Snapshot
Floor & Decor Holdings, Inc. reported $1.21B of revenue in Q2 2025, up 7.1% year over year, with diluted EPS of $0.58 and an operating margin of 6.7%.
- Revenue
- $1.21B
- YoY growth
- +7.1%
- Diluted EPS
- $0.58
- Operating margin
- 6.7%
What management said
- •Welcome to Floor & Decor fiscal 2025 second quarter earnings conference call.
- •A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings release, which is available on our Investor Relations website at ir.flooranddecor.com.
- •During today's conference call, Brad, Bryan, and I will discuss some of our second quarter earnings highlights.
- •Comparable store sales increased by 0.4%, marking the first quarterly increase since the fourth quarter of fiscal 2022.
- •That said, we remain committed to a disciplined and agile growth strategy.
- •Should the housing market or broader economic environment underperform relative to our expectations, we are prepared to adjust our expansion plans accordingly to ensure prudent capital allocation and long-term value creation.
- •With that context in mind, I'd like to take a minute to outline and update the key actions we're taking to mitigate universal, reciprocal, and sectoral tariffs to position the business for continued growth.
- •Third, we continue to apply a balanced portfolio approach to product pricing while effectively managing our Gross margin rate and overall profitability.
- •As discussed during our first quarter earnings conference call, we will continue to adjust our retail prices both upward and downward as needed to help mitigate the impact of tariffs and competition.
- •Finally, as we mentioned in our first quarter earnings call, customers are asking for products produced in the United States, and we have already taken action to identify American-made products in our stores.
- •These results are a clear reflection of the disciplined execution of our growth strategies, the agility of our operations, and the unwavering commitment of our associates.
- •In the second quarter, we saw the strongest relative sales growth across several merchandise categories, including wood, installation materials, and adjacent categories.
What went well
- •Second quarter diluted earnings per share increased 11.5% to $0.58 from $0.52 in the prior-year period, reaching the high end of expectations.
- •Sales rose 7.1% to $1,214 million and comparable store sales increased 0.4%, the first quarterly comparable store sales increase since the fourth quarter of fiscal 2022.
- •Gross margin rate improved approximately 60 basis points to 43.9%, primarily due to lower supply chain costs, with gross profit up 8.5%.
- •The company opened three new warehouse format stores in the quarter, including its first California store in close to three years, ending the quarter with 257 locations, up about 12% year over year.
- •Adjusted EBITDA increased 9.7% to $150.2 million with an adjusted EBITDA margin of 12.4%, up about 30 basis points.
- •Spartan Surfaces delivered stronger than expected sales and EBIT, with sales up approximately 7% year over year and June its strongest month in company history.
What went wrong
- •Comparable transactions declined 3.3% in the quarter, with comparable store sales declining 0.8% in June and quarter-to-date third quarter comparable store sales down 1%.
- •Selling and store operating expenses increased 10.2% and deleveraged approximately 90 basis points to 31.0% of sales, primarily due to new stores.
- •Demand for big-ticket durables and large projects remained challenged amid elevated mortgage rates above 6.6% and existing home sales that fell to a 3.93 million annual rate, the lowest in nine months.
- •Net interest expense increased 62.3% to $1.1 million and the effective tax rate rose to 21.8% from 19.8%.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Total sales | FY2025 | — | $4,660M to $4,750M (up 5% to 7%) | — |
| Comparable store sales | FY2025 | — | down 2% to flat | — |
| Gross margin rate | FY2025 | — | approximately 43.5% to 43.7% | — |
| Diluted EPS | FY2025 | — | $1.75 to $2.00 | — |
| Adjusted EBITDA | FY2025 | — | approximately $520M to $550M | — |
| New warehouse format store openings | FY2025 | — | 20 stores | — |
| New warehouse format store openings | FY2026 | — | at least 20 stores | — |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Diluted EPS | +11.5% to $0.58 | Higher sales and gross margin rate expansion. |
| Sales | +7.1% to $1,214M | New store growth and a 0.4% comparable store sales increase. |
| Comparable store sales | +0.4% | Average ticket up 3.8% from product mix toward wood and better/best tiers and minor price increases, partially offset by a 3.3% decline in transactions. |
| Gross margin rate | +~60 bps to 43.9% | Primarily lower supply chain costs. |
| Selling and store operating expenses | +10.2% to $376.2M (deleverage ~90 bps) | Primarily $33.8 million for new stores. |
| Spartan Surfaces sales | +~7% | Momentum in high-specification sectors such as healthcare, education, hospitality, and senior living. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff mitigation | Independents implementing high single-digit or higher price increases | Vendor negotiation, sourcing diversification across 240+ vendors in 26 countries, and balanced pricing; modest price increases planned for the back half | ongoing |
| Housing/macro environment | Existing home sales weak | Mortgage rates above 6.6%, existing home sales at 3.93 million annualized; bouncing along the bottom | stable/weak |
| Better and best product mix | Outcomping good for about three years | Customers continue to gravitate to better and best tiers | improving |
| U.S. sourcing | ~20% of products in fiscal 2018 | ~27% of products sold in fiscal 2024, now largest country of manufacture | improving |
| Pro business | Approximately 50% of sales | Approximately 50% of sales, outpacing company growth on transactions and ticket | improving |
Q&A summary
How much of the ticket increase was tariff-induced pricing versus trade-up to better/best, and how should pricing be viewed through the year?
Much of the second quarter ticket benefit came from mix, led by wood which carries higher average tickets; price changes in the quarter were not material. The company will take modest price increases in the back half, having mitigated much of the tariff impact through SKU shifts and vendor negotiation, using a surgical, balanced portfolio approach informed by pricing-elasticity tests.
Would you react to the consensus 2026 comp of about 4%?
It is too early to react to 2026. Benefits from maturing new stores, easier laps, and tariff-driven pricing work in the company's favor, but existing home sales at 3.93 million annualized and rates of 6.6% to 6.9% remain challenges. The midpoint of guidance assumes current trends continue.
What if elevated rates and subdued existing home sales are the new normal?
Because of what the company is lapping, the business should start to grow over time even at this rate. Management would continue investing in the in-store experience and commercial, and stores five years and older average about $22 million in volume at roughly 23% EBITDA, supporting the long-term mid-teens EBITDA goal.
How are price gaps changing and is market share accelerating?
Total sales grew over 7% with a positive comp, better than publicly traded flooring peers, indicating share gains. Independents took price earlier and quicker because they had to, so the gap has widened in Floor & Decor's favor; price is one part of a moat that also includes service, assortment, and in-stock levels.
What is the gross margin outlook beyond 2025 and is 44% a good long-term rate?
Puts include continued better/best mix, design services attachment, and sourcing benefits; takes include faster commercial growth and lower-margin adjacent categories, plus two distribution centers to burn through next year. Management believes the rate could go higher but on a slow path and is not ready to give an ultimate target.
What is driving Spartan Surfaces strength despite a slow macro?
A shift in vertical prioritization toward education, hospitality, healthcare, and senior living and away from multifamily, plus added salesperson talent that is generating nice returns despite a ramp.