Shares of Floor & Decor Holdings (NYSE:FND) dropped more than 13% at the open on Friday before recovering somewhat following the home decor retailer's third-quarter earnings report. Results came in roughly in line with expectations, but the company lowered the top end of its full-year estimates.
Before markets opened Friday, Floor & Decor reported third-quarter adjusted earnings of $0.27 on revenue of $521.1 million, beating the consensus earnings estimate by a penny but missing by about $2 million on revenue. Operating income fell by 8.3% year over year to $31.4 million, and operating margin decreased 190 basis points to 6%.
The company said its results were hurt by Hurricane Dorian, which caused disruptions along the Eastern Seaboard in late August and early September. It also was hurt by tariffs on Chinese goods, with CEO Tom Taylor saying that management "continue[s] to expect a meaningful decline in the percentage of our purchase orders that originate from China by the end of 2019."
Floor & Decor opened seven new stores in the quarter, ending the period with 113, up nearly 19% from the end of the year-ago period. It intends to open seven new stores by year's end.
All-in, Floor & Decor seems to be navigating a difficult operating environment pretty well, but challenges remain. The company said it expects fourth-quarter adjusted earnings of $0.20 to $0.21 per share on revenue of $523 million to $529 million, short of the current consensus for $0.23 per share in earnings on revenue of $545 million.
It also narrowed its full-year earnings guidance to a range of $1.09 to $1.10 per share, down from $1.09 to $1.12, and lowered revenue expectations by $10 million. Analysts had expected $1.11 per share in earnings.
Even with Friday's declines, shares are up 67% year to date. This is a solid business, but given the run-up in share price and the threat that it could come crashing back down should fears grow that the U.S. economy is falling into a recession, there's reason for caution.