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Why Shares of Floor & Decor Holdings Are Down 9% Despite a Solid First Quarter

By Daniel Miller - May 3, 2018 at 2:35PM

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It was a solid first quarter for Floor & Decor, but softer-than-anticipated guidance could be sending shares lower Thursday.

What happened

Shares of Floor & Decor Holdings, Inc. (FND 3.19%), a multi-channel specialty retailer of hard surface flooring and accessories, are down 9.3% as of 11:40 a.m. EDT Thursday, after the company announced fiscal 2018 first-quarter results.

So what

Starting from the top, net sales jumped 31.1%, compared to the prior year, to $402.9 million, which was slightly ahead of analysts' estimates calling for $401 million. Comparable store sales increased 15.6% driven in part by a 400 basis point post-hurricane demand in Houston. On the bottom line, adjusted earnings per share jumped 100% to $0.26, compared to the prior year, slightly ahead of analysts' estimates calling for a 77% gain to $0.23 per share.

"We continue to make progress on our strategic priorities that enhance our in-store and connected customer experience, which are resonating with both consumers and Pro customers across the country," said Chief Executive Officer Tom Taylor in a press release. "As we look to the remainder of 2018 and beyond, we remain focused on executing our key growth strategies as we capitalize on the significant growth opportunity that exists for Floor & Decor."

Three rows of different types of hardwood flooring displayed in store.

Image source: Getty Images.

Now what

It was a solid quarter for the company and management even increased guidance, so why did the stock dip 9.3% during early trading? Most likely because even with the increased guidance, it wasn't quite up to Wall Street expectations. Management bumped full-year revenue guidance from $1.69 billion to $1.73 billion up to $1.705 billion to $1.735 billion, which fell below analysts' calling for $1.747 billion. Management also moved full-year adjusted EPS to a range of $0.93 to $1.01, up from prior guidance of $0.91 to $1, which only meets analysts' estimates of $1 at the high end of the range.

Long-term investors should ignore today's volatility in the company's stock price as it was a solid quarter with raised guidance. If management continues to execute its growth strategies, today's slightly lower-than-expected guidance is a complete nonfactor.

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