Floor & Decor Holdings, Inc. (FND) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents mixed signals. Financial performance shows growth in revenue and Pro customer sales, but declines in comparable store sales and gross margin due to distribution costs. The Q&A highlights operational improvement plans and sustained growth in Spartan Surfaces, but also notes challenges in market share gains and pricing sensitivity. The lack of clear guidance on market share and vague management responses create uncertainties. Overall, the positive elements are balanced by challenges, leading to a neutral sentiment for stock price movement.
Key Financial Performance
Diluted Earnings Per Share (EPS) $0.36 for Q4 2025, in line with guidance. Full fiscal year EPS was $1.92, compared to $1.90 in the prior year. The prior year's results included a $6.8 million or $0.05 per share net benefit from a derivative litigation settlement.
Sales Q4 2025 sales increased 2% to $1.130 billion, while comparable store sales declined 4.8%. Full fiscal year sales grew 5.1% to $4.684 billion, with comparable store sales declining 1.8%. The decline in comparable store sales was attributed to softness in existing home sales and a shift to smaller flooring projects.
Gross Margin Q4 2025 gross margin was 43.5%, flat year-over-year but up 10 basis points sequentially. Full year gross margin improved by 30 basis points to 43.6%, driven by favorable product margins due to lower supply chain costs, partially offset by higher distribution center costs.
SG&A Expenses Q4 2025 SG&A expenses increased 4.0% to $439.2 million, primarily due to new store openings. Full year SG&A expenses increased 6.1% to $1.7738 billion, with deleverage attributed to new stores and a decline in comparable store sales.
Net Cash Provided by Operating Activities $381.8 million in 2025, compared to $603.2 million in 2024. The decline was driven by changes in trade accounts payable due to the timing of inventory receipts.
Inventory $1.1 billion as of December 25, 2025, essentially unchanged from the prior year.
Capital Expenditures $300.4 million in 2025, down from $376.3 million in 2024. The decrease was due to fewer new store openings and fewer future construction projects underway.
Pro Customer Sales Grew 9% for the full year, representing approximately 50% of total sales. Growth was attributed to a focus on understanding Pro needs and expanding wallet share in critical categories like installation materials.
Spartan Surfaces Sales Increased approximately 13% to $243 million in 2025, surpassing expectations. Growth was driven by strength in commercial segments like healthcare, education, hospitality, and senior living.
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Operating Highlights
Vetta Elements Luxe collection: Launched in 2025, this USA-made porcelain system offers cohesive, high-end design across floors, walls, and outdoor areas. It targets homeowners, designers, builders, and commercial customers. The collection will expand in 2026 with new color options and stone-inspired series.
New store openings: Opened 20 new warehouse-format stores in 2025, with plans to open 20 more in 2026. Expansion is focused on Tier 1 and Tier 2 markets, aiming for stronger first-year volumes.
Spartan Surfaces: Achieved 13% sales growth in 2025, reaching $243 million. Focused on expanding in healthcare, education, hospitality, and senior living segments, particularly in the Western U.S.
Gross margin improvement: Gross margin increased to 43.6% in 2025, driven by favorable product margins and lower supply chain costs, despite higher distribution center costs.
Supply chain productivity: Piloting initiatives to reduce distribution center-to-store lead times, improve inventory flow, and enhance in-stock performance.
Pro Loyalty 2.0: Developing an enhanced Pro loyalty program for a 2027 relaunch, focusing on personalization and improved Pro pricing and delivery offerings.
Store construction cost reduction: Reduced new store construction costs by 11% in 2025, with further cost optimizations planned for 2026.
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Risk or Challenges
Comparable Store Sales Decline: Comparable store sales declined 4.8% in Q4 2025 and 1.8% for the full year, reflecting softness in existing home sales and a shift to smaller flooring projects. This trend could adversely impact revenue growth.
Economic Uncertainty and Housing Market Conditions: Ongoing economic uncertainty, housing affordability issues, and fluctuating mortgage rates are constraining large discretionary purchases, which could limit demand for flooring products.
Tariff and Duty Pressures: Higher duties and tariffs are impacting gross margins, creating cost pressures that may affect profitability.
Winter Storm Disruptions: Severe winter storms in early 2026 disrupted operations across more than half of the stores and a key distribution center, leading to sales losses that are unlikely to be fully recovered in Q1 2026.
New Store Ramp-Up Challenges: Ensuring efficient ramp-up and strong early performance of new stores remains a challenge, particularly as the company plans to open 20 new stores in 2026.
Supply Chain and Distribution Costs: Investments in new distribution centers have created near-term gross margin pressures, although they are expected to improve long-term efficiency.
Pro Customer Economic Pressures: Pro customers are facing tighter project budgets and rising costs, which may lead to a shift towards lower-specification products, potentially impacting sales of higher-margin items.
Commercial Market Softness: Continued softness in the commercial multifamily housing segment and tariff pressures are affecting the performance of Spartan Surfaces, a key part of the company's commercial business.
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Guidance & Outlook
New Store Openings: The company plans to open 20 new warehouse-format stores in fiscal 2026, with a focus on Tier 1 and Tier 2 markets. Over half of these openings are expected in the first half of the year, aiming for stronger first-year productivity. The long-term goal is to operate 500 warehouse-format stores across the U.S. by the end of fiscal 2027.
Pro Loyalty Program: The company will focus on the design, development, and testing of a Pro Loyalty 2.0 program in fiscal 2026, with a relaunch planned for early 2027. This program aims to enhance personalization and deepen customer loyalty among Pro customers.
Gross Margin Management: The company plans to maintain strong gross margin performance in fiscal 2026 by taking modest retail pricing actions to offset tariff impacts and managing both margin rate and dollars. Gross margin is expected to be approximately 43.5% to 43.8%.
Capital Expenditures: Capital expenditures for fiscal 2026 are planned to be in the range of $250 million to $300 million, including investments in new stores, existing stores, distribution centers, and IT infrastructure.
Sales and Revenue Projections: Sales are expected to range between $4.880 billion and $5.03 billion, representing a 4% to 7% increase from fiscal 2025. Comparable store sales are estimated to range from a 2% decline to a 1% increase.
53rd Week Contribution: The 53rd week in fiscal 2026 is expected to contribute approximately $65 million to sales and $0.08 to diluted EPS.
Supply Chain Improvements: The company is piloting initiatives to reduce distribution center-to-store lead times, improve inventory flow, and enhance store service levels, aiming for better in-stock performance and increased inventory turns.
Commercial Market Expansion: The company plans to expand its commercial market share through Spartan Surfaces by increasing representative headcount and focusing on the Western U.S. market.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What are the biggest areas of opportunity for operational improvement as Brad transitions into the CEO role?
A:Brad highlighted three main areas of opportunity: 1) Improving new store performance, with a focus on delivering meaningful improvement in first-year sales performance. 2) Enhancing the digital experience to match the in-store experience, with a new leader hired to oversee this initiative. 3) Improving supply chain productivity through process and people improvements without requiring transformational investment.
Q:What is the expected cadence of comps for 2026, and how have recent weather events impacted performance?
A:Bryan Langley stated that second-half comps are expected to be better than the first half, with Q3 being the high mark. February storms impacted approximately 55% of stores, contributing 200-300 basis points of quarter-to-date pressure on comps ($12-$18 million). Initial Q1 comps were modeled to be slightly negative even before the storms.
Q:How does the EDLP strategy impact the Pro business, and are there plans to adjust pricing architecture?
A:Brad noted that the EDLP strategy has been successful, building a multibillion-dollar Pro business. However, competitors offer rebates and discounts, which some Pros use as profit. The company plans to take all of 2026 to develop a new Pro loyalty plan, considering adjustments to pricing architecture to better incentivize Pros.
Q:Was the improvement in January performance broad-based across regions and categories?
A:Yes, the improvement in January was broad-based across all geographies and categories, except for some pressure in laminate and vinyl.
Q:What is driving the reduction in SG&A expenses per average store, and how will this change as comps improve?
A:SG&A expenses per average store have been reduced by optimizing labor with transactions and cutting discretionary spending. As comps improve, there is no significant deferred cost to add back, and cost increases should flow through in the high 30% range.
Q:Why has Floor & Decor not seen accelerated market share gains during the downturn, and how does this inform future strategy?
A:Tom Taylor believes the company has taken market share during the downturn but acknowledges it could have been more. Future strategies include rethinking Pro loyalty programs and tier systems to make Pros more 'sticky,' as well as reducing cannibalization effects as store openings stabilize.
Q:What are the drivers of Spartan Surface's growth, and how does this inform the commercial strategy?
A:Spartan Surface's growth is driven by a strong platform and leadership team. The company plans to invest in additional RAMs in major metro areas like New York City and Dallas, focusing on people, process, and technology to grow the commercial business.
Q:How is the competitive environment affecting pricing and market share?
A:The competitive environment is described as rational, with pricing and promotional activity in line with expectations. Price gaps remain consistent with historical trends, except for some sensitivity in the vinyl segment of laminate and vinyl.
Q:What is driving the improvement in new store productivity, and is it sustainable?
A:The improvement in new store productivity is attributed to opening stores with more conviction and the cadence of store openings. This trend is expected to be sustainable as the company continues to optimize store openings.
Q:What levers does the company have to manage earnings if sales come in lower than expected?
A:The company has flexibility to manage earnings through optimizing labor, reducing G&A expenses, and leveraging cost-saving measures implemented in 2025. Approximately 70% of the store fleet can still flex with transactions.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about why Floor & Decor has not seen accelerated market share gains during the downturn. Tom Taylor acknowledged taking market share but did not provide specific data or clarity on why gains were not more significant. Additionally, the response to the question about pricing sensitivity and its impact on gross margin was somewhat vague, with no detailed breakdown of the trade-offs between volume and margin.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD
Full Conference
SGA ERP
SGA basis
SGA store
Spartan
Tier market
ability product
account
addition store
breakout
capability
center investment
collection
comparison
decline store
decrease preopening
discipline
example
expansion
focus
footprint
increase SGA
litigation settlement
margin pressure
network
offer
period percentage
point addition
preopening SGA
priority
progress
sale SGA
segment product
selling period
shift value
store class
store decline
store service
strength
supply house
week
FND Transcript
Floor & Decor Holdings, Inc. (FND) Q4 2025 Earnings Call Transcript
Unknown2-19
The earnings call summary presents mixed signals. Financial performance shows growth in revenue and Pro customer sales, but declines in comparable store sales and gross margin due to distribution costs. The Q&A highlights operational improvement plans and sustained growth in Spartan Surfaces, but also notes challenges in market share gains and pricing sensitivity. The lack of clear guidance on market share and vague management responses create uncertainties. Overall, the positive elements are balanced by challenges, leading to a neutral sentiment for stock price movement.
Floor & Decor Holdings, Inc. (FND) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call summary presents a mixed sentiment. The guidance for fiscal 2025 indicates modest growth, but comparable store sales are flat to slightly down. While the company is performing better than competitors, challenges persist in high-volume markets. The Q&A reveals optimism for Q4 and strategic initiatives, but management's unclear responses on key issues and flat comps temper positive sentiment. Overall, the sentiment is neutral, reflecting balanced positive and negative factors.
Floor & Decor Holdings, Inc. (FND) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call summary reveals mixed signals: modest price increases and well-managed tariffs are positive, but the company's cautious stance on 2026 guidance and reduced store openings indicate uncertainty. The Q&A session highlights management's focus on mitigating tariff impacts and strategic growth, but also reveals concerns about macroeconomic challenges. The sentiment is further balanced by potential market share gains and commercial growth. Overall, the insights suggest a neutral sentiment, with no strong catalysts for significant stock price movement.
Floor & Decor Holdings, Inc. (FND) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call shows mixed signals: sales and gross profit increased, but diluted EPS slightly decreased. The company is facing economic uncertainties and profitability risks, with no share repurchase program announced. The Q&A reveals management's cautious outlook and unclear responses on certain risks. Despite strong sales guidance and diversified sourcing, the lack of a repurchase program and economic pressures temper optimism. Consequently, the stock price is expected to remain stable, leading to a neutral rating.
FND Report
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