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    FND
    Earnings call· Mar 2026(Q1 FY26)

    Floor & Decor Holdings Q1 FY26 earnings call FND

    Apr 30, 2026 Source

    Executive summary

    Floor & Decor Q1 FY26 — Share Repurchase and Strategic Investments Amidst Macro Headwinds

    Floor & Decor reported a challenging first quarter with declining sales and EPS, driven by macro headwinds and adverse weather. Despite this, the company announced a $400 million share repurchase program, underscoring confidence in its long-term strategy and cash flow generation. Management is focused on strategic investments in new stores, commercial flooring, and a new Pro loyalty program, while maintaining disciplined cost management to navigate the dynamic environment.

    Highlights

    5

    • Board authorized a $400 million share repurchase program, reflecting strong operating model and cash flows.

    • Gross margin expanded by 20 basis points to 44.0% year-over-year, exceeding expectations.

    • Cash from operating activities increased to $109.2 million, up from $71.2 million in the prior year.

    • Opened 6 new warehouse-format stores in Q1, compared to 4 last year, with encouraging early sales performance.

    • Pro sales increased by 1.4% and Connected Customer sales grew 5.4% year-over-year, representing 19% of total sales.

    Concerns

    5

    • Total sales decreased 0.7% to $1.152 billion, and comparable store sales declined 3.7%.

    • Diluted EPS was $0.37, down from $0.45 in the same period last year.

    • Q2-to-date comparable store sales declined 4.5%, indicating continued weakness.

    • SG&A delevered by 120 basis points to 39.5% of sales, primarily due to new store openings and comp sales decline.

    • Laminate and vinyl category is expected to remain under pressure for the remainder of 2026.

    Guidance & targets

    17
    CategoryTargetConfidence
    Full-year 2026 Sales
    $4.770 billion to $4.990 billion
    high materiality
    Medium
    Full-year 2026 Sales (53rd week contribution)
    ~$65 million
    medium materiality
    High
    Full-year 2026 Comparable Store Sales
    flat to down 4%
    high materiality
    Medium
    Full-year 2026 Comp Average Ticket
    flat to up low single digits
    medium materiality
    Medium
    Full-year 2026 Comp Transactions
    down low to mid-single digits
    medium materiality
    Medium
    Full-year 2026 Gross Margin
    approximately 43.6% to 43.8%
    high materiality
    Medium
    Full-year 2026 SG&A as a percentage of sales
    approximately 38.0%
    medium materiality
    Medium
    Full-year 2026 Net Interest Expense
    approximately $4 million
    low materiality
    High
    Full-year 2026 Tax Rate
    22.5% to 23.0%
    low materiality
    High
    Full-year 2026 Depreciation and Amortization
    approximately $250 million
    low materiality
    High
    Full-year 2026 Adjusted EBITDA
    $545 million to $580 million
    high materiality
    Medium
    Full-year 2026 Adjusted EBITDA (53rd week contribution)
    ~$11 million
    medium materiality
    High
    Full-year 2026 Diluted Earnings Per Share
    $1.83 to $2.08
    high materiality
    Medium
    Full-year 2026 Diluted Earnings Per Share (53rd week contribution)
    ~$0.08
    medium materiality
    High
    Full-year 2026 Diluted Weighted Average Shares Outstanding
    approximately 109 million shares
    low materiality
    High
    Full-year 2026 Capital Expenditure
    approximately $250 million to $300 million
    medium materiality
    High
    New Store Openings
    20 new stores
    high materiality
    High

    Operational metrics

    19
    Diluted Earnings Per Share
    $0.37down from $0.45 LY
    Q1 FY26

    Came in weaker than anticipated due to challenging demand environment.

    Total Sales
    $1.152 billiondown 0.7% from $1.161 billion LY
    Q1 FY26

    Reflects challenging demand environment.

    Operating Income
    $52.4 milliondown 18.4% LY
    Q1 FY26

    Reflecting impact of new stores and expense deleverage from comp sales decline.

    Adjusted EBITDA
    $121.5 milliondown 6.4% LY
    Q1 FY26

    Reflects challenging demand environment.

    Adjusted EBITDA Margin
    10.5%vs 11.2% LY
    Q1 FY26

    Decline due to lower sales and expense deleverage.

    Net Interest Expense
    $1.1 milliondown 26.8% from $1.5 million LY
    Q1 FY26

    Primarily due to higher interest income from higher cash balances.

    Income Tax Expense
    $11.6 millionvs $13.8 million LY
    Q1 FY26

    Reflects lower pre-tax income.

    Effective Tax Rate
    22.5%vs 22.0% LY
    Q1 FY26

    Increase primarily due to a decrease in excess tax benefits related to stock-based compensation awards.

    Cash from Operating Activities
    $109.2 millionvs $71.2 million LY
    Q1 FY26

    Primarily driven by changes in inventory and trade accounts payable.

    Unrestricted Liquidity
    $1,007.2 million
    Q1 FY26

    Provides meaningful flexibility for working capital and growth initiatives.

    Debt (Term Loan)
    $198 million
    Q1 FY26

    Balance of term loan as of quarter end.

    Connected Customer Sales Growth
    5.4%YoY
    Q1 FY26

    One of the highest priority strategic growth initiatives.

    Average Store Cost
    $7.5 million to $8 millionvs $11.7 million in 2023
    FY26

    Optimization of store layout and processes has reduced average store cost, improving returns.

    SG&A Expenses Increase
    $11.1 millionup 2.5% LY
    Q1 FY26

    Primary driver was 22 new stores opened since Q1 2025, increasing personnel and occupancy costs.

    SG&A for Noncomparable Stores
    $21.4 millionincreased
    Q1 FY26

    Increase due to new store openings.

    SG&A for Comparable Stores
    $9.0 milliondecreased
    Q1 FY26

    Reflects tight expense management.

    EPS Sensitivity to Sales Shortfall
    $0.05 to $0.10reduction
    FY26

    Reflects the impact of sales shortfall on EPS after accounting for below-the-line items, better than the historical $0.10 per comp point rule of thumb due to cost management.

    May 2025 Comparable Store Sales
    0.6%
    May 2025

    One of the two highest points of 2025, noted for lapping purposes.

    Minimum Liquidity
    $500 million
    Ongoing

    Considered an absolute minimum for healthy company operations, not expected to be reached.

    Industry KPIs

    10
    MetricValueDetails
    Sg a OPEX ratio39.5%%
    Comparable sales-3.7%%
    Store count growth6stores
    Gross margin drivers44.0%%
    Pro vs diy performance1.4%%
    Net debt to adjusted EBITDA—
    Share buyback capital return$400 millionUSD
    Inventory position markdown risk$1.1 billionUSD
    Same sku like for like inflation—
    Distribution supply chain cost economics60 bpsbps

    Product announcements

    2
    ProductTypeDetails
    ERP Implementation (Financial Systems & Merchandising)milestone
    Pro Loyalty Programroadmap

    Risks & headwinds

    8
    Challenging demand environment for big-ticket discretionary purchasesQ1 FY26 and remainder of FY26

    Q1 EPS weaker than anticipated; total sales down 0.7%; comparable store sales down 3.7%; Q2-to-date comparable store sales down 4.5%

    Mitigation: Disciplined cost management, investing in high-return growth opportunities, aligning store labor hours with sales trends, managing distribution and call center expenses, tightening discretionary spending.

    Adverse weather impactQ1 FY26

    150 to 200 basis points of pressure on transactions in Q1

    Mitigation: Not explicitly stated for weather, but general agility and expense management apply.

    Elevated 30-year mortgage ratesOngoing

    Contributed to weaker Q1 earnings and consumer sentiment decline

    Mitigation: Focus on elements within company control, executing with discipline, managing expenses, prioritizing profitable growth investments.

    Geopolitical tensions in the Middle EastOngoing

    Contributed to higher gas prices and further decline in consumer sentiment (University of Michigan Consumer Sentiment Index declined sharply to 53.3 in March 2026, near all-time lows)

    Mitigation: Proactively mitigating portions of both direct and indirect cost pressures, strengthening ability to gain market share.

    Housing affordability challenges and existing home sales pressureOngoing

    March existing home sales were $3.98 million, down 3.6% sequentially and 1% year-over-year, pressuring demand for hard surface flooring

    Mitigation: Focus on elements within company control, executing with discipline, managing expenses, prioritizing profitable growth investments.

    Laminate and vinyl category under pressureRemainder of FY26

    Expected to be under pressure for the remainder of 2026 due to lower average selling price and limited square footage lift

    Mitigation: Introduced value-driven offers, special buys, enhanced in-store displays, and refinements to price bands to meet shifting demand and capture market share.

    Higher energy costs and domestic logistics expensesOngoing

    Modest impact to gross margin rate; if current elevated environment continues, would trend towards low end of guidance

    Mitigation: Mitigating some increases and managing residual through disciplined approach; ocean contracts renegotiated for back half impact; domestic costs flow through quicker.

    Softness in commercial market (Spartan Surfaces)Q1 FY26, with gradual improvement expected over coming quarters

    Q1 sales and earnings weaker than expected, primarily from multifamily segment

    Mitigation: Investments in new sales headcount, leveraging rising quoting activity and stable sample volume, solid backlog expected to be released.

    What to watch in Q2 FY26

    5

    Comparable Store Sales Trend

    Next quarter
    Currentdown 4.5% Q2-to-date
    TargetImprovement towards flat to down 4% FY26 guidance

    Why it matters

    Comp sales are a key indicator of demand and market share gains, especially given the current macro headwinds🌐 and guidance revision.

    Our second quarter-to-date comparable store sales declined 4.5%.

    Q&A highlights

    6

    What are the underlying issues driving the underperformance of the laminate and vinyl category, and is it related to housing, product innovation, or sourcing?

    The laminate and vinyl category, the second largest, is under pressure due to a shift in consumer preference towards lower-quality, lower-priced products (sub-$2 per square foot). The company has reacted quickly with value-driven offers and price band refinements, which are showing positive elasticity. While the category is expected to remain under pressure due to lower ASPs and limited square footage lift, the focus is on taking market share within this segment.

    “The dynamics that we see, we talked a little bit about this in the last call, we saw a shift in consumer preference. A portion of our consumers started to trend down to a lower quality spec and a lower price point. And that price point is sub-$2.”

    asked by Seth Sigman · answered by Bradley Paulsen

    2 min read6 chapters

    Detailed Narrative

    01

    Capital Allocation and Share Repurchase

    Floor & Decor announced a $400 million share repurchase program, reflecting confidence in its operating model, cash flows, and efficient new store investments. The capital allocation framework prioritizes new store openings and existing store investments, followed by commercial flooring platforms and new growth concepts. Excess cash flow will be used for share repurchases, without incremental debt, while maintaining a strong balance sheet and liquidity. The company views current share valuation as compelling given the long-term intrinsic value.

    02

    Q1 Performance and Macro Environment

    Q1 FY26 results were weaker than anticipated, with diluted EPS of $0.37 and total sales decreasing 0.7% to $1.152 billion. Comparable store sales declined 3.7%, driven by a 5.5% decrease in transactions, partially offset by a 1.9% increase in average ticket. Adverse weather contributed 150-200 basis points of pressure. The demand environment was challenging due to elevated mortgage rates, higher gas prices, geopolitical tensions, and declining consumer sentiment, impacting big-ticket discretionary purchases.

    03

    Merchandise Category and Pricing Strategies

    Four departments outperformed company comparable store sales: installation materials, tile, decorative accessories, and wood. Installation materials saw 1.4% growth in Pro sales. The laminate and vinyl category, the second largest, faced pressure due to a shift in consumer preference towards lower-priced options (sub-$2 per square foot). The company introduced value-driven offers and refined price bands, showing encouraging positive elasticity and improving square footage purchase trends, with plans for expansion in Q2.

    04

    New Store Expansion and Productivity

    The company opened 6 new warehouse-format stores in Q1, compared to 4 last year, and remains on track for 20 new stores in FY26. New stores average 55,000 square feet, a smaller footprint than in previous years, allowing entry into denser Tier 1 and Tier 2 markets without sacrificing sales productivity or assortment. The average store cost has decreased to $7.5-$8 million from $11.7 million in 2023, improving returns.

    05

    Strategic Growth Initiatives and Cost Management

    Investments continue in the Connected Customer platform, which grew 5.4% YoY and represents 19% of total sales. A new Pro loyalty program is on track for launch in Q1 2027. The regional commercial account manager program (76 managers) is expanding to build a scalable B2B platform. Spartan Surfaces, the commercial segment, saw weaker-than-expected performance but anticipates gradual improvement. The company is implementing disciplined cost management, including aligning store labor, managing distribution/call center expenses, and tightening discretionary spending.

    06

    Market Share and Competitive Landscape

    Management believes the company continues to gain market share in a challenging hard surface flooring market, based on publicly available data, third-party sources, and vendor feedback. They do not perceive significant market share loss, even in pressured categories like laminate and vinyl. Competition from big box retailers is not seen as disruptive, with the primary focus for market share gains being from independents, particularly through enhanced Pro programs.

    AI-generated summary of the company’s earnings call. Not investment advice.