Floor & Decor (FND) Q2 EPS Rises 12%

Floor & Decor (FND 9.13%), the specialty retailer focused on hard surface flooring, posted better-than-expected GAAP results. The company reported diluted earnings per share (GAAP) of $0.58 and revenue (GAAP) of $1.21 billion, both topping consensus GAAP estimates of $0.56 and $1.21 billion, respectively. The period marked its first positive same-store sales growth since late 2022, breaking a multi-quarter negative streak. While the company saw improvements in sales, profit margins, and operating income, comp sales growth remained modest and management maintained a cautious outlook for fiscal 2025. Overall, the quarter showed stable execution, a resilient sourcing strategy, and ongoing cost discipline against a backdrop of macroeconomic uncertainty and shifting tariffs.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Strategic Focus

Floor & Decor (FND 9.13%) operates as a specialty retailer of hard surface flooring and related accessories, catering to both professional installers (“Pro customers”) and homeowners. Its product portfolio includes tile, wood, laminate, vinyl, natural stone, and installation materials. The company pursues a warehouse-format model and complements brick-and-mortar locations with a strong online channel.

The business is built around several key focuses: a direct sourcing model that cuts out middlemen, steady warehouse-format store growth, strong engagement with professional customers, omnichannel digital integration, and a commitment to competitive everyday low pricing. These pillars are central to the company’s strategy, aiming to deliver consistent pricing, selection, and in-stock availability to its growing customer base.

Quarterly Performance and Key Developments

Revenue (GAAP) increased 7.1% to $1.21 billion. This exceeded analyst expectations (GAAP) and marked a return to top-line growth momentum. Diluted EPS (GAAP) also came in at $0.58, up 11.5% from the prior period and above consensus forecasts.

Comparable store sales, a retail industry indicator measuring sales from stores open at least a year, moved into positive territory at 0.4%. This is the first positive comparable store sales growth since Q4 FY2022, signaling some stabilization after a string of negative quarters. Operating income (GAAP) grew to $81.9 million, a 14.8% rise, while Adjusted EBITDA (non-GAAP) increased 9.7% to $150.2 million. Improved profitability was driven by higher sales and a gross margin that expanded to 43.9%, up 0.6 percentage points from the prior year (GAAP).

Management cited disciplined cost control as key to this margin improvement. Operating expenses grew 7.4% year-over-year, slightly less than sales growth. Notably, pre-opening expenses dropped 52% as the company moderated the number of new store openings. Selling and store operating expenses rose to 31.0% of sales. General and administrative costs, though slightly higher in dollar terms, fell as a percentage of total revenue.

The company continued its steady expansion, opening three new warehouse-format stores this period and now operating 257 warehouse stores and five design studios. While plans remain to add 20 new stores in FY2025, this is a reduction from the previous plan of 25 new stores, a change made in anticipation of possible headwinds. Management noted that most new store openings are scheduled for the back half of the year, providing flexibility if demand conditions soften further.

On the sourcing side, the company’s direct procurement approach underpins its cost structure and assortment. It now sources from over 240 vendors across 26 countries. Its exposure to Chinese suppliers dropped to about 16% in Q4 FY2024, and management expects this to fall to the mid to low single digits by the end of FY2025. Exposure to tariffs and shifting global trade policies remains a risk, but management stated it aims to maintain gross margin rates through diversification and selective price increases, echoing past efforts where the company successfully navigated tariff hikes.

Management reported ongoing investment in loyalty rewards, dedicated sales teams, and support services. Although no specific digital update was shared for this period, in recent quarters, digital (connected customer) sales accounted for approximately 18.3% of net sales in Q1 FY2025 and 19% in FY2024, aided by product innovation and service improvements online—such as the introduction of semi-custom cabinets and design scheduling capabilities.

FND does not currently pay a dividend.

Looking Forward: Guidance and Priorities

Management kept a cautious financial outlook for fiscal 2025, retaining guidance for net sales of $4.66–4.75 billion, comparable store sales in the range of negative 2.0% to flat, and diluted EPS between $1.75 and $2.00 for FY2025. The guidance assumes ongoing universal tariffs but does not factor in further reciprocal tariffs. The executive team emphasized ongoing volatility in consumer demand and housing, suggesting risks remain balanced across both upside and downside scenarios.

Investors should monitor how the company navigates supply-chain dynamics, cost control, and pricing power as the year progresses. Comparable sales improvements and gross margin trends will be in focus, especially if new tariffs or shifts in housing activity impact demand. Store expansion will remain measured, tailored to market and macroeconomic conditions, while ongoing investments in professional customer relationships and e-commerce capabilities are likely to stay central to long-term growth strategy.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.