Shares of Floor & Decor (FND 13.51%) jumped 28% in July, according to data from S&P Global Market Intelligence.
This surge narrows the specialty retailer’s year-to-date share losses to 38.2%, down from 51.7% before the surge.
Floor & Decor’s shares rose in tandem with a broad recovery in the Nasdaq Composite Index and S&P 500 Index for July. The former rose by 12.3% for the month while the latter recovered by 9.1%. Investors are still digesting the news about high inflation and the Federal Reserve’s intention to raise interest rates aggressively to curb it, but they seem much less pessimistic about company earnings than in the previous three months.
Not that Floor & Decor has anything to worry about. The company’s first-quarter results, released in May, showed strong growth, with net sales up 31.5% year over year to $1.03 billion. Comparable store sales also increased 14.3% year-over-year, but higher costs led to a slight 2.1% year-over-year decline in operating income and a 6.4% year-over-year -decrease in net income. The company also opened six new warehouse stores during the quarter, along with three design studios.
The flooring specialist continues to report strong revenue growth for its second quarter, with net sales up 26.7% year-over-year to $1.09 billion and comparable-store sales up 9.2% year-over-year improved. Floor & Decor continued with its ambitious expansion plan, opening a further nine new warehouse stores for the quarter. The company ended the quarter with 174 stores and five design studios.
However, Floor & Decor is not stopping there, and has laid out an aggressive expansion plan to grow its store base by 20% every year until 2024. By then, it predicts it will have 275 stores in the U.S., catering to a total addressable market of between $49 billion and $54 billion. The company’s customer loyalty program allows customers to earn points from purchases that they can redeem for rewards or enjoy savings. Nearly six in 10 customers are enrolled in the premier rewards program, and their spending is triple that of non-enrolled customers. Floor & Decor continues to engage customers through omnichannel initiatives, enabling customers to easily shop in-store or online and offering the option to purchase online and pick up in-store.
With its dominant market share, knowledge of hard and soft surfaces, and large potential addressable market, the company should see its sales and profits rise steadily over time.
Royston Yang has no position in any of the listed stocks. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.