“We believe the competitive moat is strong – people, products, prices, access to inventory. … [+]
Floor & Decor reported a significant increase in revenue for the second quarter ending June 30. Net sales were up 26.7%, and same-store sales were up 9.2% year-over-year, reaching $1.1 billion.
Chief Executive Tom Taylor said the 2021 comparisons he faced in the second quarter were the “hardest” for the year, and said earnings per share exceeded expectations at $0.76. The company’s shares rose 13.5% in Friday trading to close at $92.92.
Total revenue increased 29% to over $2.1 billion in the first half of 2022, while net income fell 3.7%, down from 9.7% to 7.2%.
By the end of the year, the company expects sales to reach $4.29 billion to $4.33 billion. This is about 25% of his $3.4335 billion in 2021, and his 2019 sales are more than double his $2.0 billion. % range.
The company’s performance is even more pronounced when compared to current economic headwinds, particularly high inflation, rising mortgage rates, recent year-over-year declines in existing home sales, rising supply chain costs and port congestion. is.
Taylor described the company’s outlook in the current environment as “cautious” and asserted: a difficult macroeconomic environment; ”
The earnings call focused on last quarter’s performance, but Taylor started by reminding us where the company was headed. Currently operating 174 warehouse stores, by the end of the year he will open 192 warehouse stores, plus six of his smaller design center stores serving interior designers, architects and specifiers. intend to do something.
Acquire market share by opening new stores
Floor & Decor still has a long way to go to reach its long-term goals. But it’s a big country, and Floor & Decor found a proven, repeatable business strategy to move even faster towards that goal. It all depends on aggressive new store openings.
So, following the opening of 27 stores last year, we are adding 32 stores this year. He now operates in 34 states, with the first Minnesota store opening in Minneapolis in the third quarter.
Floor & Decor’s footprint is concentrated in coastal metropolitans and Texas around Atlanta and Chicago. Overall, there is a long runway to opening new stores in the virgin market. And if it gains traction in a major market like Minneapolis, it’s likely to follow a hub-and-spoke model to expand locally and gain more market share.
category killer
Nationally, the retail category of specialty floor coverings is in decline. The Census Bureau has not reported retail sales in this category since 2016, when about 9,200 retailers operated his more than 11,000 stores.
By 2019, that number had dwindled to 10,669 facilities operated by about 8,800 companies, resulting in a net loss of 362 stores. And perhaps the number of flooring specialists has declined since then. That’s clearly not the case for Floor & Decor, which started with 69 stores in 2017 and has since added over 100 stores.
Nationally, Floor & Decor has few direct competitors for size. One of them is Dallas-based Artisan Design Group, founded in 2016 by the merger of Floors Inc. and Malibu Floors. Private equity firm Sterling Group later acquired ADG in 2018.
Since then, ADG has implemented a rollup strategy by acquiring independent retailers that maintain local brands. flooring weekly ADG reports $1.5 billion in sales in 2021 and operates about 100 stores.
Then there’s LL Flooring, formerly known as Lumber Liquidators.
LL
Outside of Artisan Design Group and LL, independent flooring specialists with less than 20 employees account for over 90% of the retail flooring companies in the country. It becomes especially vulnerable when the floor and decor come in.
Large home improvement chains also compete, but they cannot offer the depth and breadth of products and services for DYI and professional customers that flooring professionals like Floor & Decor can offer.
Ecommerce Expands Reach and Tickets
As most retailers are aware, establishing a physical retail presence in a market increases e-commerce sales in the area. It helped the floor & interior. This quarter, the company’s e-commerce business grew 34% from last year to reach nearly 18% of his total sales. This is a fair share considering the nature of the product.
The pandemic shutdown has forced the company to lean into an omnichannel strategy, with local stores playing an integral role in that.The majority of ecommerce orders are fulfilled by in-store pickup. .
The company’s rapid adoption of a connected customer strategy has also lifted both its revenue and bottom line, with the company reporting that ticket sales generated online are “much higher than in-store tickets.” I’m here.
trade up
Not only are Floor & Decor opening stores quickly, they’re generating more sales from their locations. Average retail ticket sales increased 18% in the second quarter. That’s because customers are trading in better and best products, especially laminates and premium vinyl, which now account for 27% of his sales, up nearly 40% year-on-year.
In-store design services can also help boost the average ticket sales, but the influence of designers is even greater. Taylor explains: “
The company currently employs around 800 designers in its stores and plans to continue increasing that number after proving its long-term potential.
Additionally, after successful launches in Houston, Dallas and Miami, we rolled out home design services in the Washington DC market this quarter and then in Atlanta. A designer visit should further strengthen the ticket.
It also plans to enhance its influence-the-influencer strategy as it builds more Design Center stores to attract independent interior designers.
an expert in your pocket
The finishing touch to our repeatable business process is attracting and servicing flooring professionals in our local market. Described as a “holistic PRO strategy,” it offers a PRO Premier Rewards program to drive repeat business and build wallet share among professionals.
Taylor said total and comparable store PRO sales growth in the second quarter was “significantly higher” than the company’s overall growth rate, and PRO sales were the fastest growing second quarter sales growth. They say it’s close to 40%.
As consumers return to normal life and spend less time on DIY projects at home, professionals will play an even more important role in Floor & Decor’s business. Taylor noted that the company didn’t quite hit his 10% same-store sales forecast for the second quarter because homeowners started traveling again on summer weekends.
Solid foundation for growth
Floor & Decor has a proven formula for continuing to capture more market share in the nearly $70 billion flooring market. By providing the most in-demand hard flooring products, along with installation supplies and related cabinets and fixtures to complete your bathroom or kitchen project, we are well stocked because supply chains are still perilous.
And we believe there are potential gains emerging from the current economic uncertainty. The company expects more homeowners to stay in places as existing home sales decline and mortgage rates rise. and improve your current home with new hard surface flooring that pays off in the long run. It should be noted that building new homes is not a significant part of the company’s business.
“I’m pleased to be on track to report our 14th consecutive year of same-store sales growth,” Taylor said in closing prepared remarks. “We have proven that we have the right team, strategy and agile business model to navigate global supply chain challenges, inflationary pressures and a weakening housing market.”
