"The Dominant Force In Flooring"
An update on Floor & Decor (FND)
From “A More Normalized Environment” (September 2024): “This cyclicality, in and of itself, isn’t problematic… but it requires some ability to estimate normalized earnings power. This is where I have struggled on Floor & Decor: the company is on pace for ~$250 million in FY24 operating income – roughly $400 million less than the FY24e EBIT target from Investor Day. Somewhat amazingly, despite that massive shortfall relative to those targets, FND closed on Friday at ~$120 per share; that’s ~25% higher than on March 15th, 2022 (the day before the Investor Day)… I continue to be surprised by Mr. Market’s willingness to look past FND’s near term challenges… If that continues into FY25, we will see if Mr. Market maintains his indifference.”
When Floor & Decor reported Q1 FY25 results, the update included across the board guidance cuts (on FY25e comps, revenues, EPS, net unit growth, etc.). This has been a recurring theme at FND in recent years, most notably relative to those Investor Day targets: FY24 adjusted operating income of $249 million came in >60% below what had been envisioned in early 2022.
The indifference that Mr. Market has generally shown in recent years to underwhelming results from Floor & Decor has started to wane, with the company’s stock price falling by roughly 30% since the last TSOH update in September 2024 (over the same period, the S&P 500 has increased ~10%).
