The overall story today is management blames macro and says they are well prepared for when that turns (nothing really different). Inflation weighing the consumer down – not sure have explicitly heard that one before for them specifically. Its always more interest rates (which they made sure to bring up) and housing.
Most people likely to ignore the new BOD announcement (not Horvers though – one reason why he is a top ranked analyst) but the big takeaway there is Ms. Taylor Wolfe was on the BOD of HD Supply when current Floor & Décor CEO Brad Paulsen worked there as a senior executive. Think it’s fair to say that no matter what you think about Brad (like how he cut expectations two of the first three quarters in his first stint as a public company CEO), he probably isn’t leaving anytime soon. Tom Taylor as Chair is likely to be well received though.
Good news is September comps up 0.4%, which is first positive month since January 2026. Bad news is 4QTD comps are down 3.8%. Ouch – maybe they should have taken the guidance down more with that...
Comp ticket up 1.6%, which was a sequential acceleration from 2Q. Maybe that by itself shows how trends are changing from commoditized luxury vinyl (although less bad this quarter) to higher ticket product like wood and tile, which both continued to outperform the company average. Tile was up 5% and they used to get 100 bps of share gains per year but that has increased to 150 bps. We wrote a super deep dive on this exact subject in our recent note: Porcelain – This “Isn’t” Goodbye, 9/13/26.
New data point in that they only expect to open 10-15 stores next year due to the macroeconomic environment. Reiterated their goal of 500 stores total over time. “Still committed to 500 stores, just a pacing thing” – Brad in Q&A. “This is just temporary, not a reflection of new runrate.” Thank you Zaccone for asking about this as was necessary question your peers ignored.
Encouraged by positive momentum in commercial through quarter – of course Brad would say that, it’s kind of his core competence. But to be fair, apparently sales per rep increased each month of the quarter. Spartan up 6%. Probably should have given us a few more data points here though.
The Grominator (Chuck Grom) went after LVT category and if they can increase unit velocity. Management “see’s price elasticity” with the category – of course they do because it’s a total commodity right now (Kroger sells more milk when they charge less). They still feel like pressure will bleed over to 2027.
Related to “elasticity”, Lasser went at them hard on gross margin by asking why we shouldn’t see a decline in 2027. We got just a lot of “we aren’t the only ones in the industry facing pressures like diesel fuel costs” as an answer. Almost entirely ignored Lasser’s point about “aggressive pricing posture”.
They “feel good about being able to flex expenses” where they are at. Continue to flex labor hours, etc. Must give management credit for doing that so far but everybody outside the company is asking themselves how much further do they have before they cut into the bone. “Have we bottomed, that’s a tough question to answer” – Brad.
Initial response to Pro Loyalty Program from associate perspective is overwhelmingly positive – I certainly hope so. Followed that up with almost a throwaway “customer perspective, also positive”. Really wish they would have said the customer perspective first. On track to launch this in 1Q27 nationally. Will be “slight” headwind to gross margin rate but should ultimately be accretive from an EBIT perspective.
Bellinger asked about agentic commerce for flooring. Dude – come on. How about start with how its super hard (for very good reasons) to buy most of their product through e-commerce to begin with (outside of LVT). Figure that out first before you get bulled up on Muse buying the tile for your kitchen renovation.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends (not edited). Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Floor & Decor and other retail/consumer research) at our website here: M Squared Capital
We currently cover 20 companies in total but all work on Nike and Restoration Hardware will always be provided for free.
Originally posted on X and Substack.