[ad_1]
We believe that competitiveness derived from people, product, price and materials is strong. … [+]
Floor & Decor reported strong revenue growth for the second quarter ended June 30. Net sales increased 26.7% to $1.1 billion while comparable store sales increased 9.2% year-over-year.
Explaining that 2021 comparisons faced in the second quarter were “very difficult” for the year, CEO Tom Taylor announced better-than-expected earnings of $0.76 per share, sending the company’s stock up 13.5% to $92.92 in Friday trading.
In the year In the first half of 2022, gross sales rose 29 percent to more than $2.1 billion, although net income fell 3.7 percent, from 9.7 percent to 7.2 percent.
Looking to the end of the year, the company expects sales to reach $4,290 million to $4,330 million – roughly 25% more than $3,433.5 million in 2021 and more than $2 billion in sales in 2019. % range.
The company’s results are even more impressive given the current economic headwinds, particularly high inflation, rising mortgage rates, a recent year-over-year decline in home sales, high supply chain costs and port congestion.
Describing the company’s outlook as “prudent” in the current environment, Taylor said, “We believe that competitiveness from people, product, price and materials is strong, giving us the confidence to grow our market share even within the market.” Difficult Macroeconomic Environment”.
While the earnings call focused on last quarter’s performance, Taylor began by noting where the company is headed: $17 billion in sales and 500 retail stores across the country. It currently manages 174 warehouse stores and will end the year with 192 warehouses and six smaller Design Center stores serving interior designers, architects and specifiers.
New stores take market share
Flooring and Décor still has a ways to go to reach its long-term goal. But it’s a big country and Floor & Decor has got a proven and repeatable business strategy to move it further and faster towards that goal. It all depends on opening new stores aggressively.
To this end, after opening 27 last year, it will add 32 new stores this year. It currently operates in 34 states, opening its first store in Minnesota in the third quarter in Minneapolis.
Floor & Decor’s footprint is concentrated in the coastal areas and large cities around Texas, including Atlanta and Chicago. It generally has a long runway for opening new stores in virgin markets. And after gaining traction in major markets like Minneapolis, it follows a hub-and-spoke model to expand locally and capture more market share.
category killer
Nationally, the specialty flooring retail category is in decline. The Census Department has not reported retail sales in the category since 2016, when some 9,200 retail firms operated more than 11,000 stores.
In the year In 2019, this number dropped to 10,669 establishments managed by 8,800 companies, a loss of 362 stores. And perhaps the number of specialty flooring stores has declined since then. That’s clearly not the case with Floor & Décor, which launched in 2017 with 69 stores and has since grown to more than 100.
Nationally, it has few direct competitors with floor and decor dimensions. One of them, Dallas-based Artis Design Group, was founded in 2016 with the merger of Floor Inc. and Malibu Floors. Private equity Sterling Group acquired ADG in 2018.
Since then, ADG has pursued a packaging strategy by acquiring independent retailers that maintain their local brands. Floor covering weekly By 2021, ADG reports that it will generate $1.5 billion in sales and operate nearly 100 stores.
Then LL Flooring, formerly known as Lumber Liquidators
LL
With the exception of Artisan Design Group and LLC, independent specialty flooring stores with fewer than 20 employees make up more than 90% of the nation’s retail flooring firms. Floors and decor are especially vulnerable when they come in.
The big box home improvement chains also compete, but cannot offer the depth and breadth of products and services for DIY or professional customers such as Floor & Decor Professionals.
E-commerce expands reach and ticketing.
As most retailers have discovered, if they establish a physical retail presence in a market, their e-commerce sales will get a huge boost in that area. That is assisted flooring and decor. In the current quarter, its e-commerce business grew by 34% from last year and accounted for about 18% of its total sales, a significant share considering the nature of its products.
The pandemic shutdown forced the company to lean towards a multi-channel strategy and the local stores played a vital role in this. Most e-commerce orders are fulfilled by in-store pickup.
And the rapid adoption of a connected customer strategy boosted the company’s top and bottom lines, with the company reporting online-generated sales for tickets “significantly higher than an in-store ticket.”
Trading
Not only are flooring and decor stores opening faster, but it’s generating more sales from those locations. The average retail ticket rose 18% in the second quarter, driven by customers trading up to its better and premium offerings, particularly laminate and luxury vinyl, which now represent 27% of sales, up 40% from last year.
In-store design services can help increase the average sales ticket, but designers’ influence goes even further. Taylor explained, “We continue to find that when a designer is involved in a project, we get higher customer satisfaction scores, higher average tickets, higher basket attachment rates, higher penetration rates for our adjacent categories, and higher gross margins. “
Currently, the company employs about 800 designers in its stores and intends to increase their number after confirming their long-term potential.
Additionally, following successful launches in Houston, Dallas and Miami, it introduced interior design services this quarter and Atlanta in the Washington, DC market. Designer house calls should further solidify tickets.
And as it builds more Design Center stores to attract independent interior designers, it puts its influencer strategy on steroids.
Professionals in the pocket
The finishing touch in the repeatable business process is attracting and serving flooring professionals in local markets. Described as a “versatile PRO strategy,” PRO offers the Premier Rewards program to encourage repeat business and build share of wallet among professionals.
Taylor noted that second-quarter total and comparable store PRO sales growth was “significantly higher” than the company’s overall growth rate, with PRO sales accounting for 40 percent of second-quarter sales growth.
Professionals can become an increasingly important part of the flooring and decor business as consumers move back and have less time to devote to DIY projects at home. The company’s second-quarter comparable store sales fell short of expectations by 10% as homeowners began traveling again on summer weekends, Taylor said.
A strong foundation for growth
Floor & Decor has a proven formula to continue to capture more market share in the nearly $70 billion flooring market. Offering the most sought-after hard-floor products, from installation supplies and related cabinetry and furniture to complete bathroom and kitchen projects, it is well-stocked in inventory, where the supply chain is still fragile.
And it looks at potential benefits from the current economic uncertainty. Noting that existing home sales have slowed and mortgage rates have increased, the company expects many homeowners to stay put. So they turn to flooring and decor to upgrade their existing homes with new hardwood floors that pay off in the long run. Note, new home construction is not an essential part of the business.
“We are very pleased to report our 14th consecutive year of comparable store sales growth,” Taylor said in concluding his prepared remarks. “We are demonstrating that we have the right teams, strategies and agile business model to navigate global supply chain challenges, inflationary pressures and a weakened housing market.”
[ad_2]
Source link
