Q2 2026 Floor & Decor Holdings Inc Earnings Call

Greetings and welcome to the Floor & Decor Holdings second quarter 2026 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press *0 on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Wayne Hood, Senior Vice President of Investor Relations.

Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Floor & Decor's fiscal 2026 second quarter earnings conference call.

Joining me today are Brad, pawson chief executive officer and Brian Langley, Executive Vice, President and Chief Financial Officer. Before we begin I want to remind everyone of the company's Safe Harbor language comments made during this call contain forward-looking statements within the meaning of the private Securities. Litigation Reform, Act of 1995.

any statement that refers to expectations projections or other characterizations of future events including Financial projections or future market, conditions is a forward-looking statement

Uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements for any reason, including those listed at the end of the earnings release and in the company's SEC filings.

Warrant. Of course, assumes no obligation to update any such forward-looking statements.

Please also note that past performance or market information is not a guarantee of future results.

During this conference call, the company will discuss certain non-gaap Financial measures. We believe these measures enable investors to better understand our core operating performance on a comparable basis between periods.

A Reconciliation of each of these non-gaap measures to the most directly comparable, gaap Financial measures and be found in the earnings press release, which is available on our investor relations website at IR Floor, and Decor court.com. A recorded replay of this call and related materials will be available on our investor relations website. Let me now turn the call over to Brad.

Thank you, Wayne, and thanks to everyone for joining us on our fiscal 2026 second quarter earnings call. I'll start by reviewing our second quarter performance and the key drivers behind our results.

After that, Brian will share our perspective on the remainder of 2026, including how we're navigating the current environment while continuing to invest in our strategic priorities and long-term growth opportunities.

Turning to our fiscal 2026 second quarter results. We are pleased to have delivered, adjusted diluted earnings per share of 58 cents, unchanged from the prior year period despite a 2.1% decline in comparable store sales driven by continued softness. In large discretionary foreign projects.

I was pleased with how our team stayed focused on the factors within our control, delivering, compelling value to our pros, and homeowners providing an exceptional, customer experience, executing our merchandising and operational initiatives, and maintaining discipline expense management.

Those efforts enabled us to maintain earnings per share in line with the prior year while generating strong free cash flow which provided the flexibility to repurchase 65.7 million in common stock during the quarter. I want to thank our approximately 14,000 Associates for their commitment and hard work throughout the quarter, their focus and disciplined execution, demonstrated the resilience of our operating model and position us to continue creating long-term value for our shareholders,

Now, let's take a deeper look at our second quarter results.

Total sales increased 3% to 1,250.3 million compared to 1 2114.2 million. In the prior year, period sales to Pros, continue to outperform the company and grew approximately 4% from the same period last year accounting for about 55% of sales.

Comparable store, sales Decline, 2.1% and improvement from the 3.7% decline reported in the first quarter.

Reflecting steady, sequential improvement throughout the quarter.

Comparable store, sales decline 5.1% in April declined. 1.3% in May and declined. 0.3% in June the Improvement in comparable store sales, reflected improving Trends across several key metrics. First our net promoter scores remained High driving the sequential Improvement in customer conversion. This is 1 proof point in how our store associates are highly engaged and this environment to win every sale.

Second, comparable transactions also improved, declining 2.9% compared with a 5.5% decline in the first quarter. Lastly, average ticket grew 0.8% year-over-year despite lapping last year's strongest quarterly growth rate of 3.8%.

So ticket and transactions were aided by a sequential Improvement and comparable square footage sales from the first quarter.

We exited the second quarter with encouraging momentum, but demand softened around the Fourth of July holiday period. While the housing market remains constrained by subdued existing home sales activity, as a result, third quarter-to-date comparable store sales declined 2.2%. Encouragingly, sales trends improved in late fiscal July and early fiscal August.

Geographically our comparable store sales Improvement broadened during the second quarter, our west region continued to outperform the company, and delivered positive comparable, store sales, excluding capitalization, and encouragingly our east region. Also turned positive on that basis.

Furthermore, among our 16 districts, 8 reported positive comparable, store sales, excluding cannibalization.

Perspective. Free departments outperformed the company's comparable store sales performance during the quarter. Installation materials piled and would...

Installation materials continue to deliver strong year-over-year growth as we expanded our share of wallet with pros, and further strengthened our position in the market.

As we continue to execute our supply house strategies and expand our store base. We believe we are becoming an increasingly convenient and reliable destination for pros to purchase insulation materials.

Tile remained a standout performer supported by the continued success of key initiatives, including the Veta elements collection, which continues to resonate with both Pro and homeowner customers.

Growth in the wood category was driven by market, share gains, and engineered and unfinished wood acoustic wall panels and the success of our bulk out. Strategies. We expect to build on this momentum in the second half of 2026 with new skus and opportunity buys.

In the vinyl flooring category comparable store sales and comparable square footage, sales sequentially improved during the quarter supported by a combination of merchandising pricing and value focused initiatives that we will continue to build on in the second half of 2026. The combination of slowing demand for vinyl and excess industry Supply continues to put pressure on the category, which could continue into 2027.

Importantly sales penetration of our better and best offerings, increased both sequentially and year-over-year reflecting sustained customer, adoption of our higher value offerings and reinforcing the effectiveness and resilience of our strategy despite ongoing macroeconomic pressures.

In June, we are excited to launch Nature Match, a new private label collection that brings the authentic look and feel of natural wood and stone to consumers at a more accessible price point.

Spanning nearly 100 SKUs across porcelain tile, luxury vinyl plank, and waterproof laminate, Nature Match reflects your ongoing commitment to technology, product innovation, and value.

In a challenging Home Improvement Market differentiated collections such as nature match, continued to drive customer engagement, support conversion and create incremental, cross category, selling opportunities. By combining premium design, strong performance, and a compelling value proposition. We are expanding our appeal across customer segments, while continuing to gain market, share.

As we look to drive sales in what we expect will remain a challenging demand environment through the second half of 2026, our marketing strategy is focused on reaching high-intent customers at key decision points in their purchase journey, through more targeted, higher-return tactics.

Furthermore, we are aligning our marketing efforts across store locations and digital channels.

Let me turn to our new warehouse store expansion.

Through the first half of fiscal 2026. We opened 11 new Warehouse format stores including 5 in the second quarter.

Syracuse, New York Portland, Oregon Mount Vernon. New York Houston. Texas and Schererville Indiana.

With approximately 55% of our planned 2026 locations now open, compared with 35% in the prior year period, the front-loaded cadence we outlined at the start of the year is progressing in line with our expectations.

These locations extend our presence in Tier 1 and tier 2 markets, where household units population density and Home Improvement activity. Support the long-term demand profile. We Target in sight selection.

We continue to expect the class of 2026 new sourced average, approximately 55,000 square feet.

A format that, while smaller than our legacy footprint, allows us to enter higher-density markets without sacrificing sales productivity.

We expect the balance of our 2026 store openings to be weighted to the fourth quarter.

Let me spend a moment on our omnichannel strategy and the digital capabilities we're building to support it.

and the second quarter online, sales penetration reached 20.3% of total sales up from 18.6% in the prior year period and up, 110 basis points from the first quarter, this continued Improvement, reflects the progress, we're making to enhance the customer experience across across both digital and store channels

We believe delivering a best-in-class omnichannel experience represents one of our largest opportunities to accelerate growth, gain market share, and achieve our long-term sales objectives, as customer expectations have evolved, particularly around digital engagement and convenience. We have recognized the need to strengthen our capabilities and are taking action.

Customer experience: modernize our digital capabilities and create a more seamless connection between our online and in-store experiences.

Through targeted investments in Talent technology and operating capabilities. We are building a stronger foundation for long-term growth.

Importantly, our strategy is centered on the distinct needs of our 2, core customer segments, pros, and homeowners.

For homeowners, flooring is a highly researched and project driven purchase.

Our research shows that about 7 to 80% of customers search online before visiting stores.

Customers seek inspiration, education, project guidance, and confidence before making a buying decision our objective is to support them. Throughout that Journey from initial project Discovery, the final installation

For pros, the priorities are different, they value, speed convenience, pricing, transparency, inventory visibility and tools that help them manage their businesses more efficiently.

Our focus is on creating a seamless experience across every touch Point, making it easier for pros to do business with us. Whether they are planning a project, purchasing materials managing Rewards or picking up an order,

A key component of that strategy will be the launch of our new Pro app next year, which will serve as the connective tissue across a pro ecosystem.

By bringing together purchasing Loyalty Rewards pricing and project management capabilities. In 1 place. We are building a differentiated Pro value proposition particularly when compared with independent flooring retailers.

While there is Meaningful work ahead. We are encouraged by the progress. We are seeing we believe is stronger, digital foundation. And a more seamless, Omni Channel experience will increase customer acquisition engagement conversion, market, share gains and ultimately long-term shareholder value creation.

Let me spend a moment on our regional commercial account managers or Rams who operate in partnership with our warehouse stores.

We continue to see meaningful opportunities to drive growth and have expanded our team of RAMs to 80 associates, significantly increasing our ability to serve customers, develop relationships, and pursue non-specified commercial product growth opportunities.

As we look at the remainder of the year, our focus will now shift from adding RAMs to increasing productivity.

We plan to further strengthen the infrastructure framing analytics and operating processes needed to support long-term scalable growth.

Our objective is to build a commercial organization that is increasingly productive, repeatable, and scalable.

While we remain early. In these initiatives, we are encouraged by the progress. We are seeing

Currently, the Spartan surfaces the second quarter represented, an early inflection point for the business with results, improving sequentially from the first quarter and momentum building throughout the period.

Second quarter sales, increased 2% year-over-year driven by strong shipment activity from the conversion of backlog into Revenue. June was 1 of the strongest months, for written sales in the company's history. While commercial and markets remain mixed particularly in multi-family housing. Customer backlogs are beginning to recover from the lows experienced in the second half of 2025.

Encouragingly sampling activity. Improved late in the quarter, average quoted project value, increase leading to a very strong project backlog at the end of the second quarter.

Taken together. These indicators provide visibility and support our expectation for continued Improvement through the second half of the year.

As we turn the page on the first half of 2026, we remain focused on driving sales, managing expenses, and delivering value to our customers. We believe these actions are resonating with customers and position us well when demand conditions improve.

I continue to believe that this environment creates an opportunity for us to accelerate our market share gains through world-class leadership and disciplined execution.

With that, I'll turn the call over to Bryan.

Thanks, Brad. Before turning to our financial results, I'd like to add my thanks to our associates across the organization. As I reflect on the second quarter, what stands out most is our ability to stay focused on the factors within our control.

The quarter reinforced, 1 of the strengths of our company, our ability to execute consistently across a range of operating environments.

We manage expenses, prudently.

Advanced key merchandising and operational initiatives and maintained, a strong focus on free cash flow and capital allocation.

These efforts enabled us to deliver adjusted diluted earnings per share of 58 cents which was above our expectations.

Before moving to our underlying operating performance. Let me discuss 2 items affecting comparability during the second quarter.

First, we recognized a $45.2 million net pre-tax benefit related to the IEA tariff refunds, which affected gross margin.

Sgna and interest income.

Second, we recognized a $1.3 million pre-tax loss on debt extinguishment associated with the refinancing of our credit facilities.

Collectively. These items resulted in a net after tax benefit of 32.9 million, contributing 31 cents to diluted earnings per share.

Our second quarter Gap, diluted earnings per share was 89 cents and excluding these items adjusted diluted earnings per. Share was 58 cents flat to the prior year period.

A reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures.

Is included in today's earnings release and additional information regarding these items is provided in our form 10q.

Returning to our underlying operating performance, our gross profit increased $70.4 million, or 13.2%, compared to the same period last year, driven primarily by a $56 million one-time benefit from AIPA. These are refunds related to inventory we had previously sold through.

The remaining amount of tariff refunds was recognized as a reduction to inventories, net related to previously capitalized amounts, and will be recognized as we sell through the inventory.

Excluding the IPA Free Funds benefit.

Adjusted gross profit, increased 14.3 million, or 2.7%, compared to the same period last year.

Adjusted gross margin for the quarter was 43.7%.

A decrease of 20 basis points year-over-year, which was within our range of expected outcomes.

SG&A expenses increased $28.3 million, or 6.3%, in the second quarter compared with the prior year period.

The increase was driven primarily by the 24 stores opened since the second quarter of fiscal 2025, as well as higher incentive compensation related to the recognition of iup Tara refunds.

Sgna for non-comparable stores increased 26.7 million while sgna for comparable stores, declined 13.7 million reflecting our ongoing focus on expense management and productivity initiatives.

As a percentage of sales sgna de-lever 120 basis points to 38.3% from 37.1% and the prior year period.

The one-time expenses related to APA tariff refunds contributed approximately 110 basis points of deleverage in the second quarter.

Adjusted EVA increased 1.2% to $152.0 million from the same period last year.

Our second quarter adjusted EVA margin was 12.2%, compared with 12.4% in the prior-year period.

Our second quarter net interest income was $2.3 million, compared to net interest expense of $1.1 million in the same period last year.

The year-over-year change was primarily driven by a one-time benefit of approximately $2.8 million in statutory interest on our IEA refunds.

Along with higher interest income.

From larger cash balances.

Additionally, we incurred 1.3 million of debt extinguishment costs associated with the refinancing of our credit facilities.

Our second quarter income tax expense was $29.1 million, compared to $17.6 million during the same period last year.

The effective tax rate was 23.3%, up from 21.8% in the same period last year, primarily due to a decrease in federal tax credits.

excluding the tax impacts related to the AIA tariff refunds, and the loss on extinguishment of debt

Our effective tax rate was 22.3% for the second quarter of 2026.

Let me turn to our balance sheet and free cash flow, both of which remain strong.

During the second quarter, we completed a comprehensive refinancing of our credit facilities that further strengthened our balance sheet and enhanced our financial flexibility.

We entered into a new $200 million term loan facility, maturing June 2033, and used the proceeds to repay the remaining $197.1 million outstanding under our prior facility that was scheduled to mature February 2027.

August 2027.

Collectively, these transactions extend our debt maturity profile.

Preserve ample borrowing-based capacity, and further enhance the flexibility of our capital structure.

We ended the quarter with $942.4 million of unrestricted liquidity, consisting of $320.6 million in cash and cash equivalents, and $621.8 million of available capacity under our ABL facility.

During the 26 weeks ended June 25th 2026. We generated 278.4 million of cash provided by operating activities compared with 155.3 million in the prior year period.

We continue to make progress on our working capital and inventory productivity initiatives. As evidenced by total inventory, increasing only 0.7% to 1.1 billion compared with December 25th 2025

Our net cash used in investing activities was $136.7 million, leading to significant excess free cash flow.

Supported by our free cash flow and financial position. We began executing against the 400 million, share repurchase authorization announced on our first quarter earnings call.

During the second quarter, we repurchased 1.3 million shares of common stock and returned 65.7 million to our shareholders and ended the quarter with 334.3 million remaining under the share repurchase authorization.

Let me now turn to the macroeconomic considerations and forming our outlook for the remainder of fiscal 2026.

The demand environment for large discretionary home improvement, foreign projects remains choppy.

Consistent with what we're seeing in how housing market activity and broader macroeconomic conditions.

Although existing home sales improved.

Modestly during the spring selling season, the recovery has yet to gain meaningful traction, with June activity remaining near historically low levels of approximately 4 million annualized units.

In addition, housing affordability continues to be challenged, and persistent inflationary pressures, as well as potential changes in tariffs, continue to influence consumer behavior.

As a result, our Outlook assumes that consumers will remain cautious and project demand will continue to be influenced by the pace and sustainability of any Improvement in housing market activity.

Following our better-than-expected second quarter earnings, and the anticipated greater impact from the repurchase of common stock, we have increased our fiscal 2026 earnings per share outlook.

As a reminder, fiscal 2026 includes a 53rd week, which will be reported in the fourth quarter.

I will highlight the expected contribution from the 53rd week as a part of our guidance.

Sales are expected to be in the range of $4.77 billion to $4.99 billion, or an increase of 1.8% to 6.5% from fiscal 2025.

The 53rd week is expected to contribute approximately 65 million to sales.

Comparable store sales are estimated to be flat to down 4%.

Comp average ticket is estimated to be flat to upload single digits.

And comp transactions is estimated to be down low to mid single digits.

Adjusted gross margin is expected to be approximately 43.6% to 43.8%.

The first quarter gross margin of 44.0% is likely to represent the high point for the year.

Sgna as a percentage of sales is estimated to be approximately 38%.

From a quarterly perspective, the first and fourth quarters will be the most pressured from new stores. If you exclude the one-time costs associated with AA, and refunds in the second quarter.

Interest income and expense, net, is expected to be approximately zero.

This includes approximately 2.8 million a statutory interest benefit from tariff refunds.

The tax rate is expected to be approximately 23%.

Depreciation and amortization expense is expected to be approximately $250 million.

Adjusted EBITDA is expected to be approximately $550 million to $585 million.

The 53rd week is expected to contribute approximately $11 million to adjusted EBITDA.

Diluted earnings per share is estimated to be approximately $2.20 to $2.45.

Adjusted diluted earnings per share is estimated to be approximately $1.88 to $2.13.

Eps.

Which implies our 52-week adjusted diluted EPS to be $1.80 to $2.05.

diluted weighted average shares outstanding our estimated to be approximately 107 million shares

CapEx is estimated to be approximately $240 million to $275 million.

Operator: We would now like to take questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

A confirmation tone. Will indicate your line is in the question queue? You may press star 2 to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions.

Thank you. Our first question is from Seth Sigman with Barclays.

Hey everybody. Uh, nice progress in the quarter. I wanted to start with the Tariff refunds. So you had this 45 million net benefit this quarter, what's that number on a full year basis, what's embedded here and then

Can you talk a little bit about how you've started to deploy those dollars, I guess either in Q2 or in Q3, and to what extent do you think that has contributed to the improvement that you saw in June? Thank you.

Hi, Seth, and thanks for the question. We assume that was going to be the first question. Um, you know, I want to just start off and say really from the onset of tariffs last year through the, the refund, our team has executed at a really high level. Um, obviously we've got multiple years of experience with this and and I would consider it an established capability at this point. Uh, what Brian? And I thought we would do. We're going to hand it over to him. He can unpack all things tariff for the folks on the call and then I'll have a comment or 2 at the end to wrap it up. So Brian. Why don't you walk me through it? Yep, thanks Brad. So from the mechanics of it,

We recorded a one-time benefit of $56 million in gross profit related to inventory that we had previously sold through.

We recorded a 28 million dollar reduction to inventory for product that was still on hand at that point in time.

Um, you know, we'll recognize the benefit of that 28 million as we sell through the inventory. Which why would I would anticipate the majority of that will be recognized in the back half, given that we turn slightly over 2 times per year and Q2 uh, you know, the benefit that we recorded from that 28 million was approximately 6 million uh that we saw in Q2 and gross profit from the sell through of that reduced inventory.

So I think it's important for us to point out that $6 million that Bryan just referenced for the second quarter. Obviously, we assumed some inflationary headwinds coming into the business. We had a set of actions that we were prepared to deploy. Once we knew that we were going to get the tariff refund, we elected not to deploy those actions and instead use the tariff refunds to offset that inflation. As we pivot into the second half of the year, there are obviously a number of different things we can do with the refund money. I think there are three big buckets that I would share with all of you. The first one...

I just talked about it with the second quarter. We'll continue to use those funds to offset the inflationary impacts from both oil and supply chain. Uh, number 2, uh, where it makes sense, and making sense means where we see elasticity, we'll selectively, invest in price to drive market, share gains. And then number 3, we're going to execute our Capital allocation framework. Big buckets on that are invest, in stores, other growth initiatives, think, commercial and other things like that. And third would be any type of excess cash that we would have, we would uh, send back to our owner or excuse me, our investors through a share repurchase program.

Okay, very helpful. So sorry, just to clarify for you. The difference in the 56 million in the 45 million that you see in the adjusted, uh, ibida addback or the net income addback, is we had 2.7 million of statutory interest that we also received. You'll see that that's part of the addback, and the rest of it really is just cost associated with the iPad tariffs, as it rolls, through kind of scna, uh, through incentive comp and other things.

Okay, got it. And then I was just going to follow up and ask about the comp guidance for the rest of the year in that context. So, it implies a pretty wide range—down 5% to up 3%. You know, you're running better than that at the low end right now; comparisons get easier. So, can you maybe talk about some of the scenarios to consider here? And then, in that context, you also mentioned the broadening of performance that you've seen across regions, so maybe tie that in. Thanks so much.

Start out with the second quarter. Um definitely pleased with the sequential Improvement that we saw uh through the quarter a couple key drivers. There are 3 drivers that I'll talk about first was in the script service continues to be really really high. Um, every month we set record levels and I think that's a reflection 1 of the culture that we have in the team that we have in the field second. Um, you know, just all things pro, uh, Pro continues to outpace the performance of the rest of the business. A lot of inputs into that Pro performance. We talked about installation materials, we talked about the performance and tile, and certainly getting some improvement in laminate and vinyl, which is something that we talked about on our first quarter call. And the other piece is, we're starting to see some nice traction from our digital business still very much early in that process. Uh, but starting to see some real real benefit from uh that team. You know, we talked about July July was a really interesting month. The start of the month was really really choppy around the 4th of July had some pretty ugly days days that we hadn't seen in a while. But as we said in the prepared remarks really, really pleased with how we ended.

The month and certainly how that has continued into August, and I'd say more in line with the run rate that we saw in both May and June, which is certainly encouraging. The one piece that I'll say in the underlying—and Bryan will probably do the same when I turn it over to him—I still feel really good about our guidance. You know, in the first quarter we said, hey, we're going to go a little bit wider than normal given the uncertainty that's in the market, so we went flat to minus 4 on the sales guidance.

Had some conversations about changing that coming into this call, but still feel like there's too much uncertainty out there. So, feel good with the flat to minus 4, but do have a high level of confidence that we're on track to hit the midpoint of that sales guidance.

Yeah, I think that spot on Brad, you know, we we would have liked to have tightened the range, uh, but we intentionally left it, you know, a little wider just because of the uncertainty. So I think when you're thinking about just the Cadence in the back, half a 2 year stack gets noisy because of all of the hurricane Helen and Milton, uh, benefits and and everything associated with the storms. So if you just look at it on a 3 year, stack comp just to help you guys model, you know, we would expect the high-end and the midpoint to increase sequentially from Q2 and then at the low end uh there'd be a slight decrease incrementally from Q2 just to kind of get those. So it it is a little bit wider of a range than than we would typically do at the end of Q2. But the Brad's Point, there's still a lot of uncertainty in the macro environment that we see today.

but we feel really good about

...midpoint. And that is our guidance philosophy too. You guys will always see that with us: if things continue on the path that they are right now, and the macro environment stays where it is today, we have great visibility to kind of achieving at the midpoint.

Okay, thank you.

Our next question is from Simeon Gutman with Morgan Stanley.

Hey guys, uh 1 quick, follow-up on the Tariff so the 28 million I think I got that number, right? That's like unrecognized that will happen as you sell the inventory, I guess it's not huge on a basis points basis. I haven't done the math but you held or you're basically not changing your gross margin guide. So and sorry for the night. Naivety is it does this mean that when you sell through that product, there should be a higher gross margin on it going forward and is that in the guidance did that help you keep the gross margin guide or does that provide an upside lever if I understood it, right?

Yeah, hey. Look out. Yes. So, we put $28 million back into inventory for items that we still had on hand of that $286 million.

...flowed through in Q2 to help offset some of the inflationary measures that we were seeing with higher oil costs. You know, we're now starting to see higher domestic supply chain costs due to trucking capacity issues that we see in the industry. We're fine from a capacity standpoint, but we're starting to see some rate changes as well as reinvesting into select pricing changes, as well. And, you know, what Brad talked about with laminate, vinyl, and a couple of other select pricing changes that we may try to go after and be more aggressive in market share. So, all of that said, are...

Adjusted gross margin, guidance of 436 to 438, incorporates the back back half being benefited. Like I said, the majority of the, the residual 22 million within that 28 will flow through, but it allows us again in this environment to be a little more aggressive and not have to take further actions, but as we exit into 2020 in exit, 26 into 2027, you know, we've got a lot of things that that we can do as a company. So again, we have a lot more to talk about, uh, whenever we think about 2027, we're not going to, we're not going to give you guys any Clarity on that today, but we've got a ton that we can do as a company when these care benefits do subside. So, again, it just gives us a lot of flexibility and optionality in 26 to be able to take more market share.

More to Brad, uh, and related to the last comment. So we've had a couple of, um, I don't know. Let's say false starts, but early reads of Industry bottoming, especially your business. It sounds like we're going through another 1 and it felt a little more emphatic. I thought the language this time. So, you know, anything, you can point to that. This is demand stabilizing turning more from replacement demand, outside of your initiatives. Or, you know, how do you, how do you, you know, assess like could this be another false start?

That would be really careful here because I don't want to be the initiator of a false start but I I'll give you my my perspective. Like a certainly pleased with the sequential Improvement through the quarter, you know, 1 of the things that we called out in the script is if you look at our business accountability, you know, we had 2 regions 2 of our 3 regions deliver positive comp, uh, which to me, uh, is a really, really strong story. We saw some improved traction on our Commercial Business, you know? All that being said,

You know, we're we're you sense the, the more emphatic approach from us is, you know, we've said that we came in to 2026 saying that we need to assume the environment is going to look a lot like 2025 and that we are going to build a stack of initiatives that felt like that. We felt like to deliver accelerated market, share gains. Um, so we do have a level of confidence around the execution of our initiatives and feel like that's paying off.

Um, probably at least from my perspective—amateur perspective—it's too early to tell if things are truly bottoming. We're going to assume that's going to continue to be the case and do everything we can to deliver a great customer experience and take as much care as possible.

Okay, thanks a lot. Good luck.

Thank you.

Our next question is from Stephen Zakon with Croup.

Great, good afternoon, and thanks very much for taking my question. Um, can we talk a little about the laminate and vinyl category? It sounds like you're expecting that weakness to continue into '27. That sounds like a new comment—maybe, what are you seeing there? And then, could you elaborate a little bit more on, you know, the pricing environment in that category as well?

Sure. And I'll rewind the tape a little bit with my answer. So, laminate and vinyl, it's our second-largest category. It's the only category that we sell where we're seeing any type of downward pressure. And we believe that downward pressure is a result of excess supply in the market, and the term that Ersan and I have used is the category's been devalued.

And what we mean by that is is a is a SKU that used to be considered a better and a good better. Best lineup is now considered and priced as a good skew So that obviously puts pressure on all parts of that category and it is the vinyl part of laminate and vinyl. You know we are really clear in our first quarter call to say, we're going to play offense, we're going to be falsely.

For around pricing, we're going to have aggressive opportunity buys and we're going to add new SKUs to our assortment to make sure we're hitting the mark with the customers that are interested. In that category, we did see improvement.

Um, and we're going to continue to push for more improvement for the remainder of the year. But when we say, hey, we think that pressure is going to bleed over into 2027, that's consistent with what we talked about in the first quarter. We're just trying to get a sense of how quickly this excess inventory will dissipate. Tough things to tell. I trust her son, he's been in the business a long time, and our sense is it's going to run through at least the first half of next year. But again, our perspective is it's an opportunity for us to take share and make that comp performance better—certainly better than it was in the first quarter.

Okay, I understood. And then the follow-up I had, bearing in mind some of the tariff commentary and then, in this category in particular, how do you think about the pricing environment, expectations, and comps for the second half of the year? Has that changed versus your original thinking?

On August 1st. Bryan, if you want to add anything, feel free, but, um, you know, the term that I have used pretty consistently since the start of tariffs is the market's been rational.

I had a few more words in that is I'm not seeing anything disruptive from a pricing perspective outside of what, I just explained on laminate and vinyl.

Um, you know, we've got really kind of two sets of competitors. You have independents...

But the nature of our business—because we do have a really unique pricing model—there’s always a little bit of up and a little bit of down, but it'll net out to a modest increase across our categories. And this is Bryan. Our guidance from last quarter to this quarter is the same, with average ticket expected to be kind of flat to up low single digits.

The pressure in laminate and vinyl does put pressure on our average ticket because it's a much bigger project when somebody decides to take that on. So just overall, it's putting pressure on average ticket. Um, but no, no change from last quarter in what we think is going to be better for the guide, or assumed in the guide.

Okay, thanks very much. Best of luck.

Thank you.

Our next question is from Michael Lasser with UBS.

Good evening, thank you so much for taking my question. Do you think the industry saw the same inflection that Floor & Decor has seen over the last few months, or as your initiative kicked in, did your market share accelerate and is this a part of that? Why is there such a divergence between your pro performance in the quarter versus your DIY performance in the quarter?

So the the second 2 questions are a lot easier to answer than the first. Um you know, I think we're going to know more as some of our uh public competitors and manufacturers report their results, you know obviously it's a tough question to answer just because you know by our measure 60% of our space is still Independence. All private really hard to get a gauge on on how they're performing. Uh en does a nice job of kind of triangulating through conversations with both manufacturers and our supplier Partners. Um our sense is I'm now getting into your second question is our initiatives are paying off.

Uh, we feel like we're focused on the right things, some initiatives are a little bit further down the path and make more sense in this environment and that is the pro piece. You know, again going back to this idea that as a team we said 26 is going to look a lot like 25 in order for us to deliver uh positive comp sales. We knew we had to do that through increased share of wallet, gains through the Pro customer. Why is that important that customer is in our store every single day?

We reported in the second quarter, or Q2, of 55. That customer is 55% of our sales. We think they influence up to 20% of the remaining 45% of sales. So, a really, really important customer.

And the thing, Michael, that I would point out—you know, we're really pleased with installation materials; that is a driver of footsteps. So the opportunity that we have, and why we're excited about the Pro initiative, is we clearly have a hook when it comes to installation materials. Now, we have a great opportunity to sell the rest of the categories that we offer. And one other thing that's really important is, as we continue to open new stores and become even more convenient for our Pro customers, I think we're going to drive traffic there. So, really excited again and feel good about our initiatives. Still somewhere early in the process, but already seeing some dividends from them.

Okay. And my my follow-up question is, can you help calibrate? The relationship between Floor and Decor, same store, sales growth and and eventual? Inflection in existing home sales, it's hard to necessarily use the historic relationship because flooring, the core throughout much of the 2018 was seeing the benefit from the new store is ramping. The maturity, the increase in vinyl as well as less cannibalization. It seems like those are going to be no longer benefits to your same store sales as the uh Market recovers. So, is it best to think of maybe a high single digit comp in a good case scenario? As the market recovers? A mid single digit?

Big comp is the most realistic outcome in light of some of those factors.

It it listen it's it's a great question and and we are bouncing versions of that around the hallways here on on what our business looks like at different points in the cycle, we still think existing home sales is the metric for us strongly correlated to our performance. Historically, we have said, as existing home sales improved.

Uh, that it's generally a two- to three-month flash to bang before you see it in our business. In an environment though, I'll say, in this kind of current cycle where you're just flirting with four million homes—got a little bit above it, a little bit below it—you do see outside impact on our initiatives in different parts of the country. Um, so if you think about the West, we've consistently said, hey, the West is outperforming the rest of the country. One, that's a part of the business. That is—

And other parts of the United States. So, you're naturally going to get more traction and more benefit from some of the things that we're focused on. But as far as, you know, how we're forecasting what the business looks like from an organic growth perspective and kind of mid-trough or kind of a more normal environment—I'm not going to get into that level of detail on this call.

Understood. Good luck. Thank you so much.

Thank you.

In the interest of time, we'll ask some participants to limit themselves to one question.

Our next question is from Kate McShane with Goldman Sachs.

Hi, good afternoon. Thanks for taking our question.

We wanted to speak a little bit more about the, uh, competitive environment just in terms of what Behavior you're seeing more from the Home Improvement, um, competitors versus The Independents, um, and how they acted throughout the quarter. I do know that, uh, it seems like at least 1 of the larger scale Home Improvements. Retailers seems to be partnering more with mohawk and, um, there's a lot more initiative. Uh, there. It seems, uh, even more recently. So can you just talk about that piece of the competitive set and again, just maybe tie it back to how you're thinking about the, the tariff-free funds, and how it can play a role in pricing relative to that?

Paying it for me—you know, big box retailers are amazing companies. Like I said, they have incredible locations and for our customer, hard surface flooring that provides a level of convenience. You know, they're always investing in their assortment, but generally speaking, where we compete with them is on opening price point.

And insulation materials. And if you think about where we sell, it's primarily in the better and best, and I think that's a really important distinction when you think about our model versus the big box retailers and where we overlap—and absolutely, we do overlap. And we watch them very, very closely. But as I said earlier, I don't see anything at this point that would be disruptive, that would lead me to think that there's accelerated share gains from either one of them. And that's speculation, because I haven't obviously heard their results. And we generally feel really good about the model that we have, and how it competes against big box retail.

Our next question is from Steve Forbes with Guggenheim Securities.

Good afternoon.

Brett, maybe just following up on laminate and vinyl. I think it was the cones question before.

Revisiting the Improvement. I think you guys talked about, you know, some merchandising initiatives within that department, uh, that you were sort of rolling out, uh, regionally and nationally. So curious, maybe you could just remind us where where those initiatives are in terms of breath, uh, and scope. And if, if there's sort of any other merchandising initiatives in the pipeline,

Particularly for laminate and vinyl, that can maybe be a self-help story as it relates to getting that category back to growth.

Yeah. Uh, great. Great question. And, you know, 3 areas, uh, that we really leaned into, uh, the the quickest reaction as you would expect was rethinking our pricing strategy.

Um, and, um, credit to Ersson and team. Uh, we moved really quickly, we put more aggressive pricing in the market where we saw elasticity. We watched it. We refined it. And we're in a spot now where we feel really comfortable about the investment that we've made from a price perspective to drive more market share into that business. So that's step one. Step two—and this is kind of in the order of how they hit the stores—were opportunity buys. Uh, we knew we had a gap as far as our everyday current assortment relative to where customers were shopping. So, we quickly overseas the supplier partnerships we had across the US and across the world to get really aggressive opportunity buys into our stores at the right inventory levels.

Those were a huge win, huge win. And that's a matter of weeks from when we identified the opportunity. And then the third piece—

In laminate and vinyl.

Thank you.

Our next question is from Christopher with JP Morgan.

Good evening. Thanks for taking my question. I have a two-part question.

It's taken the other side of it and trying to think about what drove the Slowdown on July 4th, obviously July. 4th happens. Every year, you know, is there something that you can you point to and you say well, that that was just an anomaly and that was in, you know, the Improvement in the later. Part of July, really like the past 2 to 3 weeks isn't just a a normalization of demand relative to earlier in July. And then in the follow-up question, on the pricing side, you know that most year Independence, don't buy directly

What is your impression of what the wholesalers are doing? Are they are they lowering prices as tariff refunds come in and, and such that, you know, the the independent Market could see, you know, prices prices come down and is that already happening? Thanks so much.

Chris, great question on July. And, as you can imagine, there has been a lot of discussion here trying to dissect what actually happened in the first couple of weeks.

You know, we have three or four thoughts, uh, but nothing that we're willing to share publicly. Um, now the great news, again, is that in the back half of July, we returned more to that kind of May—uh, yeah, May/June performance and comp run rate, which is really encouraging.

Um, so right now I'm going to say those two weeks were an anomaly. Um, if for whatever reason we see a return to that two-week performance, then certainly we're going to have more concrete answers, but it didn't—it didn't, uh, continue, which again for us is really, really encouraging from an independent perspective. You're right—for the most part, they're sourcing models or a two-step sourcing model. So, one, when you think about tariff refunds, because they're not the importer of record, it's unlikely that they're going to get those tariff refunds and be able to reinvest into their business, which, because of that, I think would prevent them from getting too aggressive around price or promotion in the second half of the year. And everything that we have seen, generally speaking, has been prices going up and certainly not going down.

Our next question is from Keith Hughes with Truist Securities.

Thank you. We've talked a good bit about your lamina Neli LVP product on the call, and that's been underperforming the group average. But you have other products overperforming it. Is this just the consumer changing its preference for one product over the other, versus real category issues?

Yeah, again, great questions. I had made some notes on the laminate and vinyl question, and my last bullet point that I continue to ignore is there is category shift, we believe, happening both into wood and tile. So, you know, certainly that’s an element of the conversation, of all the reasons why we’re seeing pressure there. Keith, it’s probably the least impactful, but it’s certainly a part of the conversation.

And is the tile sale a better sale for Floor & Decor? It uses more accessories and LBT.

Yeah, we like all of our categories. Um, tile is our largest category, it's in the center of the store. Uh as we take both kind of customer feedback and Associate feedback. That's the 1 that there's kind of universal confidence around. Um, having the right products having the right inventory always being Trend, right? So we love our tile category and we believe that's a category that we're going to 1.

We'll continue to lean into and will continue to grow for us. Hey, it's Ty also. You’re right, it has more attachments. When that happens, we still get attachment when laminate and vinyl is sold, but there tends to be more when tile is sold. And IM is actually one of our best performing categories, and that's just winning more with Pro. So, I know there was an earlier question on the outperformance within Pro, and you see that within IM—just our supply house strategies are working.

Our next question is from Peter Keith with Piper Sandler.

Oh thank you very much. Uh, nice to see you, this is potential Improvement. Um Brad you, you did speak in the preparator marks around uh, your own sequential permit in conversion and um, I guess I was curious. If is there something you're doing at the store level?

Could you speak more to what is driving better execution? Or is it that consumers are behaving differently? I was hoping you could unpack that comment a bit.

Um, I mean, if you go back three years ago, um, one of the things that we pointed to is just really strong service, and the thing that's amazed all of us is it's continued to improve. You know, the one area that I think we continue to dial in is making sure there's a consistency around what plays we're calling and the level of execution on the play, particularly with our Pro customers.

And we have a level of confidence that we could go into every one of our stores at this point and ask that team, "Hey, how are you growing a pro share wallet?" And all of our stores would have the same answer, and they would have the data to support those efforts—to understand the customer, where the opportunity is, and then, like I hinted at around service, we've got great teams. We've got great teams that are passionate about taking care of our customers, love helping them navigate the journey of selecting a hard surface floor. So we are well positioned around service and really refining that conversion, or the inputs to driving that conversion improvement that we talked about.

Thank you.

Our next question is from Max Breeno with TD Cowen.

Hey guys, uh, thanks a lot. So can you provide more color on the work that your new pricing team is doing? What's ahead, and how could we see your portfolio approach to pricing evolve in the medium term?

Yeah, so when we talk about evolving our business, we talk a lot about digital, we talk about supply chain, and pricing is certainly an element that is front and center. Ersan has built a world-class merchandising team that has always been top-notch when it comes to pricing. The other piece that's unique about our business is we have a bottom-up kind of feedback process, where there are decision rights at our stores to ensure that we're appropriately positioned from a pricing perspective in every geography in which we operate. At the same time, massive improvement around technology and tools that you can use to get really scientific around pricing. We've invested in team and talent and process, and we're on the cusp of a technology investment.

So I only expect that capability to get better and better, and stronger and stronger. For Floor & Decor, as far as the portfolio approach, there isn't any meaningful changes ahead. I think we've got that pretty locked in. As we introduce different categories down the road, certainly that might be a different conversation, but we feel pretty locked in when it comes to our portfolio approach.

Our last question is from Jonathan Matinsky with Jefferies.

Up, great, good evening and thanks for uh, squeezing me in Brad. Can you update us on what you're hearing from your prose during uh Round Table sessions, maybe just regarding project backlogs? Um you know some of the data out there is is talking to kind of rising cancellation rates or postponement rates among homeowners for for remodeling projects are are your pro roundtables revealing anything in that regard regarding, um, you know, project deferrals or anything along those lines? Thanks.

Uh, we have not heard anything that would signal a change to that behavior versus what we experienced in the first quarter. You know, we did talk on the commercial side a little bit about some delays in the first quarter, driving some of the challenges they saw there. That obviously improved in the second quarter, and we don't expect any type of project delays unless the macro changes meaningfully in the second half of the year. So, short answer is no, we haven't heard any change to that from what's previously been discussed with our Pros.

Thank you. We have reached the end of our question-and-answer session. This does conclude today's conference. We thank you again for your participation. You may now disconnect your lines.

Goodbye.