.1% in the corresponding prior year period. The decrease in the effective tax rate was primarily due to an increase in excess tax benefits related to stock-based compensation awards that was partially offset by limitations on deductions for compensation to certain employees under Internal Revenue Code Section 162(m).
Current wording
Income tax expense was $14.0 million during the thirteen weeks ended June 27, 2024 compared to $20.6 million during the thirteen weeks ended June 29, 2023. The effective tax rate was 19.8% for the thirteen weeks ended June 27, 2024 compared to 22.4% in the corresponding prior year period.
Previous wording
(c)Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both the thirteen weeks ended March 28, 2024 and March 30, 2023 relate to changes in the fair value of contingent earn-out liabilities.
Current wording
(c)Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both the thirteen and twenty-six weeks ended June 27, 2024 and June 29, 2023 relate to changes in the fair value of contingent earn-out liabilities.
Previous wording
Liquidity is provided primarily by cash flows from operations and our $800.0 million ABL Facility. Unrestricted liquidity as of March 28, 2024 was $698.2 million, consisting of $57.4 million in cash and cash equivalents and $640.8 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder. Our liquidity is generally not seasonal, and our uses of cash are primarily tied to when we open stores and make other capital expenditures.
Current wording
Liquidity is provided primarily by cash flows from operations and our $800.0 million ABL Facility. Unrestricted liquidity based on our June 27, 2024 financial data was $772.1 million, consisting of $138.1 million in cash and cash equivalents and $634.0 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder. Our liquidity is generally not seasonal, and our uses of cash are primarily tied to when we open stores and make other capital expenditures.
Previous wording
Total capital expenditures in fiscal 2024 are planned to be between approximately $400.0 million to $475.0 million and are expected to be funded primarily by cash generated from operations and borrowings under the ABL Facility. Our capital needs may change in the future due to changes in our business, new opportunities that we choose to pursue, or other factors. We currently expect the following for capital expenditures in fiscal 2024 (projected amounts are based on the gross costs that we expect to accrue for these investments on the Condensed Consolidated Balance Sheets in fiscal 2024, which may include amounts incurred but not yet settled in cash during the period):
Current wording
Total capital expenditures in fiscal 2024 are planned to be between approximately $360 million to $410 million and are expected to be funded primarily by cash generated from operations and borrowings under the ABL Facility. Our capital needs may change in the future due to changes in our business, new opportunities that we choose to pursue, or other factors. We currently expect the following for capital expenditures in fiscal 2024 (projected amounts are based on the gross costs that we expect to accrue for these investments on the Condensed Consolidated Balance Sheets in fiscal 2024, which may include amounts incurred but not yet settled in cash during the period):
Previous wording
•invest approximately $315.0 million to $365.0 million to open 30 to 35 warehouse-format stores, relocate stores, and begin construction on stores opening after fiscal 2024;
Current wording
•invest approximately $270 million to $310 million to open 30 warehouse-format stores, relocate stores, and begin construction on stores opening after fiscal 2024;
Previous wording
•invest approximately $60.0 million to $75.0 million in existing store remodeling projects and our distribution centers; and
Current wording
•invest approximately $60 million to $70 million in existing store remodeling projects and our distribution centers; and
Previous wording
•invest approximately $25.0 million to $35.0 million in information technology infrastructure, e-commerce, and other store support center initiatives.
Current wording
•invest approximately $30 million in information technology infrastructure, e-commerce, and other store support center initiatives.
Previous wording
Net cash provided by operating activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $147.5 million and $250.3 million, respectively. The decrease in net cash provided by operating activities was primarily driven by a decrease in trade accounts payable and a decline in cash earnings after adjusting net income for non-cash items such as depreciation and amortization that were partially offset by decreases in inventory and other working capital items.
Current wording
Net cash provided by operating activities during the twenty-six weeks ended June 27, 2024 and June 29, 2023 was $341.5 million and $476.6 million, respectively. The decrease in net cash provided by operating activities was primarily driven by a lower decrease in inventory, lower increase in trade accounts payable, an increase in receivables, and a decline in cash earnings after adjusting net income for non-cash items such as depreciation and amortization, which were partially offset by a decrease in income taxes receivable.
Previous wording
Net cash used in investing activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $111.7 million and $139.4 million, respectively. The decrease in cash used in investing activities was due to a decrease in capital expenditures driven by timing of construction payable settlements for recently completed stores.
Current wording
Net cash used in investing activities during the twenty-six weeks ended June 27, 2024 and June 29, 2023 was $225.6 million and $296.3 million, respectively. The decrease in cash used in investing activities was due to a decrease in capital expenditures and cash paid for an acquisition in 2023. The decline in capital expenditures was driven by the timing of construction payable settlements for recently completed stores and a decrease in new stores under construction compared to the corresponding prior year period.
Previous wording
Net cash used in financing activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $12.8 million and $115.6 million, respectively. The decrease in net cash used in financing activities was primarily driven by a decrease in net ABL Facility repayments.
Current wording
Net cash used in financing activities during the twenty-six weeks ended June 27, 2024 and June 29, 2023 was $12.2 million and $185.9 million, respectively. The decrease in net cash used in financing activities was primarily driven by a decrease in net ABL Facility repayments.
Previous wording
As of March 28, 2024, total Term Loan Facility debt was $201.9 million, and no amounts were outstanding under our ABL Facility. For additional information regarding our Term Loan Facility and ABL Facility, including applicable covenants and other details, please refer to Note 3, “Debt.”
Current wording
As of June 27, 2024, total Term Loan Facility debt was $201.3 million, and no amounts were outstanding under our ABL Facility. For additional information regarding our Term Loan Facility and ABL Facility, including applicable covenants and other details, please refer to Note 3, “Debt.”
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Net sales during the twenty-six weeks ended June 27, 2024 decreased $27.5 million, or 1.2%, compared to the corresponding prior year period primarily due to a decrease in comparable store sales of 10.3%, partially offset by sales from the 28 new warehouse-format stores that we opened since June 29, 2023 and growth in our commercial business. The comparable store sales decline during the period of 10.3%, or $224.0 million, was due to a 6.3% decrease in comparable transactions and a 4.3% decrease in comparable average ticket. Non-comparable store sales of $196.5 million during the same period were primarily driven by new stores and revenue from Spartan.
Current report — wording carried from elsewhere
Gross profit during the twenty-six weeks ended June 27, 2024 increased $12.3 million, or 1.3%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by an increase in gross margin to 43.1%, up approximately 110 basis points from 42.0% in the same period a year ago.
Current report — wording carried from elsewhere
The increases in selling and store operating expenses in total and as a percentage of net sales during the thirteen and twenty-six weeks ended June 27, 2024 were primarily attributable to deleverage from a decrease in comparable store sales and the addition of new stores.
Current report — wording carried from elsewhere
The effective tax rate decreases during the thirteen and twenty-six weeks ended June 27, 2024 were primarily due to increases in excess tax benefits related to stock-based compensation awards that were partially offset by limitations on deductions for compensation to certain employees under Internal Revenue Code Section 162(m).