Floor & Decor(US:FND)2023-02-24 04:05Financial Data and Key Metrics Changes - The fourth quarter GAAP net income increased by 38.8% to $69.2 million, and diluted earnings per share increased by 39.1% to $0.64 per share [40] - Adjusted EBITDA grew by 42% from the same period last year, with the fourth quarter adjusted EBITDA margin increasing to 13.7% from 11% [18][40] - Inventory increased by 28.2% to $1.3 billion, which was above the sales growth of 24.2% [19][168] Business Line Data and Key Metrics Changes - The commercial form business, including Spartan Surfaces, saw fourth quarter sales increase by over 60% compared to the same period last year, with EBIT increasing by 370% [33] - The RAMs fourth quarter sales increased by 72.4% compared to the fourth quarter of 2021 [33] Market Data and Key Metrics Changes - The company expects fiscal 2023 sales to increase by 8% to 11% from last year, assuming 65% of planned 32 to 35 warehouse store openings occur in the second half of the year [21] - Comparable store sales are expected to decline through the third quarter before returning to growth in the fourth quarter [22] Company Strategy and Development Direction - The company plans to invest approximately $620 million to $675 million in capital expenditures for fiscal 2023, primarily funded by cash flow from operations and borrowings [26] - A strategic balanced approach to price reductions is expected to moderate growth in average ticket but improve transaction trends throughout the year [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic challenges, including significant declines in existing home sales and cost inflation, while still achieving record sales and profit [35] - The company anticipates a sequential improvement in gross margin rate throughout 2023, approaching 42% by year-end [23] Other Important Information - The company ended fiscal 2022 with $566.3 million of liquidity and $210.2 million outstanding on its ABL facility [20] - The company plans to continue investing in information technology and e-commerce initiatives, allocating approximately $30 million to $40 million for these efforts [47] Q&A Session All Questions and Answers Question: What is the outlook on existing home sales and its impact on the business? - Management indicated that if existing home sales continue to decline, there could be risks to their sales plan, but they expect a stronger back half of the year [29][50] Question: Can you elaborate on the margin assumptions and how they compare to pre-pandemic levels? - Management noted that they are guiding to significantly higher margins, with expectations of 8.8% relative to 2019 [3] Question: How are you managing store expenses despite opening new stores? - The company successfully held store expenses flat sequentially in Q4 despite opening 13 new stores, reflecting operational efficiency [5] Question: What are the expectations for new store productivity? - New stores are expected to generate $14 million to $16 million in first-year sales, with a goal of reaching $28 million to $29 million as they mature [55] Question: How is the company addressing the competitive landscape and pricing? - Management stated that they are not planning to reduce prices dollar for dollar with supply chain cost reductions, maintaining a competitive price gap [137][138]