Many Floor & Decor 2Q25 statements were perplexing/inconsistent with history. Dug deeper into mature store productivity, pricing narrative, and cross checked with independent seller/installer in a Major Metropolitan Area. Love the business model and management but came away skeptical. Reasonable 2025 EPS range is $1.70 to $1.85.
Management commentary inconsistency towards mature store productivity is highly concerning when thinking trough vs. peak as well as any potential comp benefit from the new store maturity curve…
We notice a massive inconsistency with how they characterized mature store volume pre-COVID (late 2019)…
The implication is tremendous as it appears quite possible that the company is not “bouncing along the bottom” at a trough but rather instead is closer to a normalized level of sales…
This topic also has major implications towards the potential comp benefit of new stores as they ramp the maturity curve, as going from a targeted first year average of $14-$16 mm to $22 mm in five years, while nice, is not as compelling as $28 mm…
Management’s narrative towards pricing sounds great at first but seems to imply their competitive position is about to get substantially more difficult…
If Floor & Decor hasn’t raised prices but their competitors have, it would seem they had outsized share benefits in 2Q25 and maybe even 1Q25 that are unlikely to last as their inventory turns…
Lot of commentary on the call could be interpreted that Floor & Décor is indeed preparing for more intensive share battles, such as discussion about the other pieces of the moat…
Checks indicate final consumer resistance to price increases leading to discounts from vendors for now. American manufacturers raising price just as aggressively as non-American…
Every vendor frontloaded inventory ahead of tariffs…
Commercial construction is asking for tons of cuts. Which is hard as costs going up. Squeeze everyone as home sales don’t turn. They aren’t talking about it publicly though…
You can find the complete deep dive note at our website here: M Squared Capital
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