Floor & Decor (FND) 2 May 242024 Q1 Earnings call transcript

Greetings, and welcome to the Floor & Decor Holdings, Inc.

First Quarter 2024 Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Wayne Hood, Senior Vice President of Investor Relations. ahead. go Please

and Decor's operator, everyone. to Welcome Thank XXXX good First & fiscal Call. Quarter Floor you, afternoon, Earnings Conference

on Chief Financial are today Trevor Bryan our Chief Officer. Executive me Langley, and Officer; and Lang, Tom President Vice Executive President; Joining Taylor, call

language. and webcast XXXX uncertainties. characterizations the is statement start, harbor contain future within meaning or want of forward-looking and Securities company's to I are projections of this Litigation events, statement. projections during risks we expectations, to Act remind everyone refers Any statements made Before the subject conference financial Private Reform of a forward-looking to safe Comments call and conditions that or of future other market the including

materially statements its such note forward-looking expressed any is of future differ performance The Decor statements. results. from Floor those for a or update guarantee also market reason, in listed company's no forward-looking actual SEC those filings. assumes such Please including & in results to any not past future obligation that information could

call financial available this to Investor of website. Relations our on can on the ir.flooranddecor.com. earnings be recorded our During performance between of will of better directly which financial our by these comparable operating measures replay is available measures as defined investors comparable a We discuss Regulation reconciliation materials press disclosures understand company Relations this website most related GAAP G. call, measures found SEC release, to will believe core non-GAAP periods. non-GAAP Investor conference A in the The and basis on the at enable be non-GAAP each

Tom. Let me to turn now call the over

us earnings call. conference fiscal First you, XXXX, and our Thank on everyone, joining Wayne, for quarter

XXXX. some share for more our I review First of fiscal quarter first call, will about remainder fiscal a Then and highlights. our some our the of today's financial XXXX During financial in-depth projections Bryan will thoughts provide of and our Trevor of earnings performance quarter discuss

pride pleased manage first $X.XX, teams demand quarter diluted our ongoing prudently customer to rate per without earnings are they in share results expenses surpassed profitability manage can report demonstrate service continuing our We by to as for hard fiscal take margin XXXX, gross these which grow strategically and flooring. sacrificing of We amid our expectations. our surface how weak

These to results are drive testament associates' engagement tireless hard dedication, with their a our work to and and Pro and store sales our homeowner daily. reflecting customers work

that our set scores our their in We to competition. efforts from service all customer are high us across apart report helps which points, happy to result continue touch

it's to During for demand displays category to out offerings. our surface this on weak buys, we've messaging value of We period the hard bulk this at and compelling stores. our we the by front flooring, reinforce offering and do uncertain taken opportunity deals Therefore, control. steps focus important of what price of for can us adjacent

also well equipped designers strategy having floor includes at on the Our time. the right salespeople and

assist project proactively on? them conversions and stores working customers who helps asking This satisfaction. us our and enter agreed are what customer by We approach drive you

on and inactive up tools intelligence and are closing drive in focused our Pros. opportunities high-value following and Pro to open about diligent quotes sales data business design and We also solutions. are We engagement CRM our CRM with new and use using on active

to new quarter, stores. Additionally, to XXX like bringing that XX first sales locations offering products XL innovative the with we the labs to added in continue additional drive were warehouse

and create us points. service lifetime increase to term, across value that job and lot hard growth flooring hard remain our customers strategy, for low share demand surface homeowners remain products the to believe in a stylish level innovative These in providing high at committed values our surface offering help everyday of superior and Pros. we and While challenged we fundamental likely of quantities them among all will to with is touch our quality and are near prices market

turn briefly me We working the my and collapse in caused channel many thank very efforts. agencies hard know as for tragedy bridge the as to to March Let are Francis Baltimore possible, on comments XX. their Scott by Key reopen them the quickly we

We States. Accepted foot have operating X a square facility now products port of the This distribution and received X.X the in of million center normally. other X open distribution state-of-the-art our from near Baltimore, centers is ports. United

and a challenges. chain of chain have history team we leadership know, a overcoming and you of strong successfully unexpected distribution long supply with supply many distribution As experienced global

to as again, expected, on and have a strategies timely proudly modest only with on called to flow profitability. our implemented the stores quickly they ensure We them, inventory of impact

carrier We are ports Norfolk closely the divert New Jersey, York, to East our Coast partners other of ocean nearby ports. and to with containers working New

leveraging are mitigate to to products transporting of center. dedicated our We cost impacts our trucking fleets existing help the distribution

Recently, smaller a can open. channel that commercial accommodate vessels

vessels well. our barge as to this center begin replenish utilizing shortly will We channel distribution products on moving

the normally admist We will start by Corps [ Engineers. Army of -- end are May hopeful the of operating Baltimore ] port the

in call would the is leadership how make capital goal like By we despite and doing take weak warehouse posed Before of our to over the the spending our a Trevor, with long-term operating investments a United of challenges stores team's strategic XXX our growth can to profitability, by I proud States. significant inventory turning express ability to so, to moment demand. flooring to manage continue

welcome details York. the of warehouse about includes Trevor store store XX,XXXnd their on Brooklyn, plan, and the new fiscal inspirational to the foot New opening busy visit store more embark XXX,XXX quarter which our next people format of project. new a flooring square warehouse York opening New share We will in

now call to over turn the me Trevor. Let

store surface sales XX.X% sales first pride the comparable and of year. same to manage the with hard execution from X.X% floored. In by in for falling XXXX, to billion, the our of sales-driving our Tom. the quarter share by demand We take fiscal period last the grow all declined profitability by $X,XXX.X challenges Thanks, associates initiatives our in despite near-term our market of our

initiatives. As expected, comparable in Monthly cycle store sequentially past XX.X% as sales January, our March. XX% comparable declined comparisons in execute store we and sales sales X.X% sales-driving and easier February improved in successfully

XXXX, fiscal declined from X.X% last quarter-to-date Our store period second same the year. sales comparable

discussed As the conference positive are call, fiscal we earnings XXXX XXXX we prior from quarter trends early half in West comparable emerging division. represent From period. expect fourth albeit challenging sales of first regional sales our most standpoint, to seeing our some, our a

in opening store to new less Comparable was store the openings. impacted fewer by are are to East has and The the than softening excluding average. in divisions store and division due were better the Comparable stores. South similar sequentially to experience impact company improving sales new XXXX been sales compared other sales of and cannibalization our West first divisions,

Turning to fourth sales insulation in the categories tile, adjacent our were and sales. store of by wood, fiscal categories. trends quarter of our XXXX, than merchandise comparable store decline quarter the comparable sales materials fiscal in overall better first Like XXXX XX.X%

Laminate our merchandise category. and remains vinyl weakest

that industry-leading at our continue drawn towards as strategies our merchandise offer are price and to everyday and products, trends customers with resonate our which low styles they point best innovation, prices. We pleased better remain consistently

products. lead the successful execution strategies to that higher-margin of happy shift to to are a continues merchandising sales mix We our

by comparable by quarter. transaction store second sales, by in in our declining our store and X.X% me ticket and in quarter that the comment quarter Recall X.X% increased and the average first about average fiscal before third by ticket Let fourth the comparable quarter X.X% X.X% trends. XXXX,

began lap In X.X% the declining the to last first as XXXX. year our from quarter strategic sequentially average we we fiscal in reductions ticket XXXX, of took improved slightly price

store smaller transactions a a In of to the terms of largely decline X.X% and first comparable a reflect are fell square in quarter X.X% quarter. macroeconomic decline footage transactions, quarter, a less in X.X%, second the third as first X.X% trends the and fourth in fiscal well in projects. the purchasing X.X% the our decline XXXX, as quarter XXXX, decline compared headwinds quarter undertaking customers The

Turning my to comments growth. pillar customer connected our of

purchase our independents, our consideration purchases their for through Achieving crucial our touch It's journey. customer Pro as a happy with experience touch XX continue a and with homeowner these unified among strategies particularly to can the like noting flooring. competitive resonate high the engage us over connected during to points see that execution are points We advantage different customers that and customer customers. worth to

customers that our On our customers. visit stores recent processes call, single-channel and most further in-store with than online more observed substantially and experience. discussed who and We've spend how engage to technology we develop our integrating seamless earnings our website a solutions are we

online our website organic of strategies, processes adding experience. these on plan enhancing our improving website our continue for we to and by customers the inspiring driving customer search, further speed achieve search content increase optimizing to growth traffic and the and focused this To refining We quality website efficiency. our to merchandise

in year, which saw sales quarter XXXX, in last improvement first fiscal of penetration the increased to customer the organic connected traffic we In sales sequential points from by and basis XX%. X.X% a increase XXX in a resulted

be with continue We pleased design services. our to

with opportunities our Our products. up on the design CRM high-value passionate sales about focused our solution. through selling by and The who of project, on the an entire engagement service design are power designers teams elevated customer experience focused following and on are leveraging are driving our delivering teams engagement,

the Furthermore, relationships our to Pro with designers collaborating contractors. with desk build are

sales than the happy was that to report better first design our We quarter are sales overall growth company's performance.

pleased design that that the ] and result, Net selling sequentially and sales increased working. are to are our a basket Promoter Score grow Moreover, efforts sequentially we year-over-year. [ As our improved penetration

opened with pillar stores increase openings XXX last new Georgia. Mansfield, our growth, Florida; from fiscal the to period These of we same XX% the year. warehouse XXXX, Summerville, new stores, Burnie, new and; Moving format Texas; ending Glen Augusta, first warehouse warehouse include stores store the format in an quarter Maryland in quarter of format of X

Lone Bremerton, We Brooklyn, and; have York fiscal opening XXXX, plan Colorado; busy quarter New X have and stores, including Hendersonville, Tennessee. already Tree, new second a warehouse opened Washington;

the market new we share. Columbus, South, XXXX large format guidance. in markets grow existing small be in to store various Palm expect sizes to in our and XX market in are West Most unchanged and to we June, openings stores and Georgia. previous format warehouse where warehouse Florida new from to large, stores plan the open of the We warehouse open our XX medium fiscal across to expected Beach, East XXXX In continue

will openings the anticipate of store new be we XX% in our XXXX, fiscal In warehouse year. half first the of about

expect warehouse with second remaining fiscal the in the the We in be new of quarter. XX% openings store fourth majority XXXX will openings the of the half our

Top my year. first Turning from our to order average sales. comments for accounted moderately of last Pros frequency their quarter In XX% of of increasing XX% are Pros busy, approximately Pros. the fiscal XXXX,

for quarter points store comparable top average. that insulation due supply first materials our led among engagement XX% last house pleased particularly from market sales to grow, exceeding Notably, XXX of the Pros our are continues the our in and penetration Pros. top year materials basis Pros points our our this We quarter mindset. share with the to for Consequently, sales first XXX company rate basis insulation the increased and among mindset

underpenetrated We this the category. our market are about pro grow opportunity in heavy share merchandise excited further to

leadership tools of now closed effectiveness Store the We the first a quarter, dashboards provide intend our market our share of journey. effectiveness managers new, Pros field to and leveraging We contact that engagement drive their enhanced CRM active to with measure better by better we to will and launched with reporting grow In contact inactive, fully and sales the Pro new our help tools Pro journey. our Pros. understand

platforms have new provide avenue begun a we bank's should and cost-efficient Pro to drive practical digital native to advertising acquisitions. Furthermore, with with channels partner us within that

an Pro's us host roundtables that are allows we initiatives These to Pro will the We them of successful and quarterly. events we understand to investments on needs making drive their number business. increasing by see opportunity better update and also customer benefit further engagement networking new

with with partnering installation Pros relationship certain are Finally, events. host educational as associations to important trade continue education our deepen to categories our in Increasingly, we to events Pros complex. by is

see attending from events. a Pros these significant we sales lift in Importantly,

Pros. educational events of contractor and XXXX, National fiscal approximately Wood XX hosted XXX Flooring first the training quarter Association X Tower national we In Association

We XXX in XXXX. excited to events are host educational about

first the XX sales the regional fiscal pleased the quarter managers regional that ended first our of compared expectations above of XXXX. XX end quarter fiscal are year. and then account managers with with were We account exceeded at from XXXX significantly our last We

of Sales quarter Let's expectations, significantly year to June first Surfaces increasing XXXX. from now sales business. commercial due exceeded discuss acquisition in Spartan last our the our Master

With ended first XXXX the the acquisition of fiscal compared quarter of to XX March of the with Sales Master, XX reps XXXX. we end at

flipping is an care, location. installed is specification health price economic in cycles, and homebuilders. Health to reindexing commercial to example its of Spartan continues that sensitive to attractive excellent and progress diversification segment education, strategy, its care due hospitality to less an

continue sales In opportunistic acquisitions, right remain and we plan that to macroeconomic and growth boosting through the model environment and growth rep productivity. have XXXX, this organic to challenging market In navigate drive share we business people, we strategies rep confident closing, successfully. to

Let to me over Bryan. now call turn the

Thank of to contributed you, I quarter gratitude first want Tom, Trevor. XXXX, to my our all express results. and who associates our to fiscal

surface dedication and spending strong and work, time when allowed enabled to our uncertain. us is on commitment hard us flooring to expectations remain flexible, discretionary a resilient exceed Your hard which customers at

plan in of is sales delivering prudently Although of spending. end capital quarter due per fell at delivered gross and and expectations. the margin efforts earnings low on expansion surpassing This our to diligent first expenses we teams diluted of achievement share the expectations, our our managing $X.XX our

me in our as statement line of for the XXXX our quarter well let sheet some the as statement, changes discuss the first remainder balance items of of significant year. cash outlook fiscal income Now among and flows the

gross by to in a decline grow to enabled This despite XX.X%. fiscal was X.X% better XXXX to mainly extent, chain profit margin sales. product increase the than year first and X.X% margin Our was same favorable gross period expected, from rate in to lesser basis rate supply cost. XXX cost last us increasing our a points due The our gross quarter

at period million last increased XXXX was $XXX.X stores of or additional This $XX.X store an quarter million the from year. driven same comparable stores. $X.X primarily fiscal same by and million versus increase our offset year by and Spartan, partially million growth from operating first period a by XX the million operating Our of to XX.X% last at decrease selling $XX.X expenses $XX.X

of due delevered to XX.X% and percentage same first to the sales, XXX operating basis decrease last from comparable in is stores. expense expenses by a of sales selling the year. This quarter period XXXX and addition the As fiscal store points store deleverage new

XX a million to from and percentage related Our growth X.X% to and including decline attributed to growth points fiscal year. increased support lesser by to to of $X.X million compensation. the for we our to the sales, store of general the expenses general investments make administrative quarter first additional incentive $XX.X our quarter last to expenses The and XXXX administrative expenses same period is growth staff personnel extent, X.X% in Due deleveraged a sales. basis first as of continue

first The resulted Our increased year. fiscal from XXXX quarter million last new preopening XX.X% period of the increase primarily from timing expenses of for stores. year-over-year $X.X the same spend

debt. first on the interest outstanding XX.X% Our in rate The fiscal reduction borrowings ABL is partially cap increase due by an year. higher period $X.X net facility, under offset expense derivative rate our interest quarter or capitalized our expense increases from lower last to interest decreased same interest income interest and interest, XXXX from contracts million average in

first the primarily decreased expense XX.X% fiscal year, due million our to sales. decline adjusted quarter store Our comparable by deleverage same the period from $XXX.X from last XXXX EBITDA in of

amortization net to $XX.X million the $X.XX, and earnings to period XX.X% following by same and declining diluted by year. XX.X%, share Depreciation last per increased income contributing XX% from of

compensation Our awards. same decreased increased stock-based tax last to from fiscal of the primarily XXXX period year, XX.X% benefits effective related quarter XX.X% tax first due to rate in

on Moving flow. and to sheet our cash balance

which within We our capital continue allows of strong even balance during a grow us a structure existing contraction. to industry sheet maintain to period prudently

to $X.X declined decreased of and first end from pleased are the quarter X.X% inventory fiscal XXXX. quarter XXXX billion fiscal of the XX.X% our We fiscal first that from and XXXX

facility. $XXX.X than We new grow most borrowing our the and XXXX slightly planned XXXX store and liquidity, ABL faster to equivalents with call, As earnings ended discussed fiscal of million being exit late the we our as openings. the available openings consisting under of we due XXXX in $XXX.X quarter cash anticipate for store inventory in sales of XXXX to prior first $XX.X million in and cash unrestricted million year

XXXX. thinking me of remainder sales now The remains flooring sequentially existing existing home year, million about environment units about our at in X.XX XXXX. improving last and falling October to in we Let the timing sales performance in are units surface to sales absolute February considerable March. spending X.XX in bottomed potential the home of before units but have choppy, of how discuss financial and were may million improvement X.XX of and There they for slope macroeconomic million in hard the XXXX uncertainty

Unfortunately, the large and mortgage goods affordability headwinds. durable discretionary again housing interest rising on direction rates of absolute remain are spending and and ticket level XX-year

we reasons, slope more low and our to improvement these end believe $X.XXX fiscal could billion of timing the sales of the $X.XXX year could at guidance as For full be elongated. be XXXX billion of

better to sequential a which line timing of us will in of to sales. and gain That quarterly the of say improvement the the slope expect sight is half we next We about months, about over not store comparable sales expect XXXX. second don't better inform several

We expect represent easier year the year sales store comparisons store XX.X% our quarter improve fiscal and trough to comparable for decline sales the improving XXXX throughout of transactions. the and from sales first sequentially to comparable

of meantime, XX.X% to the of successful our in XXXX our our believe plan can gross margin margin annual us The we gives expansion gross manage the XX.X%. profitability. more guidance execution we confidence top In end of

operating remainder quarter operating selling of first As we anticipate in from we manage of fiscal store we the XXXX. store expect growth fiscal look to sequential expenses, prudently the XXXX, to and and modest selling dollars expense

per $X.XX As in a store impacts with annual compared points change earnings XXX sales share. plan reminder, comparable approximately basis every by our

Based first we gross fiscal interest and in our tax year on manage period. Our XXXX approximate our to to and and million quarter results, this profitability enables tax now to approximate expense full rate expense us ability manage lower to XX%. million our prudently XXXX our fiscal manage expect expenses uncertain $X interest $XX to margin, our

Over still the supply see margin. a long opportunities EBITDA well-documented exceeds adjusted in an repair/remodel including We demand of path run, stock. aging structural mid- in high our we remain flooring and excited teens housing to goal to about that spend, the achieving long-term housing

questions. now would to take like we Operator,

And from line comes question JPMorgan. Horvers the Instructions] with [Operator our Chris of first

impact. can is, demand How above played January April? is relative reflexive how from below rates proceed question out expectations? the it related quarter talk some first about And to My think how mortgage did that, your to to I and there weather through X%? you or had are

Tom. start, Chris, The this can in. a XX% negative negative it? to did was I'll I negative little is was start quarter, . January we the comp was and in each We bit month quarter Bryan jump -- -- what got January off XX% better. It a think the

XX% Negative

now and XX% negative Negative we're X.X%.

into the the moderating So we along comparisons against comps to be year. to were get going up easier further

we'll how plays So that see out.

interest been home approaching the only report, We are in to of rates We how affected We've the sales of March. going back to the reported back it's last at are But March. affect. the year. X%. got of go to step the X.X% existing up. don't continuing month It's that's highest They know that through month

that tell happen. it's So will to what hard ] [

a home rates sales will on have I think interest existing effect challenge. make and an it

thought sort much implicitly is, I you to of way weighting half more what another ago? the the I asked to few back a months the sales guess thought how relative of you year, about guess, Maybe are you how cadence relative

mean I end. the we're towards in that lower the that's is prepared think I you turning what remarks Yes. heard

back more of today, We guide. call are get more perhaps think from why alluded that kind end. that's the not mean, it's things we in half. that better I reflected I trending but expect to putting the we're lower do towards slightly And in So that's we the to we're where

Chris, only . bumping the of annualized that So year-over-year started million February a bit [indiscernible] else gets mean, the above positive, gives $X.XX little started was say below soon we month And at between I then the lapping $X.X that existing a June we million last start sales for but along would in do as I the lag, year, in That thing get million. the opportunity as spread just be $X.X month with there'll home those comp of further us to we went -- but as X only as turn a year, think And into it positive. better you better. occurred they numbers, we

and in what I coming we biggest improvement mean, on we ticket the expect Exactly. transactions to reiterate the quarter, do said just sequential last in transactions. with both movement

is if QX. about [ the towards XX% year it, just to end and the of year. sit you of in the negative is ticket the then at we towards get will hopefully on towards same So positive. XX% and stay end flat getting QX of being we'll move slightly flat ] down in the thing And think where kind That it

compare improvement So the through both are easier slightly those of movements based than on year.

Got it.

what's So the to if that's the back going half, like you're reward just it's largely the in your of expect why happened I -- range? half view first really you essentially, and unchanged leaving just the end low were back it. and is half

That's Yes, that's Yes. right. right.

next comes with the Simeon line of from Stanley. Morgan Our question Gutman

that or happening normalizing that? you're is against seeing Can able DIY for Are comments I ask that's were decide Pro? that ] to if if And easy you The or know it then Simeon. was I [ compares some or on the don't improving. made West reacceleration? It's

the this the of Trevor. in to The X before good months issues West Simeon, rest started XXXX. is X off having business a

more they've off period now with of for the -- this because of they've existing home to start for this negative So longer time had had strenuous they been -- dealing with. longer sales a some

think up easier we going -- against So they're comparisons.

everybody our the bigger affecting seeing now States, and come more that of we're some up ended markets. in of United difficult that malaise housing has the of some think I across some

Texas to Midwest lesser like [indiscernible] the and and extent maybe North places in Georgia to and So Florida and the a Northeast.

east. its housing call West better recession And for so I lack worked just out way the a think and term, it started to of

why that's so doing they're And better.

and Georgia harder like stores markets of out a are why in having And didn't the just Texas the hit conversely, that, time as West. Mid-Atlantic some time it the same at in them that's Florida because hit our

it. Got

is, stores said Okay. is in the I -- the opening? don't industry's but it The you the West, was business, which It more versus region as from growth, the obviously that's by cannibalized rate in How mean percentage that much industry's mentioned it some if pick the also stores cannibalization that you've up you're And tougher stores? follow-up health the recently, and controlled the pace maybe cannibalization like not would I controlling you're my growth. is health? at feel would opening in of is more I dictated the opening environments. as well? Or by know

Yes.

I think of latter. more it's the

what actually last we're that the of our in stores better seen bit in the little yes, bit we'd could be timing. generally cannibalization opening than obviously little that's store by and cannibalization against. But to opening we're dictated nice a previous Our quarters. is X kind where And quarter see. was a speaking,

XX bigger an going And store beautiful so have if it's and within, or to opening higher you're smaller less, a it, store, cannibalization. call -- going older, have against you're to closed minutes brand-new you're

to If said some stores year, store well. time, you're drive probably in that's, which markets against call it's year to going this as XX% see new much think similar last think as I I cannibalization. big a we is are store going our it, XX-minute of -- another maybe up not big And existing

market So than that I cannibalization more the own factors. think we

Lasser UBS. of the question with Michael next comes from The line

the markets? line range? do the the top your of comments you it relative How you'll first share where quarter-to-date, think what's of had especially mature that been, low in quarter versus your And more think especially in you year light in hit market trended end full happened

Yes, Michael, is that Tom. I'll a first. shot at this take

to a So reported know yet. kind hard share perspective, quarter everyone's it's happened market not in of from first the what

down all have flooring to reported negative worse market at the comp predicted to minute sales Shop , $X.X revenue publicly grew was Catalina million And last take the North and traded them. everyone's Floor by and numbers went big digest than you see. Mohawk you American lumber, year, to they're competitors, the boxes our negative. look [indiscernible] across Tile negative So a & X.X% Decor When

So the slightly we we were. and reported positive. In or better were negative than Mohawk they out, were reported quarter, negative first they only

So landscape, were way in we -- quarter, I you at I haven't the the much competition way I year and first the competing compete don't and versus competitive in When last look much think of change. think the changed. seen the we a

So continuing anticipate take a I market. share would in to market we're that really tough

anything My getting low on is been guidance full you Okay. light in quarter-to-date, to of could say about of comments especially happening end the follow-up the what's the there year range?

quarter-to-date mean, better -- modestly again, the month-over-month. comp getting is I

June would at I -- step see taking quicker. of million, sales to X.X existing look we it's March's it a X low So -- with this last month up being it, million-ish would have sales a really backwards, existing hoped you better there's lag been get is we've when what home we there. year, But which in this February. and since just we X.X only mean at

So a we pause as the the it of year. about think rest just us gives

very when second of is if home know in the a will sales, get be important It's Spring tougher, of what important what existing to but our of more the good, sales, home when the more talk month about with be for happen we get know May April, and during during happened we'll data and to the very We'll what's one. the we going we existing then that it If they're and benefit June quarter. good. not, lag we'll from they're of should happens month

a home what uncompetitive a change would be existing that, became if for? trends Would be I the it case? Tom, sales, well would Or be was disconnected become negative? is from Would where Can be case the there maybe & on your dig scenario? positive Decor not just into either What your Floor positioned that was some there it or prices competitive? that product more that category on

is this Trevor. Chris,

it's a They have spending had companies level under that just theme products recently I bit here think savings been is is they that rates large had. and have discretionary reported they consumer lot drawn of a of little down. power have a still high, the just the same Inflation that pressure. consumer other reading the common don't

And probably one high closely that's as for noted well well, you've under as and that in reporting . Historically a have so us, the is sales. that's your consumer only existing just watching thing things had home pressure. as of we others very -- we're to stay correlation that have the

that inflation they've question because have stretched. a of I little the is we're and consumer now at just, been retailers is the position I fills a consumer other just than hearing stretched only think where in more

just Yes. say are would we the competitive mean in. And that advantage still Michael, participate every the from hasn't across that -- I that category, across stores we department our every we have compete a we saw changed. way I

fundamental much more So I in model would anything the . the challenge. bit don't be a It's consumer of health think there's that. the that that would affect

the Haskett Ladies of Chuck next only. Grom ask interest from question one and yourself of question our gentlemen, due comes to please research. to with line the time, Gordon limit you And we

how say, of XXX-store I then I growth And How smaller or quarter. store part on guess single-digit bigger us were are many to us you switch versus here. I'm continue 'XX. that remind store target, openings, rate, down picture the in in your the just long-term mix format high I'll you've do begun sure second in can and remind And large Can the as within comps you the to a 'XX process? guess just the already gears. think follow-up, locations. you just through to locations? about third planning trend if small

second to the part, Trevor? take part and you take Do I'll first want the

I the It's the head smaller was relative I top it yes, -- of looking of our my maybe of off to than larger smaller in be stores year -- don't to how the have I going On think format than it's see of many the less the this are less format. our to -- stores XX% XX% format.

a . market. in tertiary we're that's that mostly be a also sometimes in existing And markets. that's further in a opening if store But smaller out more could market

a long 'XX Yes. away. is And then ways

will be growth store new in our what about XXXX. talk to prepared not we're So

believe new pressure. units we -- went guidance down sales slowed year new -- from this opening a gave have existing became and growth will on of under make We you progresses that it XX We we next per that to determination. as now know be year our within We'll XX as still store year, year XX% range. to stores home be to get and the determination we'll let watch since

will now, business. already of It that to in way the been deploy we about is been still affect pace We goes. going slow, the the grow we'll opening. investing if or at back recovery -- to going that XXX in We're investing how as continue. If of continuing sure about way capital. we're It's thoughtful the going make that half not and slope we've we all of our if the costs. then may make business. this believe long-term -- stores, we're have the and already We a of to we're -- thoughtful on decision little the range best we're can not opening bit, the depend we're the we doesn't how to our So is it slowed plans think

we format X look just I that real response to Tom I'll this elegant that was they're have giving roughly stores as be going the And of stores think our quick one. year. small

the Fargo. line Fadem question of comes with from next Wells the Zach And

et housing then company-specific slippers, back cetera, look shift and and seen designers, we to years, a cetera. as we've lot et had internally of some loyalty, the you've Pro both So tailwinds stock, house hard externally from like tailwinds over aging surface,

about the through you is internal and both comps it to So external? fair just category on as think the last as be of over could next walk round you us upset? they've think tailwinds upswing, your say the been the that could what And next could next upswing we be as strong

at take our [ better. is type a us think are stores, at I'll we we're making to I take in that's look I'll there's today trending XL products unique Labs, I when Larger area. talked ] Trevor. that. investments one categories stab -- you upon this mean about, that key think

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States. think million in over of the units the say XXX X housing term, years are them United X got long the on last old. years you've I XX many or times as have you guys XX% us is heard over

years to average, just they're old. cycle happen. XX there's that on a And replacement While has

everybody should nearly know, term , medium homes we're you a formation because got many as do space, new -- the to as well think do in this I over that the to not adding as and household we're long relative adding including we're So us, having we've just country.

the go to And and reason that house part values so of up continue up.

for time, stores aesthetics over one in even feeling isn't But I time. would when of the business the and I the thing medium service all and we're is customer good. last long at higher. better. great, [indiscernible] are we're term, think stores, that our much us better, So relative the scores all And and I Tom And are though our the as you the mention our we're all competition feel in-stock seeing to the look the think mentioned, -- peers like stores, levels I our just performance

is down. turnover Our

We're resilient. is chain comes. supply it when Our ready

Zach, opportunity walls even was commercial outside the in super going X about the too, as we're to well. say I excited

So one innings there. in the early

next So accelerate something that's total well. think when as should about of the couple that growth, years your sales you

anything line think changed I our across bring with kind would We're last we product just And that say mentioned, department thing, we in every Trevor strategy. continuing of view haven't I newness to that, have.

Newness and newness across every fashion, and department. durability

the as better about [indiscernible] I today, So [indiscernible]. feel product I but our I market didn't turns, mean,

macro. a of when. -- So pass. shall tough question It's in just it's This just we're too . a

Steven line from with question next Zaccone comes of Citi. the The

follow to wanted I asked. up on been X points already that have

The on West. first the

aspect, you actually that long-term remind it just as a seeing to then driving And the now cannibalization, is larger see can So more to improvement? Are sizes? what second you the cannibalization? right project are comp? actually drag what us for the the starting Is traffic? goal some on what And you is that's

Yes.

best answer my I'll So those. to do

size transactions there. activity, So see slightly, it's more to and get our driver. I would has we're the but really increased Coast. around that on it's transaction-based. starting say That West so it's healthier main not out It's the traffic

actually it's what can't trends we've number, we as and say the it just compared is in the impact it cannibalization, many favorable where line, the in side. to probably years more QX, but never relatively I is. they of next stay a to the there Trevor exactly what And slightly I'm and stores. stores going more historical quote to so opening said stores given it's just over exactly still was it recent of our matter we're on expect It's cannibalization to how Trevor's couple planned point, trends, are

have because as because will not term, XX% as long assuming many still opening won't stores. just this we're many we're down won't store adding it Long, of openings you count, -- come have store new new level

new that fact markets some run right the out of at point, by now. we'll offset Somewhat

some XX because be just it they XX think point, in stores At markets. want a and in have markets of existing lot would we're I stores. XX-XX, to new all new XXX%

because our But worked as I at I've here and other think get will stores. the other side open it half productivity I've you of that of the store when second better new as companies well seen is

for So in good, stores stores but good same X in example, the second first thing did did the Phoenix. Houston, incredibly Dallas, Atlanta, X

think recognition, productivity as where for over the you convenient hopefully more open markets. know Pros, are they new store do stores will where brand these existing I more So time improve we our more people in got better

comes of Forbes Steven question from line the next Guggenheim Securities. the with And

I my think of success, penetration the curious sort I with is? penetration as terms store the sort that penetration maybe are you about what you Trevor, if the right, how we mentioned highest was you focus how that have there's of anything could a And today? of stores materials. of across on, in and right in opportunity on fleet just installation And varies question right, today? driver those maybe particular, if seen the sort of that thinking

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we so Pros that at XX% installation, installation. at this see they can is are XX% And our have pro of XX% is so hands exceptional products, data to CRM of best our at

work materials understand categories I but close we're roughly materials. total know sales don't are will When get I almost of say to that we our it's that a lot put I'd installation merchandising -- there, XX%. the the store it X XX% think industry. mean our you I So operations done It's have and teams our together, ever installation of

category is So year. our grow. to last goal to It best-performing continue was our

than still other adjacent it's again category think It's categories. our best-performing year. I this

opportunity that. a and we've to And so more done there, yes, we've job continue on good focus got to

X more I are the Perfect a by to answer. the & & insulation Decor. at lot out Floor take in to where of the store Pros, to drive drive other improvement the the some X have would occurs materials drive and the it your the purchase purchase to get I I of add that we time we of The and convenient Floor past more. the to more Decor thing of you may home for the equation, not purchase. stores centers of think answer have we because had or user other our markets only makes times get to to I build the out, lot the think And times a the market think is, didn't a product to end when make one different purchase And we X and Pro

go up. that So penetration to continue should

question Barclays. line with The Sigman Seth comes next of from the

on than better XX%, bit question average been. a My is ticket little down it's

decline Are a close about talked quarters, are lot that we the we to us few you sizes. last that? Can correction? in in project the Over just remind cycling you've where

about just last go you do think couple And side while some a sizes then pressures be, consumer it the the guys to perhaps were context that that could earlier, other could back factors years. of different the of you meaning in How the guess project don't for of be I of mentioned think that? just in this the of is one do where you you

Tom. of the take question, first take the part the second of of question. the question. part I'll the This the is I'll can second then take and part Bryan

come On I the think back were historically. will part second to of question, they job sizes what the

right market flippers I today are think has long size that job our the home as do existing -- just out as of sales, to of amount with the now.

aren't or a at houses someone's powder houses, and upgrade a good Again, backsplash. over, bath, project, correlation when the there's they'll upgrade tend they'll they small a house whole doing when selling turning buying flooring versus redo to

be believe million going annualized to home our sales come dependent up improvement. job been, that back $X I when So to sizes go back that to will what that on historically it's existing they've that but

people don't think fundamentally buy the there's category. changed I with way the anything So

square I was drop product existing sales. with kind home that of a is just footage think the

other the answer you let I'll part. So

I'll Yes, Bryan. take the This is part. first

Whenever So through declining. talked last sequentially bottomed yes, all about of out. I mean, we've kind and we year were it

I QX QX, of moderated. from kind think to it

vinyl is that, hit at in powder is stress other like actually with we've of do has your If stay-in-place things bathrooms and and alluded to which that things we've to pickup activity, projects, of if a I it look Tom's small our well, to tiles So we laminate more I categories. saw kind bottom that that compilation as the point, of bigger it's some . on think why more which category. think you put it's the is the

with we as categories you should start well. that these see Tom, vinyl categories, go of a that size, bigger see with also as laminate agree in I to rooms pickup So in in some

So.

Robert with And the of from next question Baird. line Justin comes W. the Kleber

the wanted with as aggressive a of Just If it even maintain Would to wide to similar price. regional that your more start get the some a more one mom-and-pops if pricing so or ask comfortable industry feel of relates in and getting does need spread? gross Or you are the today rational? margin. hypothetical to gaps you would not be pricing price your to competitors responding necessarily

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managers local responsible Our for they're price.

change So They they've an have that's their to got aggressive. to the competition. independent bring price that ability and prices their react to down

the merchants have better a from costs job doing costs, So been from coming chain margin getting the on improvements -- our supply better better suppliers. gross are

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So there's improvement. that other pieces gross ancillary that helping a margin are lot of

have and feel I irrational competition. more they versus authority if independent it, an or the aggressive and have with spread managers, the good than our even that deal the about we they autonomy do. gets to store So

of David the line from Bellinger with Mizuho question And comes Securities. the next

As follow-up gross cadence. on just and a the margins

Or just to initiatives still and revenues the range, move gross positives we should way that can second, continue So are sequential ago. improvement expect metrics given some And work towards underlying some guidance just minute those a if in you of to low total year? end trend and through mentioned comps a decoupled the margins of the higher?

a about caveat from QX the we improvement think of ] sit From to to stab Tom still could impact if we we the see and at ]. they back Bryan. that what Trevor You to which is we feel one have. Baltimore XX.X%. [ high be XX.X% to. slight still need in I'll need of came can jump end, today, the Obviously, sit center distribution just we off [ this could there. about is The that it where and take is Yes, good and

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see from slightly what but XX.X And alluded you to it meaningful % there. XX.X% in the than I expect higher wouldn't could we improvement , so steps

next question of the line Melich Evercore And ISI. with comes from the Greg

follow comps gets through I'd what up love on to year. the better

both that said and you would better. think get you I traffic thought ticket

if that? Or to expansion then what be project So turning And help would Just flat going to a counts on little I'd to give you side, inflation? little size? negative are mix need sales a those from X% us of how go there to love that to think on guidepost existing deflation what it a to know the more ticket transaction from negative X% home flat, get of X much is bit shift or to the factors. is do

it at stab if jump is get a they and just it and take I'll then actually to. Trevor need Tom majority The Bryan. is this Yes, of your compare. in

quarter-over-quarter there So on improvement sales. easier needed improvement the compare. slight majority existing home is of the a expectation of the to an comes When from it transactions, is

pinning you asking number, QX where it you're that at maintain if need improving. So of to least coming it us today, without an exact off slightly down then and is

units around If the original X.X X guidance million. remember million to you

things would slightly year. to get better are be improvement transactions, I see they say have flat to the we you'd where from as so to today And in slight exit

that discretionary is X if We months. have more happen that a earlier, actually could one kind it well. to take lag consumers than little and have to is the out that again, see of spending for correlation tight could of And disconnects they're you alluded more pressured, harder on we'd fan spending bit if as that but

we to from And to there. compressed months, stay need so that's we improvement one of the X lag of X to the need things slight kind as and that

retail is we're really ticket Average took the lapping reductions year. last those. just strategic we

there, flat little lot the improvement size, to QX project for a us in in ticket. but of as going that And thing to get us take is get back biggest to bit maybe the that to should not not the kind average back going we lot happen year, a just throughout It's to a get flat. that that's us so for help of

down last it, QX, QX, we down -- to the by get time to X.X%. XX% year. we call or we Like we X% in Yes. were When go transactions

one, that as throughout we're originally will when this So we our do gave home continue didn't easier the got and really Bryan And comparisons. mentioned, guidance just thesis -- existing sales we is we year. to improve change that we've --

So macro comparisons. easier going we are and up help to those the then gives expecting us some

the of with And from Basham Securities. Seth question line Wedbush comes next the

elasticity is those there? on My if have price retail price first question any Any to thoughts changes you your updated related guys reductions? in viewpoint

across We're flooring the we or always We're right, improvement improvement all a -- to categories do category of it when that's on testing. or -- product to going be don't see product consistent drop where We we'll much an say, beneficial. we'd prices a a enough themselves. and automatically

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So know that is benefit. that, we one a

get year. we But And benefit. testing direction drive that prices can kind won't benefits and we'll or the We're we haven't we to stop the always of throughout meaningful adjusting category continue And seen if testing. one other. enough from just seeing and

Our store store. customer spreads just one versus another volume lowering changing versus that the in from usually our are the the price of transfers competition significant the SKU enough to a

line The of Robbie next with America. of question comes Ohmes from the Bank

that follow-up question. a Maybe on

week and about said stores and quarter, kind you case? things. quarter, at were Last the opportunity -- guys last you you seeing this deals consumer quarter talked towards and the I the think still of I and the the value better that buys of still front Is best. the leaning think of

across towards buying, and leaning Yes. still we're trends, The customers the same of when best products better all they're our departments.

do it's opting what -- when the So to want. when the they're getting they're they project,

company we're positive comp [ ] -- we look, Now whole life. cost a it's that's

price trying stores, So make points. trying staying the We're to sales. why in everything, aggressive that's and -- on the we're opening the you to go to doing customers the front engage at get are of close trying stores of that we're deals, and front

do up We'll that better that to stay message. So try continue to stepping flooring best. But and aggressive to we'll continue someone job, drive that. when a they're to in is still doing is the and

And the of line comes with question Chris next the Bottiglieri Paribas. from BNP

cost a This question. is

company. exist since whole been So a if growth your you've

the of return internally. declined. or So the ways SG&A? downturn been has do a Can go sales talk rule you we up stomach does as investment think do comps has the to when When thumb imagine What SG&A existing this there incremental at taken XX%? you've about think slowed about still costs business home the normal scenario? up? sales you does Like go and of could comps about in is that How

If up going if we're flow go Because well. comps we out. by we to cost incredibly have taken through learned anything -- XX%,

plan P&L, to We every working aren't execute across aggressive line when in trying more our sales much of a have favor. been our upon

we some . add So incremental -- don't you'll pretty a general, as well. adding through and plan There's should costs in we But on sales go back. back up. sales flow

going through well. fixed drive a the XX% typical That's And period cost, a a lot we're just reminder, as variable we're -- as within that time of to flow XX% stores.

our down, rate has gross gone margin has gone up. structure cost Our

better positive So flow-through should our be comping.

And the of line the Jefferies. Jonathan from next Matuszewski question with comes

your on Just a Pros. most question valuable

I year-over-year. increasing think XX% mentioned were frequency Pros you of their order the top

ecosystem you maybe hearing those to training Premier year-over-year? designer Pro if services, to Pros? more certain more your elaborate Any us could on skew So just they on you and that. can what's are integrated they're with them Do that, beyond increase driving a color but you from with give Presumably, actually you classes and maybe region? into transactions what

taken significant component of that not frankly . is sure a that care else. And taken just Pro Pro that making strategy There care a being relationship. successful somewhere that's of in way they're is Sure. of

in care All would shop flywheel they it and technology of nobody we that for probably else do who and of and do sort taking business important but take of have practices, we out and add the does to know with has lot is think of features sure Pros. the those -- a job and just that services relationship we the way And approach aspect why have them. Pros I to other good care we benefits we are making if call just exceptional of those with the good a ancillary they us. because most are that that an we good Pro

come And Advisory with our last Telsey question will the line Joe Feldman of Group. from

to just a asked, different take what Jonathan somewhat actually but I similar wanted approach. was has It to

the I XX% up a the Pros pretty of had bit In other where broad from or of terms well a that's feel -- of little where as Pros change last like a category. holding the been two, call

Now just of seeing but best the it's anything isolating same, more holding guys, just Pros can you that you're it the kind curious projects, it's and you're just . I'm what of other to like presumably, share hearing people those on are from aren't up. that? doing

sales performing the tell having jobs. do most from reports, performing but lower. see went single a total our low that do, we've of best a actually lot. to as and there's by best to there. not been not what We the mean the businesses mid- we're year I having as just all we'll we much our us, many historically, And business the Again, for shot. they're having sales just long And last up in Pros of be digits out

and our doing And doing plumbing about where of from of XX% work just were in was this during Store we environment they this were fences to are the stay peak. talking flooring done home Head work just busy and a Operations other -- time. less store There's sales things how to existing down be period they were and Steve we what were in

appreciate look as forward thorough giving more we end quarter. your We Look, that. We and amount to the time you appreciate update for today. answer appreciate question get a good Thanks, interest. of of We I everybody. to all the of this

Thank you. This concludes today's conference.

disconnect Enjoy may day. rest now You of your your the lines.