Group 1 - Floor & Decor Holdings is expected to announce fiscal second-quarter earnings on July 31, 2025, with analysts predicting earnings of 56 cents per share and revenue of $1.2 billion, reflecting a 6% increase in earnings and a 7% rise in sales year-over-year [2] - The company operates 250 locations averaging between 50,000 and 80,000 square feet, generating a $4.5 billion business with $301 million in operating profit and $205 million in net income over the past year [3] - Floor & Decor aims to expand to approximately 500 stores, indicating a focus on high efficiency and scalability in its operations, supported by an $8.6 billion market cap [3] Group 2 - Historical data shows that Floor & Decor stock has increased 60% of the time following earnings announcements, with a median rise of 2.3% on the day of the announcement [2][6] - Over the last five years, there have been 20 documented earnings data points, with positive one-day returns occurring approximately 60% of the time, increasing to 75% over the last three years [6] - The median of positive one-day returns is 2.3%, while the median of negative returns is -5.8% [6]

Core Insights - True value in investments is derived from growth rather than short-term gains, emphasizing the importance of a long-term perspective [1] - Great businesses provide significant societal value and demonstrate durability, which is a key factor in their valuation [1] - Companies that offer products and services significantly superior to competitors are positioned for substantial growth [1] Business Characteristics - Selection, convenience, and value are critical attributes sought in businesses [1] - Durability acts as a multiplier for value, with a preference for non-cyclical businesses [1] - The ability to innovate and maintain competitive advantages through unique product features is essential [1] Revenue and Structure - Companies should aim to develop multiple revenue streams and possess anti-fragile business structures [1] - Complex operations can be advantageous, particularly if the business can recover from adversities [1] - Uniqueness is identified as the primary driver of value [1] Cost and Investment Strategy - Low costs associated with maintaining existing business operations allow for high leverage in reinvestment and growth [1] - Minimal marketing expenditures are required for sustainable growth [1] - Trust and network effects are valuable indicators of a company's durability [1] Management and Leadership - Effective management is crucial, with a preference for executives who have aligned interests and a strong focus on the business [1] - Companies led by seasoned CEOs, founders, or family businesses are favored [1] - A culture that empowers employees and attracts talent is indicative of a good business [1] Market Timing and Investment Philosophy - The best investment opportunities arise when negative news is already priced in, revealing true value [1] - Companies that initiate layoffs may signal a turning point where real value becomes apparent [1] - A strategy of buying more shares during price declines is recommended for long-term investors [1]

Core Insights - Floor & Decor has formed a partnership with Habitat for Humanity International to enhance community stability through safe and affordable housing [1][3] - In 2025, Floor & Decor has donated over $300,000 in flooring and installation materials to more than 60 local Habitat affiliates, impacting over 80 communities across the U.S. [2] - The partnership reflects a shared commitment to improving lives and communities, aligning with the mission of Habitat for Humanity [3][4] Company Overview - Floor & Decor is a leading retailer specializing in hard surface flooring, operating over 250 warehouse-format stores and five design studios across 38 states as of March 27, 2025 [6] - The company offers a wide range of flooring products, including laminate, vinyl, tile, wood, and natural stone, at competitive prices [6] - Founded in 2000 and headquartered in Atlanta, Georgia, Floor & Decor emphasizes continuous improvement in both its business operations and philanthropic efforts [4][6]

Core Insights - Costco Wholesale has delivered exceptional returns, with an investment of $10,000 in 1990 growing to over $400,000 today, highlighting its consistent performance [1] - Despite strong historical returns, Costco's current price-to-earnings (P/E) ratio of nearly 60 is the highest in over 30 years, raising concerns among investors about its valuation [2] - The article suggests three alternative companies—Floor & Decor, Academy Sports, and BJ's Wholesale Club—that share Costco's business model but are currently valued more attractively [4] Company Summaries Floor & Decor - Floor & Decor operates a high-volume business model similar to Costco, focusing on fewer, larger locations to enhance profitability [5] - The company experienced a 1.8% decline in same-store sales in Q1 2025, reflecting broader trends in the home improvement sector [6] - Despite the slowdown, Floor & Decor maintained a profit margin of 4% in Q1, indicating consistent profitability [7] - The company has plans to double its locations to 500, which could significantly enhance shareholder returns if executed well [8] Academy Sports - Academy Sports also follows a high-volume store model, with 303 locations and aims for first-year sales of $12 million to $16 million per new store, providing operational leverage [9] - The company plans to open 15 to 20 new locations in 2025, contributing to overall sales growth [10] - Academy Sports is currently trading at a P/E ratio of just 8, significantly lower than Costco's, making it an attractive investment option [11] - The company is rewarding shareholders through a growing dividend and stock buybacks, reducing its share count by 20% over the past three years [12] BJ's Wholesale - BJ's Wholesale is the most similar to Costco among the three companies, but it is trading at a valuation more than 50% cheaper than Costco [14] - The company has a strong membership model, with membership fee income increasing annually for 25 years and a renewal rate of 90% [17] - BJ's plans to open 25 to 30 new locations over the next two years, indicating potential for meaningful growth [18] - Overall, Floor & Decor, Academy Sports, and BJ's are positioned to potentially outperform Costco stock over the next five years due to better valuations and growth rates [19]

Core Viewpoint - Floor & Decor Holdings is positioned as a strong investment opportunity due to its attractive business model, growth plans, and favorable valuation compared to competitors like Home Depot [1][12][16] Group 1: Business Model - Floor & Decor operates a high-volume retail model with around 250 locations, each between 50,000 and 80,000 square feet, generating $4.5 billion in trailing-12-month revenue [7][8] - The business model is praised for its efficiency, allowing for operating leverage and strong profitability, akin to Costco's approach [6][8] - The company aims to maintain a limited number of high-volume stores rather than expanding into numerous low-volume locations [11] Group 2: Growth Plans - Floor & Decor plans to grow to at least 500 locations, with 20 new stores expected to open in 2025, representing about 8% growth [9][10] - The company also owns Spartan Surfaces, which provides flooring installations for commercial properties, offering an additional growth avenue [10][11] - Revenue is projected to potentially double in the next five years through sales growth, new store openings, and ancillary business initiatives [11] Group 3: Valuation - Floor & Decor's price-to-sales (P/S) ratio is more attractive compared to Home Depot, despite the latter's higher profit margins [12][14] - The company has demonstrated the ability to achieve profit margins over 8% during peak periods, currently maintaining around 5% [14][15] - The current valuation is considered one of the cheapest in its history, making it an opportune time for investment [16]

Core Insights - The home improvement retail sector is characterized by a competition between Home Depot and Floor & Decor, with Home Depot leveraging its scale and extensive product range, while Floor & Decor focuses on high-growth hard surface flooring [1][2][3] Group 1: Market Positioning - Home Depot generated $39.9 billion in sales for Q1 fiscal 2025, holding a 25% market share in the U.S. home improvement market, while Floor & Decor's market share is significantly smaller but growing due to its specialization [4][5] - Home Depot's strategy is based on its vast scale, product assortment, and omnichannel integration, serving both DIY consumers and professional contractors [6][9] - Floor & Decor's focused model on hard surface flooring allows it to operate efficiently with high inventory turnover, appealing to both professional installers and design-conscious homeowners [12][14] Group 2: Financial Performance - Home Depot's fiscal 2025 revenue is projected to grow by 2.9% to $164.1 billion, while EPS is expected to decline by 1.4% to $15.03 [16] - Floor & Decor's sales are anticipated to increase by 5.9% to $4.7 billion, with EPS expected to decline by 0.5% to $1.84 [16] - Home Depot has a return on invested capital (ROIC) of 31.3% and distributed $2.3 billion in dividends in Q1 fiscal 2025, while Floor & Decor does not pay dividends, focusing on reinvestment [9][29] Group 3: Valuation and Stock Performance - Home Depot's stock has shown a total return of 12.7% over the past year, outperforming the S&P 500 and Floor & Decor, which has seen a 35% decline [21] - Home Depot trades at a forward P/E multiple of 23.69, while Floor & Decor's multiple is higher at 37.22, indicating that Home Depot may be undervalued relative to its fundamentals [23][24] - Home Depot's dividend yield is approximately 2.48%, supported by a payout ratio of 59%, contrasting with Floor & Decor's strategy of reinvesting profits [30][29] Group 4: Strategic Outlook - Home Depot is well-positioned to capitalize on deferred home improvement demand estimated at $50 billion, especially as macroeconomic conditions improve [9] - Floor & Decor's growth strategy includes aggressive store expansion and digital enhancements, although it faces tariff risks due to reliance on imported materials [12][15] - The competitive landscape favors Home Depot due to its scale, execution, and investor confidence, while Floor & Decor's focused strategy may limit its broader appeal [30][31][32]

Core Viewpoint - The current economic turmoil in the U.S. presents investment opportunities, echoing Warren Buffett's advice from 2008 to invest in American companies, as highlighted by Jamie Dimon, CEO of JPMorgan Chase [2][3][5]. Company Summaries 1. Tractor Supply - Tractor Supply operates over 2,300 locations in the U.S. and is recognized as the largest rural lifestyle retailer in the country [7]. - The company has experienced minimal growth, with only 15 net new stores opened in Q1 2025 and a projected net sales growth of 4% to 8% for the year [8]. - Operating margins are under pressure, expected to be just under 10% for 2025, down from over 10% in previous years, with potential further declines due to tariffs [9]. - Despite challenges, Tractor Supply has a loyal customer base and has consistently paid and raised dividends for 16 consecutive years [10]. 2. Floor & Decor - Floor & Decor operates around 250 locations in the U.S. and sources 18% of its products from China, which poses challenges [11]. - The company anticipates modest revenue growth for 2025 and expects EPS to decline to $2, down from 2023 results [12]. - Floor & Decor is strategically opening 20 to 25 new stores annually until reaching 500 locations, positioning itself for future profit growth as the housing market rebounds [14][21]. 3. Texas Roadhouse - Texas Roadhouse has nearly 800 restaurants in the U.S., making it a quintessential American stock [15]. - The restaurant chain recorded almost 10% year-over-year revenue growth in Q1 2025, despite a pullback in profit margins [16]. - Management is investing in technology upgrades to improve long-term profit margins, and the brand remains popular among consumers [17][19]. Investment Recommendations - Tractor Supply and Texas Roadhouse are suitable for investors seeking low volatility and consistent business results [20]. - Floor & Decor is recommended for those looking for better growth potential, especially with the anticipated recovery in the housing market [20][21].

Group 1 - The core viewpoint is that the analyst maintains a hold rating on Floor & Decor Holdings due to concerns about the business recovery and visible headwinds [1] - The analyst emphasizes a fundamentals-based approach to value investing, focusing on companies with long-term durability and robust balance sheets [1] - There is a disagreement with the notion that low multiple stocks are inherently cheap, highlighting the importance of valuation in investment decisions [1] Group 2 - The analyst expresses that investing in successful companies carries risks, particularly the risk of overpaying for stocks [1] - The potential for significant development in certain companies may lessen the immediate importance of price [1]

Financial Performance - Floor & Decor reported revenue of $1.16 billion for the quarter ended March 2025, reflecting a year-over-year increase of 5.8% [1] - The earnings per share (EPS) for the same period was $0.45, slightly down from $0.46 a year ago [1] - The reported revenue was a surprise of -0.31% compared to the Zacks Consensus Estimate of $1.16 billion, while the EPS met the consensus estimate [1] Key Metrics - Comparable store sales decreased by 1.8%, which was below the nine-analyst average estimate of -1.2% [4] - The total number of warehouse stores was 254, slightly below the average estimate of 255 based on four analysts [4] - The company opened 4 new warehouse stores, exceeding the average estimate of 3 from two analysts [4] Stock Performance - Shares of Floor & Decor have returned -13% over the past month, compared to a -0.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Floor & Decor (FND) reported quarterly earnings of $0.45 per share, matching the Zacks Consensus Estimate, but down from $0.46 per share a year ago [1] - The company posted revenues of $1.16 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.31%, compared to $1.1 billion in the same quarter last year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates three times, but has topped consensus revenue estimates only once [2][3] Stock Movement and Outlook - Floor & Decor shares have declined approximately 28.4% since the beginning of the year, contrasting with the S&P 500's decline of 5.3% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.56 on revenues of $1.23 billion, and for the current fiscal year, it is $1.99 on revenues of $4.83 billion [7] Industry Context - The Retail - Home Furnishings industry, to which Floor & Decor belongs, is currently ranked in the bottom 18% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Floor & Decor's stock performance [5][6]