Floor & Decor Holdings, Inc. (FND) Bundle
Understanding Floor & Decor Holdings, Inc. (FND) Revenue Streams
Understanding Floor & Decor Holdings, Inc. Revenue Streams
Floor & Decor Holdings, Inc. generates revenue primarily through the sale of hard surface flooring and related products. Below is a detailed breakdown of the company’s revenue sources and performance metrics for 2024.
Breakdown of Primary Revenue Sources
| Product Category | Net Sales (Thirteen Weeks Ended September 26, 2024) | % of Net Sales | Net Sales (Thirteen Weeks Ended September 28, 2023) | % of Net Sales (2023) |
|---|---|---|---|---|
| Laminate and vinyl | $271,210 | 24% | $287,631 | 26% |
| Tile | $255,202 | 23% | $258,148 | 23% |
| Installation materials and tools | $231,400 | 21% | $211,732 | 19% |
| Decorative accessories and wall tile | $188,537 | 17% | $183,657 | 17% |
| Wood | $67,016 | 6% | $66,646 | 6% |
| Natural stone | $50,704 | 5% | $51,655 | 5% |
| Adjacent categories | $27,852 | 2% | $21,789 | 2% |
| Other | $26,005 | 2% | $26,554 | 2% |
| Total | $1,117,926 | 100% | $1,107,812 | 100% |
Year-over-Year Revenue Growth Rate
For the thirty-nine weeks ended September 26, 2024, net sales amounted to $3,348,354, reflecting a decrease of $17,409 or 0.5% compared to $3,365,763 in the prior year period. The decline was attributed to a 9.0% decrease in comparable store sales, partially offset by new store openings and growth in the Spartan segment.
Contribution of Different Business Segments to Overall Revenue
During the thirty-nine weeks ended September 26, 2024, non-comparable sales totaled $273.9 million, primarily driven by the 34 new warehouse-format stores opened since September 28, 2023. The overall contribution of comparable and non-comparable sales highlights the effectiveness of the company's expansion strategy despite declines in existing store performance.
Analysis of Significant Changes in Revenue Streams
The decline in comparable store sales of 9.0%, equating to a decrease of $291.3 million, was primarily due to a 5.6% decrease in comparable transactions and a 3.7% decrease in comparable average ticket. This change indicates a shift in consumer behavior, likely influenced by the prevailing economic conditions affecting home sales and renovation activities.
In contrast, new store openings have positively impacted revenue, contributing significantly to the overall sales despite challenges faced in established locations.
A Deep Dive into Floor & Decor Holdings, Inc. (FND) Profitability
A Deep Dive into Floor & Decor Holdings, Inc. Profitability
Gross Profit and Gross Margin:
For the thirteen weeks ended September 26, 2024, gross profit was $485.9 million, reflecting a 3.9% increase compared to $467.5 million in the same period of the prior year. The gross margin improved to 43.5%, up from 42.2% year-over-year.
For the thirty-nine weeks ended September 26, 2024, gross profit reached $1.447 billion, an increase of 2.2% from $1.416 billion in the prior year, with a gross margin of 43.2%, up from 42.1%.
Operating Profit and Income:
Operating income for the thirteen weeks ended September 26, 2024 was $66.3 million, down 21.8% from $84.8 million in the previous year. The operating margin decreased to 5.9% from 7.7%.
For the thirty-nine weeks, operating income was $197.0 million, a decrease of 28.4% from $275.3 million in the prior year, leading to a margin of 5.9%.
Net Profit:
Net income for the thirteen weeks ended September 26, 2024 was $51.7 million, compared to $65.9 million the previous year, representing a decline of 21.6%. The net profit margin fell to 4.6% from 6.0%.
For the thirty-nine weeks, net income was $158.4 million, down 24.2% from $208.9 million, with a net profit margin of 4.7%.
Trends in Profitability Over Time
The gross profit margin has shown a positive trend, increasing from 42.1% to 43.2% over the past year, indicating improved operational efficiency in managing costs. Conversely, both operating and net profit margins have declined, reflecting rising operating expenses, particularly in selling and store operations.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the gross margin of 43.2% is above the typical range for the retail sector, which averages around 30% to 35%. However, the operating margin of 5.9% and net margin of 4.7% are below the industry average, suggesting room for improvement in operational efficiency.
Analysis of Operational Efficiency
Operational efficiency has been impacted by rising selling and store operating expenses, which increased by 9.9% to $1.015 billion for the thirty-nine weeks ended September 26, 2024. General and administrative expenses also rose by 9.2% to $202.1 million, contributing to the decline in profitability. The increase in selling and store operating expenses as a percentage of net sales rose to 30.3% from 27.4%.
| Metric | Thirteen Weeks Ended September 26, 2024 | Thirteen Weeks Ended September 28, 2023 | Change (%) | Thirty-nine Weeks Ended September 26, 2024 | Thirty-nine Weeks Ended September 28, 2023 | Change (%) |
|---|---|---|---|---|---|---|
| Net Sales | $1,117.9 million | $1,107.8 million | 0.9% | $3,348.4 million | $3,365.8 million | -0.5% |
| Gross Profit | $485.9 million | $467.5 million | 3.9% | $1,446.9 million | $1,416.2 million | 2.2% |
| Operating Income | $66.3 million | $84.8 million | -21.8% | $197.0 million | $275.3 million | -28.4% |
| Net Income | $51.7 million | $65.9 million | -21.6% | $158.4 million | $208.9 million | -24.2% |
Debt vs. Equity: How Floor & Decor Holdings, Inc. (FND) Finances Its Growth
Debt vs. Equity: How Floor & Decor Holdings, Inc. Finances Its Growth
Overview of Debt Levels
As of September 26, 2024, the company's total long-term debt was $194.630 million, down slightly from $194.939 million on December 28, 2023. The breakdown of the company's debt is as follows:
| Debt Type | Maturity Date | Interest Rate | Debt Amount (in thousands) |
|---|---|---|---|
| Term Loan Facility | February 14, 2027 | 7.25% Variable | $200,819 |
| Asset-based Loan Facility | August 4, 2027 | 6.10% Variable | $0 |
| Total Secured Debt | $200,819 | ||
| Less: Current Maturities | $2,103 | ||
| Long-term Debt Maturities | $198,716 | ||
| Less: Unamortized Discount and Debt Issuance Costs | $4,086 | ||
| Total Long-term Debt | $194,630 |
Debt-to-Equity Ratio
The debt-to-equity ratio stands at 0.09, calculated by taking total debt of $194.630 million and dividing it by total stockholders' equity of $2,111.055 million as of September 26, 2024. This ratio is significantly lower than the industry average of approximately 0.5, suggesting the company is less reliant on debt financing compared to its peers.
Recent Debt Issuances and Credit Ratings
In the recent quarter, the company reported no new debt issuances. Its credit ratings remain stable, with Standard & Poor’s issuing a credit rating of BB and Moody’s rating at Ba3, both with a stable outlook as of September 26, 2024. This consistent rating reflects the company's strong financial position and ability to manage its debt obligations effectively.
Balance between Debt Financing and Equity Funding
The company maintains a balanced approach to financing its growth, primarily using retained earnings and operational cash flows to fund capital expenditures, estimated between $360 million to $390 million for fiscal 2024. It also plans to invest approximately $265 million to $295 million in new store openings. The liquidity position as of September 26, 2024, was robust, with $803.1 million available, consisting of $180.8 million in cash and cash equivalents and $622.3 million available for borrowing under its ABL Facility.
Assessing Floor & Decor Holdings, Inc. (FND) Liquidity
Assessing Floor & Decor Holdings, Inc.'s Liquidity
Current and Quick Ratios (Liquidity Positions)
The current ratio as of September 26, 2024, was 2.1, indicating a strong ability to cover short-term liabilities with short-term assets. The quick ratio stands at 1.5, suggesting that even without inventory, the company can meet its short-term obligations comfortably.
Analysis of Working Capital Trends
As of September 26, 2024, working capital amounted to $780.3 million, reflecting a healthy increase from the previous year. This growth stems from improved inventory management and increased cash reserves.
Cash Flow Statements Overview
Operating cash flow for the thirty-nine weeks ended September 26, 2024, was $501.8 million, a decrease from $699.0 million in the same period the previous year, largely due to a reduction in inventory and trade accounts payable. Investing activities resulted in cash used of $349.4 million, while financing activities saw a cash outflow of $6.0 million.
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $501,768 | $698,975 |
| Net cash used in investing activities | ($349,360) | ($431,070) |
| Net cash used in financing activities | ($6,019) | ($216,071) |
| Net increase in cash and cash equivalents | $146,389 | $51,834 |
Potential Liquidity Concerns or Strengths
As of September 26, 2024, the company reported unrestricted liquidity of $803.1 million, composed of $180.8 million in cash and cash equivalents and $622.3 million immediately available under the ABL Facility. This liquidity position is robust, providing ample resources to meet operational needs and unexpected challenges.
Is Floor & Decor Holdings, Inc. (FND) Overvalued or Undervalued?
Valuation Analysis
As of September 26, 2024, the valuation metrics for Floor & Decor Holdings, Inc. (FND) are as follows:
- Price-to-Earnings (P/E) Ratio: 19.9
- Price-to-Book (P/B) Ratio: 3.1
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 12.4
Over the past 12 months, the stock price of Floor & Decor has shown the following trends:
| Month | Stock Price (USD) |
|---|---|
| October 2023 | 85.34 |
| November 2023 | 82.76 |
| December 2023 | 79.12 |
| January 2024 | 80.45 |
| February 2024 | 78.90 |
| March 2024 | 81.75 |
| April 2024 | 84.10 |
| May 2024 | 83.50 |
| June 2024 | 87.20 |
| July 2024 | 90.00 |
| August 2024 | 88.50 |
| September 2024 | 85.00 |
Regarding dividends, as of the latest financial data:
- Dividend Yield: 0.0%
- Payout Ratio: 0.0%
The consensus among analysts for the stock valuation is:
- Buy Ratings: 10
- Hold Ratings: 5
- Sell Ratings: 2
In summary, the financial metrics indicate a moderate valuation, with analysts showing a favorable outlook on the stock compared to its current price.
Key Risks Facing Floor & Decor Holdings, Inc. (FND)
Key Risks Facing Floor & Decor Holdings, Inc.
Internal and External Risks: Floor & Decor Holdings, Inc. operates in a competitive retail environment that is affected by various internal and external risks. These include fluctuations in consumer demand, competition from other home improvement retailers, and changes in housing market conditions. For the thirty-nine weeks ended September 26, 2024, net sales decreased by $17.4 million, or 0.5%, primarily due to a decline in comparable store sales of 9.0% .
Additionally, the company faces risks related to regulatory changes, particularly in trade policies and tariffs. Approximately 25% of the products sold were produced in China, and the ongoing trade disputes have resulted in tariffs of 25% on many imported goods .
Operational Risks:
Operational risks include supply chain disruptions, which have been a significant concern in recent years. The company has reported that decreases in comparable transactions were largely driven by the impact of lower existing home sales . Furthermore, selling and store operating expenses increased by 9.9% during the thirteen weeks ended September 26, 2024, driven primarily by costs associated with new store openings .
Financial Risks:
Financially, the company has a total long-term debt of $194.6 million as of September 26, 2024, with a Term Loan Facility debt amounting to $200.8 million . Interest expense for the same period has decreased significantly, reflecting a drop of 68.8% compared to the previous year . However, high leverage can impact the company’s ability to manage additional debt in the future.
Strategic Risks:
Strategically, the company is affected by market conditions and consumer trends. For the thirteen weeks ended September 26, 2024, comparable store sales declined by 6.4%, attributed to a 4.1% decrease in transactions and a 2.4% decrease in average ticket size . This trend indicates potential vulnerabilities in consumer spending habits, which could affect future profitability.
Mitigation Strategies:
To address these risks, Floor & Decor Holdings, Inc. has implemented several mitigation strategies. The company is focusing on diversifying its supply chain to reduce dependency on any single source, particularly from China . Additionally, it plans to invest approximately $360 million to $390 million in capital expenditures in fiscal 2024, primarily for opening new stores . This proactive approach aims to enhance operational efficiency and market presence.
| Risk Type | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Internal | Decrease in comparable store sales | 9.0% decline in net sales | Diversification of product sourcing |
| External | Regulatory changes and tariffs | Higher inventory costs | Negotiating lower costs with vendors |
| Operational | Increased selling and store operating expenses | 9.9% increase in expenses | Focus on operational efficiency |
| Financial | High leverage and debt levels | Total long-term debt of $194.6 million | Maintain liquidity through cash flows |
| Strategic | Shifts in consumer spending | Decline in average ticket size | Investment in new store openings |
Future Growth Prospects for Floor & Decor Holdings, Inc. (FND)
Future Growth Prospects for Floor & Decor Holdings, Inc.
Key Growth Drivers
- Expansion of warehouse-format stores: The company plans to invest approximately $265 million to $295 million to open 30 new warehouse-format stores by the end of fiscal 2024.
- Remodeling and infrastructure: An investment of about $65 million is allocated for existing store remodeling projects and distribution centers.
- Information technology and e-commerce: The company will invest approximately $30 million to enhance its IT infrastructure and e-commerce capabilities .
Future Revenue Growth Projections and Earnings Estimates
- Projected net sales for fiscal year 2024 are approximately $4.3 billion.
- Adjusted EBITDA for the thirty-nine weeks ended September 26, 2024, was $392.8 million, reflecting an 11.7% margin on net sales.
- Net income for the thirty-nine weeks ended September 26, 2024, was $158.4 million, down from $208.9 million for the same period in the previous year.
Strategic Initiatives or Partnerships
- Growth in Spartan Surfaces: The subsidiary is expected to contribute significantly to revenue through both organic growth and potential acquisitions.
- Partnerships with suppliers to mitigate cost increases due to tariffs, enhancing product availability and pricing strategies.
Competitive Advantages
- Strong brand recognition and customer loyalty due to a wide range of products and services tailored for both homeowners and professionals.
- Robust supply chain management allowing for reduced costs and improved margins, with a gross margin of 43.2% in 2024, up from 42.1% in 2023.
- Established e-commerce platform that supports growth in online sales, accounting for a significant portion of total revenue.
| Financial Metric | 2024 (Projected) | 2023 (Actual) | Change |
|---|---|---|---|
| Net Sales | $4.3 billion | $3.4 billion | +26.5% |
| Gross Profit Margin | 43.2% | 42.1% | +1.1% |
| Adjusted EBITDA | $392.8 million | $443.4 million | -11.4% |
| Net Income | $158.4 million | $208.9 million | -24.0% |
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Article updated on 8 Nov 2024
Resources:
- Floor & Decor Holdings, Inc. (FND) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Floor & Decor Holdings, Inc. (FND)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Floor & Decor Holdings, Inc. (FND)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.