Floor & Decor Holdings, Inc. (FND) reported a first-quarter fiscal 2024 earnings per share of $0.46, surpassing expectations. Despite a decline in sales and comparable store sales due to softer demand for hard surface flooring, the company achieved growth in gross margin rate and maintained control over expenses.
Floor & Decor is focusing on enhancing customer experience and engagement, particularly with professional customers (Pros), and remains optimistic about long-term opportunities in the repair and remodel sector. The company is navigating supply chain disruptions from the Francis Scott Key Bridge collapse and is continuing its expansion with new warehouse stores, including a Brooklyn location, aiming for a long-term goal of 500 stores.
Key Takeaways
- Floor & Decor's diluted earnings per share of $0.46 exceeded market expectations.
- Sales have declined due to weaker demand for hard surface flooring, but gross margin rates improved.
- The company opened four new warehouse stores in Q1 and plans to open 30 to 35 in FY 2024.
- Pro segment sales represented about 45% of Q1 sales, with efforts to grow this market share ongoing.
- Acquisitions and organic rep growth are part of the strategy to drive sales and market share increases.
- Full-year sales guidance for FY 2024 may be at the lower end of the range, with expected improvement in comparable store sales throughout the year.
Company Outlook
- Long-term goal to operate 500 warehouse stores, with a focus on newness and innovation in product lines.
- Expecting to open 30 to 35 new warehouse stores in FY 2024, despite existing home sales pressure.
- Plans to manage profitability through gross margin expansion, expense management, and lower interest and tax expenses.
Bearish Highlights
- Consumer spending is under pressure from inflation, reducing discretionary spending power.
- The health of the consumer and existing home sales are closely monitored due to their high correlation with the company's performance.
- Project sizes have declined, dependent on the existing home sales market.
Bullish Highlights
- The company has seen better design sales growth and improvements in Net Promoter Score and basket selling efforts.
- There is a strong competitive advantage across all departments, with a focus on installation materials and top brands.
- Optimism remains for long-term opportunities in the repair/remodel and flooring spend sectors.
Misses
- No significant benefits observed from testing price reductions in flooring categories.
- The decline in business for 80% of Pros due to fewer available projects.
Q&A Highlights
- The company is working on retaining and increasing transactions with top Pros through strong relationships and exceptional care.
- The impact of existing home sales on demand for flooring work is acknowledged, with a 40% decrease from the peak.
- A more detailed update on performance may be provided at the end of the quarter.
Floor & Decor continues to adapt its strategies to the changing market conditions while maintaining a focus on customer satisfaction and professional engagement. The company's ability to manage profitability and its commitment to long-term growth demonstrate resilience in the face of current economic challenges.
InvestingPro Insights
Floor & Decor Holdings, Inc. (FND) has shown resilience amid market fluctuations, as reflected in their recent earnings report. Here are some key metrics and insights from InvestingPro that provide a deeper understanding of the company's financial health and stock performance:
InvestingPro Data:
- The company's market capitalization stands at $12.08 billion, indicating its significant presence in the retail sector.
- With a Price/Earnings (P/E) ratio of 48.73, FND is trading at a high earnings multiple, which might suggest investor confidence in future growth or potentially signal an overvalued stock.
- The Price/Book (P/B) ratio of 6.25 further underscores this valuation perspective, as it is considered high relative to the industry average.
InvestingPro Tips:
- Analysts predict that FND will be profitable this year, which aligns with the company's optimistic outlook despite current economic headwinds.
- The stock's price has experienced a large uptick, showing a 39.64% return over the last six months, highlighting investor enthusiasm and the potential for continued momentum.
For investors seeking more comprehensive insights and additional tips on FND, InvestingPro offers a wealth of information. Currently, there are 13 additional InvestingPro Tips available, which can be accessed at: https://www.investing.com/pro/FND. To enhance your investing strategy with these valuable tips, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Floor Decor Holdings (FND) Q1 2024:
Operator: Greetings, and welcome to the Floor & Decor Holdings, Inc. First Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [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. Please go ahead.
Wayne Hood: Thank you, operator, and good afternoon, everyone. Welcome to Floor & Décor’s fiscal 2024 first quarter earnings conference call. Joining me on our call today are Tom Taylor, Chief Executive Officer; Trevor Lang, President; and Bryan Langley, Executive Vice President and Chief Financial Officer. Before we start, I want to remind everyone of the company’s Safe Harbor language. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. 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. The company’s actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. Floor & Decor 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 non-GAAP financial measures as defined by SEC Regulation G. We believe non-GAAP disclosures 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 can be found in the earnings press release, which is available on our Investor Relations website at ir.flooranddecor.com. The recorded replay of this call and related materials will be available on our Investor Relations website. Let me now turn the call over to Tom.
Tom Taylor: Thank you, Wayne, and everyone, for joining us on our fiscal 2024 first quarter earnings conference call. During today’s call, Trevor and I will discuss some of our fiscal 2024 first quarter earnings highlights. Then Bryan will provide a more in-depth review of our first quarter financial performance and share our thoughts about some of our financial projections for the remainder of fiscal 2024. We are pleased to report fiscal 2024, first quarter diluted earnings per share of $0.46, which surpassed our expectations. We take pride in these results as they demonstrate how our teams can manage our profitability by continuing to strategically grow our gross margin rate and prudently manage expenses without sacrificing customer service amid ongoing weak demand for hard surface flooring. These results are a testament to our store associates’ hard work and dedication, reflecting their tireless work to drive sales and engagement with our homeowner and Pro customers daily. We are happy to report that their efforts continue to result in high customer service scores across all our touch points, which helps set us apart from our competition. During this uncertain demand period for hard surface flooring, it’s important for us to focus on what we can control. Therefore, we’ve taken steps to reinforce our price and value messaging at the front of our stores. We do this by offering bulk out displays of opportunity buys, deals of the weak and compelling adjacent category offerings. Our strategy also includes having well equipped salespeople and designers on the floor at the right time. We proactively agreed and assist customers who enter our stores by asking them what project are you working on? This approach helps us drive conversions and customer satisfaction. We are also diligent about following up on open quotes and are focused on closing high-value opportunities in design and Pro using our CRM solutions. We use our CRM data and business intelligence tools to drive sales and engagement with inactive, active and new Pros. Additionally, we continue to drive sales with innovative new products like XL [ph] labs that were added to 17 additional locations in the first quarter, bringing the offering to 130 warehouse stores. While demand for hard surface flooring is likely to remain challenged in the near-term, we remain committed to offering our customers innovative and stylish hard surface products of superior quality at everyday low prices in job lot quantities and providing them with a high level of service across all touch points. These values are fundamental to our growth strategy, and we believe that will help us increase our market share and create lifetime value among homeowners and Pros. Let me briefly turn my comments to the tragedy in Baltimore caused by the Francis Scott Key Bridge collapse on March 26. We know many agencies are working very hard to reopen the channel as quickly as possible, and we thank them for their efforts. We have a 1.5 million square foot state-of-the-art distribution center near the port of Baltimore, one of our four distribution centers in the United States. This facility is open and operating normally. Accepted now received products from other ports. As many of you know, we have a strong experienced distribution and supply chain leadership team with a long history of successfully overcoming unexpected global distribution and supply chain challenges. We have proudly called on them, again, and as expected, they quickly implemented strategies to ensure the timely flow of inventory to our stores with only a modest impact on profitability. We are working closely with our ocean carrier partners to divert containers to the nearby ports of New York, New Jersey, Norfolk and other East Coast ports. We are leveraging our existing dedicated trucking fleets to help mitigate the cost impacts of transporting products to our distribution center. Recently, a channel that can accommodate smaller commercial vessels open. We will shortly begin moving products on barge vessels utilizing this channel to replenish our distribution center as well. We are hopeful the Baltimore port will start operating normally by the end of May estimate of the Army Corps of Engineers. Before turning the call over to Trevor, I would like to take a moment to express how proud our leadership is of our team’s ability to manage our profitability, inventory and capital spending despite the challenges posed by weak flooring demand. By doing so, we can continue to make significant strategic growth investments with a long-term goal of operating 500 warehouse stores in the United States. Trevor will share more details about our busy fiscal 2024 second quarter new warehouse store opening plan, which includes the opening of a new 129,000 square foot warehouse format store in Brooklyn, New York. We welcome the people of New York to visit the store and embark on their next inspirational flooring project. Let me now turn the call over to Trevor.
Trevor Lang: Thanks, Tom. We take pride in the execution of our sales-driving initiatives by all of our associates to grow our market share and manage our profitability despite the near-term challenges in the demand for hard surface floored. In the first quarter of fiscal 2024, our sales declined by 2.2% to $1,097.3 million, with comparable store sales falling by 11.6% from the same period last year. As expected, comparable store sales sequentially improved as we cycle past easier sales comparisons and successfully execute our sales-driving initiatives. Monthly comparable store sales declined 14.7% in January, 10.7% in February and 10% in March. Our fiscal 2024, second quarter-to-date comparable store sales declined 9.3% from the same period last year. As discussed in our fiscal 2023 fourth quarter prior earnings conference call, we expect the first half of 2024 to represent our most challenging comparable sales period. From a regional standpoint, we are seeing some, albeit early positive sales trends emerging from our West division. Comparable store sales are improving sequentially and are better than the company average. The West division was the first to experience softening sales in 2022 and has been less impacted by cannibalization compared to other divisions due to fewer new store openings. Comparable store sales were similar in our East and South divisions, excluding the impact of opening new stores. Turning to our sales trends by merchandise categories. Like the fourth quarter of fiscal 2023, our fiscal 2024 first quarter comparable store sales in tile, wood, insulation materials and adjacent categories were better than the overall decline of 11.6% in comparable store sales. Laminate and vinyl remains our weakest merchandise category. We are pleased that our merchandise strategies continue to resonate with our customers as they remain consistently drawn towards our better and best price point products, which offer industry-leading innovation, trends and styles at everyday low prices. We are happy that the successful execution of our merchandising strategies continues to lead to a sales mix shift to higher-margin products. Let me comment about our comparable store sales, average ticket and transaction trends. Recall that our fiscal 2023, first quarter comparable stores average ticket increased by 7.3% and by 1.1% in the second quarter before declining by 2.8% in the third quarter and by 4.7% in the fourth quarter. In the first quarter of fiscal 2024, our average ticket sequentially improved slightly declining 4.2% from the last year as we began to lap strategic price reductions we took in 2023. In terms of transactions, our 2024, first quarter comparable store transactions fell 7.7%, compared to a 4.9% decline in the fourth quarter of fiscal 2023, a 6.8% decline in the third quarter, a 7.1% decline in the second quarter and a 9.9% decline in the first quarter. The trends largely reflect the macroeconomic headwinds as well as customers are purchasing less square footage and undertaking smaller projects. Turning my comments to our connected customer pillar of growth. We are happy to see that our connected customer strategies continue to resonate with our homeowner and Pro customers. It's worth noting that our customers can engage with us through 10 different touch points during their purchase journey. Achieving a unified execution among these touch points as crucial to the customer experience and a competitive advantage over the independents, particularly for high consideration purchases like flooring. We've observed that customers who visit our stores and engage with our website spend substantially more than single-channel customers. On our most recent earnings call, we discussed how we are integrating our processes and technology solutions to further develop a seamless in-store and online experience. To continue enhancing these strategies, we focused on driving organic traffic growth to our website and further optimizing the customer search experience. We plan to achieve this by improving our website speed and the quality of our website search, adding inspiring content for customers and refining our online merchandise processes to increase efficiency. In the first quarter of fiscal 2024, we saw a sequential improvement in organic traffic and connected customer sales increased by 1.1% from last year, which resulted in a 100 basis points increase in the sales penetration to 19%. We continue to be pleased with our design services. Our design teams are focused on delivering an elevated design experience through engagement with designers who are passionate about our customer service and our products. The teams are focused on driving engagement, selling the entire project, and following up on high-value sales opportunities by leveraging the power of our CRM solution. Furthermore, our designers are collaborating with the Pro desk to build relationships with contractors. We are happy to report that our first quarter design sales growth was better than the company's overall sales performance. As a result, the design sales penetration increased sequentially and year-over-year. Moreover, we are pleased that our Net Promoter Score improved sequentially and that efforts to grow our basket selling are working. Moving to our new warehouse store format pillar of growth, in the first quarter of fiscal 2024, we opened four new warehouse format stores ending the quarter with 225 stores, an increase of 16% from the same period last year. These openings include new warehouse format stores in Mansfield, Texas; Summerville, Florida; Glen Burnie, Maryland; and Augusta, Georgia. We have a busy fiscal 2024 second quarter opening plan and have already opened four new warehouse stores, including Lone Tree, Colorado; Bremerton, Washington; Brooklyn, New York; and Hendersonville, Tennessee. In June, we expect to open new warehouse stores in West Palm Beach, Florida and Columbus, Georgia. We plan to open 30 to 35 new warehouse format stores in fiscal 2024 across various large, medium and small market sizes unchanged from our previous guidance. Most of the 2024 warehouse format store openings are expected to be in large existing markets in the East and the South, where we continue to grow our market share. In fiscal 2024, we anticipate about 30% of our new warehouse store openings will be in the first half of the year. We expect the remaining 70% of our fiscal 2024 new warehouse store openings will be in the second half with the majority of the openings in the fourth quarter. Turning my comments to Pros. In the first quarter of fiscal 2024, Pros accounted for approximately 45% of sales. Top 20% of our Pros are busy, increasing their average order frequency moderately from last year. We are pleased that our market share with our Pros continues to grow, particularly among our top Pros due to our engagement and supply house mindset. Notably, this mindset led comparable store sales in the first quarter for insulation materials exceeding the company average. Consequently, the first quarter sales penetration rate for insulation materials increased 200 basis points from last year and 220 basis points among the top 20% of our Pros. We are excited about the opportunity to grow our market share further in this underpenetrated pro heavy merchandise category. We intend to grow our market share fully with Pros by leveraging our Pro dashboards and CRM tools to drive engagement with new, inactive, and active Pros. In the first quarter, we launched a new tools that will better measure the effectiveness of our Store Pro sales managers contact journey. We now provide enhanced reporting to help our field leadership better understand the effectiveness of their contact and closed journey. Furthermore, we have begun to partner with native advertising platforms within bank's digital channels that should provide us with a practical and cost-efficient avenue to drive new Pro acquisitions. We also see an opportunity to drive engagement by increasing the number of Pro customer roundtables we host quarterly. These successful networking events allows us to further understand Pro's needs better and update them on new initiatives and investments we are making that will benefit their business. Finally, we continue to deepen our relationship with Pros by partnering with trade associations to host educational events. Increasingly, education events are important to our Pros as installation in certain categories is complex. Importantly, we see a significant lift in sales from Pros attending these events. In the first quarter of fiscal 2024, we hosted 25 national tower contractor association and five National Wood Flooring Association educational events training approximately 580 Pros. We are excited to host about 145 educational events in 2024. We are pleased that the first quarter sales from our regional account managers exceeded our expectations and then were significantly above last year. We ended the first quarter of fiscal 2024 with 65 regional account managers compared with 60 at the end of fiscal 2023. Let's now discuss our commercial business. Spartan Surfaces first quarter sales exceeded our expectations, increasing significantly from last year due to the acquisition of Sales Master in June 2023. With the acquisition of Sales Master, we ended the first quarter of fiscal 2024 with 81 reps compared to 65 at the end of March 2023. Spartan continues to progress in its diversification strategy, reindexing to health care, education, hospitality and homebuilders. Health care is an excellent example of an attractive commercial segment that is less sensitive to economic cycles, price and specification flipping due to its installed location. In 2024, we plan to continue to drive sales and market share growth through opportunistic acquisitions, organic rep growth and boosting rep productivity. In closing, we remain confident that we have the right people, strategies and business model to navigate this challenging macroeconomic environment successfully. Let me now turn the call over to Bryan.
Bryan Langley: Thank you, Tom, and Trevor. I want to express my gratitude to all of our associates who contributed to our fiscal 2024 first quarter results. Your hard work, dedication and commitment enabled us to remain flexible, strong and resilient which allowed us to exceed our expectations at a time when customer spending on discretionary hard surface flooring is uncertain. Although first quarter sales fell at the low end of our expectations, we delivered diluted earnings per share of $0.46 surpassing our expectations. This achievement is due to the diligent efforts of our teams in delivering on our gross margin expansion plan and prudently managing expenses and capital spending. Now let me discuss some of the changes among the significant line items in our fiscal 2024 first quarter income statement, balance sheet and statement of cash flows as well as our outlook for the remainder of the year. Our fiscal 2024 first quarter gross margin rate was better than expected, increasing 100 basis points to 42.8%. This was mainly due to favorable supply chain cost and to a lesser extent, product cost. The increase in our gross margin rate enabled us to grow our gross profit by 0.2% from the same period last year despite a 2.2% decline in sales. Our fiscal 2024 first quarter selling and store operating expenses increased by $30.7 million or 10.1% to $334.3 million from the same period last year. This growth was primarily driven by an increase of $39.6 million from operating 31 additional stores versus the same period last year and $3.5 million at Spartan, partially offset by a decrease of $12.4 million at our comparable stores. As a percentage of sales, fiscal 2024 first quarter selling and store operating expenses delevered by 340 basis points to 30.5% from the same period last year. This expense deleverage is due to the decrease in comparable store sales and the addition of new stores. Our fiscal 2024 first quarter general and administrative expenses of $66.8 million increased by 7.9% from the same period last year. The growth is attributed to the investments we continue to make to support our store growth including growth of $4.9 million for personnel expenses related to additional staff and to a lesser extent, incentive compensation. Due to the decline in our first quarter sales, general and administrative expenses deleveraged 60 basis points to 6.1% as a percentage of sales. Our fiscal 2024 first quarter preopening expenses of $9.6 million increased 19.6% from the same period last year. The year-over-year increase primarily resulted from the timing of spend for new stores. Our fiscal 2024 first quarter net interest expense decreased $2.9 million or 59.8% from the same period last year. The reduction in interest expense is due to lower average borrowings under our ABL facility, higher interest income from our interest rate cap derivative contracts and an increase in capitalized interest, partially offset by interest rate increases on outstanding debt. Our fiscal 2024 first quarter adjusted EBITDA of $123.0 million decreased by 17.8% from the same period last year, primarily due to expense deleverage from the decline in our comparable store sales. Depreciation and amortization increased 21.7%, contributing to net income declining by 30% to $50.0 million and diluted earnings per share of $0.46, falling [ph] by 30.3% from the same period last year. Our fiscal 2024 first quarter effective tax rate of 12.8% decreased from 21.1% in the same period last year, primarily due to increased tax benefits related to stock-based compensation awards. Moving on to our balance sheet and cash flow. We continue to maintain a strong balance sheet which allows us to prudently grow within our existing capital structure even during a period of industry contraction. We are pleased that our fiscal 2024 first quarter inventory decreased 6.7% and to $1.0 billion from the end of fiscal 2023 and declined 12.6% from the first quarter of fiscal 2023. As discussed in our prior earnings call, we anticipate inventory to grow slightly faster than sales as we exit 2024 due to most of our 2024 new store openings being late in the year and planned 2025 store openings. We ended the fiscal 2024 first quarter with $698.2 million of unrestricted liquidity, consisting of $57.4 million in cash and cash equivalents and $640.8 million available for borrowing under the ABL facility. Let me now discuss how we were thinking about the macroeconomic environment and our financial performance for the remainder of 2024. There remains considerable uncertainty about the timing and slope of potential improvement in existing home sales and hard surface flooring spending in 2024. The absolute sales of existing home sales may have bottomed at 3.85 million units in October of last year, but they are choppy, improving sequentially to 4.38 million units in February 2024 before falling to 4.19 million units in March. Unfortunately, the direction and absolute level of 30-year mortgage interest rates are rising again and housing affordability and spending on large ticket discretionary durable goods remain headwinds. For these reasons, we believe fiscal 2024 full year sales could be at the low end of our guidance of $4.600 billion to $4.770 billion as the timing and slope of improvement could be more elongated. We expect to gain a better line of sight about the timing and slope of sales over the next several months, which will better inform us about the second half of 2024. That is not to say we don’t expect sequential quarterly improvement in comparable store sales. We expect our fiscal 2024 first quarter comparable store sales decline of 11.6% to represent the trough for the year and comparable store sales to improve sequentially throughout the year from easier sales comparisons and improving transactions. In the meantime, we believe we can manage our profitability. The successful execution of our gross margin expansion plan gives us more confidence in the top end of our annual 2024 gross margin guidance of 42.6% to 42.8%. As we look to the remainder of fiscal 2024, we expect to prudently manage selling and store operating expenses, we anticipate modest sequential growth in selling and store operating expense dollars from the first quarter of fiscal 2024. As a reminder, every 100 basis points change in annual comparable store sales compared with our plan impacts earnings by approximately $0.10 per share. Our ability to manage our gross margin, prudently manage expenses and lower interest and tax expense enables us to manage our profitability in this uncertain period. Based on our fiscal 2024 first quarter results, we now expect our fiscal 2024 full year interest expense to approximate $9 million to $11 million and our tax rate to approximate 20%. Over the long run, we remain excited about the well-documented structural opportunities in repair/remodel and flooring spend, including housing demand that exceeds supply in an aging housing stock. We still see a path to achieving our long-term goal of mid to high teens adjusted EBITDA margin. Operator, we would now like to take questions.
Operator: Thank you. [Operator Instructions] And our first question comes from the line of Chris Horvers with JPMorgan. Please proceed.
Chris Horvers: Thanks. Good morning guys. My first question is, can you talk about how the quarter played out relative to your expectations? I think January had some weather impact. How did it proceed from there and through April? And related to that, how reflexive is demand to mortgage rates are above or below 7%?
Tom Taylor: Hey Chris. This is Tom. I’ll start, and Bryan can jump in. The quarter we – the comp in the quarter, each month got a little bit better. We did start off January – I think January was a negative 14%, what was it, it was negative 14% to negative [indiscernible] negative 10% and now we’re negative 9.3%. So the comps moderating were going to be up against easier comparisons to further along we get into the year. So we’ll see how that plays out. We are affected interest rates are continuing to go up. But at the last report, 7.5% back to that approaching 8%. It’s the highest it’s been of the year. We don’t know how that’s going to affect. We’ve only got existing home sales reported through the month of March. They step back in the month of March. So it’s hard to tell what that will happen. I think interest rates will have an effect on existing home sales and make it a challenge.
Chris Horvers: I guess, maybe asked another way is, I guess, relative to how you thought about the cadence of the year, I guess how much more are you sort of implicitly back half weighting the sales relative to what you thought a few months ago?
Bryan Langley: Yes. I mean I think that’s what you heard in the prepared remarks is that we’re turning towards the lower end. So I mean, I think it’s we’re not putting more to the back half. We do expect things perhaps to get slightly better from where we are today, but that’s reflected in that guide. And that’s why we kind of alluded in the call that we’re trending more towards the lower end.
Tom Taylor: And Chris, the only thing else that I would say is that the further we get into the year, I mean you started in June of last year, we started bumping along below $4.1 million annualized for only one month went above that $4.1 million. That was in the month of February that just occurred with at $4.38 million So as we start lapping those numbers, the spread year-over-year between existing home sales gets a little bit better. And as soon as they turn positive, we do think there’ll be a lag, but then it gives us a better opportunity to comp positive.
Bryan Langley: Exactly. I mean, just to reiterate what we said on the last quarter, we do expect sequential improvement in both transactions and ticket with the biggest movement coming in transactions. So if you think about it, we just sit in Q1 at negative 77%. We’ll get towards the end of the year and being flat to slightly positive. And the same thing on ticket is down 42% in Q1. That will stay kind of where it is and then move towards hopefully getting flat towards the end of the year. So both of those movements are based on easier compare than slightly improvement through the year.
Chris Horvers: Got it. So if I were just going to reward it. like essentially, you’re leaving the back half – your back half view is largely unchanged and it’s really just what’s happened in the first half, and that’s why you expect the low end of the range?
Tom Taylor: Yes. That’s right. Yes. That’s right.
Chris Horvers: Got it. Thanks very much.
Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed.
Simeon Gutman: Hey, good afternoon, everyone. It's Simeon. The comments that were made on the West I don’t know if it was normalizing or improving. Can I ask if that’s happening against easy compares or you’re seeing some reacceleration? And then is that DIY or Pro? Are you able to decide for that?
Trevor Lang: Simeon, this is Trevor. The West started off having issues a good six to eight months before the rest of the business in 2022. So they’ve had this now for longer – they’ve been dealing with this for a longer period of time because they had some of the more strenuous – negative existing home sales to start off with. So – we think they’re going up against easier comparisons. I think some of the housing malaise that ended up affecting everybody has come across the United States, and now we’re seeing some of that more difficult in some of our bigger markets. So places like North Texas and Florida and Georgia and even so, lesser, extend up in the Midwest and the Northeast. And so I think just to call it the housing recession for lack of a better term, started out West and worked its way East. And so that’s why they’re doing better. And conversely, that’s why some of our stores in Texas and Florida in Georgia markets like that, the Mid-Atlantic are having a harder time because it just didn’t hit them at the same time as the hit out West.
Simeon Gutman: Got it. Okay. And my follow-up is, you also said in the West, maybe some stores not as cannibalized from growth. The cannibalization rate of the business, and I don’t know if you’ve mentioned it recently, is that – that’s more controlled by the percentage opening? How much you’re opening stores in the region versus the industry’s health? I mean the industry’s health is controlling the growth, but I was obviously in tougher environments. It would feel like that cannibalization would pick up as well? Or is it more dictated by the pace at which you’re opening stores?
Trevor Lang: Yes. I think it’s more of the latter. Our cannibalization in the last quarter was actually a little bit better than we’d seen in the previous four quarters. That’s obviously a little bit nice to see. And that could be timing. But yes, generally speaking, our cannibalization is dictated by where we’re opening stores and what kind of store we’re opening against. And so if you’re opening a brand-new beautiful bigger store against an older, smaller store, you’re going to have – and it’s closed within, call it, 30 minutes or less, you’re going to have higher cannibalization. If it’s a big store going up against another new big store that’s, call it, 45-minute drive time, you’re not going to see as much cannibalization. And I think we said this year, I think some – maybe 70% of our stores are in existing markets which is probably similar to last year as well. So I think we own that cannibalization more than the market factors.
Simeon Gutman: Got it. Okay. Thanks. Good luck.
Operator: The next question comes from the line of Michael Lasser with UBS. Please proceed.
Michael Lasser: Good evening. Thank you so much for taking my question. How do you think your relative market share trended in the first quarter versus where it had been, especially in more mature markets? And what’s happened quarter-to-date, especially in light of your comments that you think you’ll hit the low end of the full year top line range? Thank you.
Tom Taylor: Yes, Michael, this is Tom. I’ll take a shot at that first. So it’s hard to know in the first quarter kind of what happened from a market share perspective, not everyone’s reported yet. So you have to take a minute to digest everyone’s numbers to see. When you look at last year, Floor & Decor grew our revenue by 3.5% and Catalina predicted the market went down $5.2 million the big boxes comp negative and flooring was worse than them. And across the publicly traded competitors, Tile Shop (NASDAQ:TTSH), [indiscernible], they’re all negative Mohawk reported North American sales negative. So we were positive. In the first quarter, only Mohawk reported out, they reported negative and we were negative or slightly better than they were. So – and I don’t think much changed. When you look at the competition and the competitive landscape, I think the way we were competing in last year versus the way we compete in the first quarter, I haven’t seen much of a change. So I would anticipate that we’re continuing to take market share in a really tough market.
Michael Lasser: Okay. My follow-up is there anything you could say about what’s been happening quarter-to-date, especially in light of the comments on getting to the low end of the full year guidance range?
Tom Taylor: I mean, quarter-to-date – again, the comp is modestly getting better month-over-month. So it’s – we would have hoped it would get better quicker. March’s existing sales taking a step backwards, there’s a lag to what we see there. But when you look at it, I mean we just – we’ve been in this since June of last year, this really low 4.1 million-ish existing home sales and with only one month being up at 4.3 million, which is February. So it just gives us a pause as we think about the rest of the year. We’ll know more Spring is a very important selling – it’s very important for existing home sales, and we’ll know more when we get the data of what happened during the month of April, what’s going to happen during the month of May and what happens in June with the lag of our benefit from existing home sales, if they’re good, and we should be good. If they’re not, then it will be tougher, but we’ll talk about that when we get to the second quarter.
Michael Lasser: Can I just dig into that, Tom, is there a case? Or what would be the case where your trends become disconnected from existing home sales, either on a positive on the negative? Would it be if there was some product category change that Floor & Decor was not well positioned for? Would it be that your prices became uncompetitive or maybe more competitive? What would be that scenario?
Trevor Lang: Hey Chris, this is Trevor. I think just reading a lot of the other large consumer products companies that have reported here recently they had a common theme and it’s just that the consumer is under pressure. Inflation is still a little bit high, savings rates have been drawn down. They don’t have the same level of discretionary spending power that they had. And so that’s probably the only thing that’s – one of the things that we’re watching closely is just as that consumer stay under pressure. Historically for us, as you’ve well noted in your reporting and others have as well, we have had a very high correlation to existing home sales. I think the only question I have now is just, is that consumer in a more stretched position than they’ve been because of inflation and just where we’re hearing other retailers at the consumer fills a little stretched.
Bryan Langley: Yes. And Michael, I would just say that the from the way we compete across every category, we saw that hasn’t changed. I mean our stores are – we still have a competitive advantage across every department that we participate in. So I don’t think there’s anything fundamental in the model that would affect that. It’s much more the health of the consumer that would be bit a challenge.
Michael Lasser: Got you. All right. Thank you very much and good luck.
Tom Taylor: Thanks, Michael.
Operator: [Operator Instructions] Thank you. And our next question comes from the line of Chuck Grom with Gordon Haskett Research. Please proceed.
Chuck Grom: Hey, thanks very much. Good afternoon. Maybe I'll try two part here. Can you just remind us on the store openings, just to switch gears. How many are in the smaller format locations. And bigger picture within your 500-store long-term target, can you remind us the mix of small versus large locations? And then I guess as a follow-up, if comps were to continue to trend down in the high single-digit rate, say, through the second or third quarter. I guess how do you think about store growth in 2025 and 2026. I’m sure you’ve already begun that planning process? Thanks.
Tom Taylor: Do you want to take the first part and I’ll take the second part, Trevor?
Trevor Lang: On the – yes, I was looking to see – I don’t have it off the top of my head how many of the smaller format. It’s – I think it’s less than 20% of our stores maybe less than 30% of our stores are going to be in the smaller format this year relative to the larger format. And sometimes that’s mostly in a smaller market. But that could also be if we’re opening a store in a more tertiary market that’s further out in existing markets.
Tom Taylor: Yes. And then 2025 is a long ways away. So we’re not prepared to talk about what our new store growth will be in 2025. We have slowed our new store growth down since existing home sales became under pressure. We went from opening 20% new units per year to – now this year, it will be – we gave guidance of 30 to 35 stores still believe we’ll be within that range. We’ll watch as the year progresses and make a determination on next year and let you know as we get to that determination. So as of now, we’ve been – we’re not going to grow at all costs. We’re going to make sure that we’re thoughtful about the way we’re investing in the business. We already have been thoughtful about the way we’re investing in the business. If we think that this is – if the slope or the range of recovery is continuing to slow, then we’ll make the best decision we can and how we deploy our capital. We still believe – if it doesn’t affect our long-term plans of opening 500 stores, the pace of opening. It’s already slowed a little bit, and that may continue. It will depend on how the back half goes.
Trevor Lang: And I’ll just look real quick one. Tom was giving that elegant response that I think we have seven of our stores roughly as they’re going to be the small format stores this year.
Chuck Grom: Okay. Great. Thank you, guys.
Operator: And the next question comes from the line of Zach Fadem with Wells Fargo. Please proceed.
Zach Fadem: Hey, good afternoon. So as we look back over the years, we’ve seen a lot of tailwinds both internally and externally from aging housing stock, you’ve had shift to hard surface, house slippers, et cetera, and then some company-specific tailwinds like designers, Pro loyalty, et cetera. So just as we think about the next category upswing, could you walk us through what you think the next round of tailwinds could be both internal and external? And is it fair to say that your comps on the next upswing could be as strong as they’ve been over the last upswing?
Trevor Lang: I’ll take – this is Trevor. I’ll take a stab at that. I mean I think we’re making investments in key categories today that we think there’s unique to us when you look at our stores, XL Labs, upon talked about, that’s one area. Larger type products are trending better. Our stores are big. That’s a nice category. It’s small today, but if you look at our adjacent categories, that category is growing. We’ve got ideas there where we could continue to add adjacent categories. I think on the macro front, so those are things that, yes, I mean, we got great merchants. We’ve been thinking about ways to drive merchandising strategies that are unique to us, and we’ll continue to do that. I think on the long-term, as you guys have heard us say many times over the last seven or eight years is you’ve got 130 million housing units in the United States. 80% of them are over 20 years old. While on average, they’re 40 years old. And there’s just a replacement cycle that has to happen. So I do think everybody in this space, including us, should do well over the medium to long-term just because we’ve got – and we’re not adding, as you know, we’re adding nearly as many new homes relative to the household formation that we’re having as a country. And so that part of the reason house values continue to go up and up. So I think for us over the medium and long-term, we’re feeling good. And one last thing I would just mention Bryan just that we’re in the stores all the time, and we’re seeing our competition all the time. And I feel like even though our business isn’t great, as Tom mentioned, our performance relative to all our peers is much better. But I think when you look at the stores, the aesthetics of the stores, the in-stock levels are better, customer service scores are higher. Our turnover is down. Our supply chain is resilient. We’re ready when it comes.
Bryan Langley: Zach, I was going to say even outside the four walls too, we’re super excited about the opportunity in commercial as well. So one in the early innings there. So when you think about your total sales growth, that’s something that the next couple of years should accelerate as well.
Tom Taylor: And last thing, I think Trevor kind of mentioned, I would just say that, we haven’t changed anything with our product line view strategy. We’re continuing to bring in newness across every department that we have. Newness and fashion, newness and durability across every department. So as the market turns, I mean, I feel better about our product storm and today than I did when we were comp 20%. So it’s just – we’re just in a tough macro. This too shall pass. It’s just a question of when.
Zach Fadem: Thanks for the time.
Operator: The next question comes from the line of Steven Zaccone with Citi. Please proceed.
Steven Zaccone: Hi, good afternoon, guys. Thanks for taking my question. I wanted to follow up on two points that have already been asked. The first on the West. So what are you actually seeing that’s driving the improvement? Is it more traffic? Are you actually starting to see some larger project sizes? And then on the second aspect, cannibalization, can you just remind us what is that right now as a drag to the comp? And what is the long-term goal for cannibalization?
Bryan Langley: Yes. So I’ll do my best to answer those. So it’s more transaction-based. I would say our size has increased slightly, but it’s not the main driver. It’s really around activity, so it’s traffic and transactions on the West Coast. That we’re starting to see that get healthier out there. And the cannibalization, we’ve never actually given the number, so I can’t quote exactly what it is. I’m going to say exactly what Trevor just said is it was slightly favorable compared to historical trends, more recent trends in Q1, but it’s relatively in line, and we expect it to stay there probably over the next couple of years as we’re still opening stores. It’s just a matter of where the stores are and how many stores they impact to Trevor’s point, it’s more planned cannibalization on our side, so.
Trevor Lang: Yes. Long, long-term, assuming we’re still opening this level of store count, it will come down just because you won’t have as many new store openings because we’re not adding 20% new stores. Somewhat offset by the fact that at some point, we’ll run out of new markets right now. I think we’re 70-30, 70 in existing stores and 30 new markets. At some point, it would be 100% in all markets because they just want to have a lot of new stores. But I think the other side of that is our new store productivity will get better because I’ve seen it here and as well as other companies I’ve worked at when you open the second half of stores. So in Houston, for example, the first five stores did good, but the second five stores did incredibly good same thing in Dallas, Atlanta, Phoenix. So I do think our new store productivity over time will hopefully improve as we open more stores in these existing markets where they got better brand recognition, more convenient for the Pros, more people know where you are.
Operator: And the next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed.
Steven Forbes: Good evening. Trevor, I think you mentioned installation materials. I was curious maybe if we could just focus on that with my question on, how are you sort of thinking about what the right penetration in terms of the opportunity is? And how penetration sort of varies across the store fleet today? And if there’s anything in particular, right, that you sort of seen as a driver of success, right, and maybe those stores that have the highest penetration today?
Trevor Lang: Yes. I mean I think it’s a lot of heavy lifting by the merchandising team and the store operations team. We made some very dedicated strategies going on two years ago now or so on, where we brought in some of the best brands, that’s the one part of our business where brands matter. So we brought in two of the best brands that are out there for installation and setting type products that really matter to the Pros. We increased our in-stocks, so that they could have confidence that we were in there. That we have the in-stock jobs when they need it. We got our protein some really good reporting on where we were underpenetrated with Pros. And so we have exceptional CRM data that is at our hands of our products, so they can see this Pros at 17% of installation, best Pros are at 25% to 30% installation. So I’d say it’s a lot of work that our store operations and our merchandising teams have done. I don’t know that it will ever get there, but we understand the industry. It’s roughly, I mean almost 25% of the total sales are installation materials. When you put our two installation materials categories together, I think we’re close to 20%. So our goal is to continue to grow. It was our best-performing category last year. I think it’s other than adjacent categories. It’s still our best-performing category again this year. And so, yes, we’ve done a good job there, and we’ve got more opportunity to continue to focus on that.
Tom Taylor: I think, perfect answer. The only thing I would add to your answer is, I think a lot of times the purchase of the product and the purchase of the insulation materials occurs at two different times because the end user may make one purchase and the Pro makes to the other purchase. And I think when we didn’t have markets build out, you had to drive past a lot of home improvement centers to get to a Floor & Decor. And I think the more Floor & Decor’s we have in the market where we take that drive time out of the equation, the more convenient we are for the Pros, not to drive by five or six other stores to get to our store and it some more. So that penetration should continue to go up.
Operator: And the next question comes from the line of Seth Sigman with Barclays. Please proceed.
Seth Sigman: Hey everyone, my question is on average ticket down 42%, a little bit better than it’s been. Over the last few quarters, you’ve talked a lot about the decline in project sizes. Can you just remind us where are we in that correction? Are we close to cycling that? And then I guess the other side of it could be – do you think this could be one of the factors that perhaps is just different for a while in the context of some of the consumer pressures you mentioned earlier, meaning that you just don’t go back to where project sizes were in the last couple of years. How do you guys think about that? Thanks so much.
Tom Taylor: I’ll take the second part of the question. This is Tom. I’ll take the second part of the question, and then Bryan can take the first part of the question. On the second part of the question, I think job sizes will come back to what they were historically. I think our job size today just has to do with – as long as existing home sales, the amount of flippers that are out of the market right now. Again, there’s a good correlation when someone’s buying or selling houses, they tend to redo the whole house and flooring versus doing a small project, when houses aren’t turning over, they’ll upgrade a powder bath, they’ll upgrade at backsplash. So I believe that when existing home sales come back up to that $5 million annualized that our job sizes will go back to what they’ve historically been, but it’s going to be dependent on that improvement. So I don’t think there’s anything fundamentally changed with the way people buy the category. I think the square footage drop is just a product that was kind of with existing home sales. So I’ll let you answer the other part.
Bryan Langley: Yes, I’ll take the first part. This is Bryan. So yes, I mean, we’ve kind of bottomed out. Whenever we talked about it all through last year and were sequentially declining. I think from Q4 to Q1, it kind of moderated. So I think we’ve kind of hit the bottom to Tom’s point, I think it has to do with the compilation of stay-in-place activity, which is more your small powder bathrooms and things like that, which is why we actually saw a pickup in tiles as well, if you look at our categories. If it’s some of the bigger projects, it’s more laminate vinyl and other things that we’ve alluded to is that put stress on that category. So I agree with Tom, as we see a pickup in size, you also should start to see that in laminate vinyl categories, with categories that go in some of these bigger rooms as well, so.
Operator: And the next question comes from the line of Justin Kleber with Robert W. Baird. Please proceed.
Justin Kleber: Hey, good afternoon, guys. Thanks for taking the question. Just wanted to ask more of a hypothetical one as it relates to pricing and gross margin. If some of the mom-and-pops or even your regional competitors start to getting more aggressive with price. Would you feel the need to maintain a similar price spread? Or are your gaps so wide today that you would be comfortable not necessarily responding if pricing in the industry does get rational? Thanks.
Tom Taylor: Look, I think the independents are – I think they're aggressive, I think they've been aggressive, and I think our spreads are good against them. If they start getting more aggressive, we'll be able to deal with that. Our local managers they're responsible for price. So they've got an independent that's aggressive. They have the ability to change their price and bring their prices down to react to that competition. So our gross margin improvements have been coming from better supply chain costs, better – the merchants are doing a better job on getting costs from the suppliers. Our mix is benefiting our gross margin. So there's a lot of other ancillary pieces that are helping that gross margin improvement. So I feel good about the spread versus the competition. If we have an independent that gets even more aggressive or irrational than our store managers, they have the authority and autonomy to deal with it, and they do.
Operator: And the next question comes from the line of David Bellinger with Mizuho Securities. Please proceed.
David Bellinger: Hey, great. Thanks for the question. As a follow-up on gross margins and just the cadence. So should we still expect a sequential improvement through the year? And second, if total revenues and comps work to trend towards that low end of the guidance range, can gross margins continue to move higher? Or are those metrics decoupled in some way just given some of the underlying initiatives and positives you just mentioned a minute ago.
Bryan Langley: Yes, this is Bryan. I'll take a stab at it and Trevor and Tom can jump in if they need to. From where we sit today, we still feel good about the high end, which is 42.8%. Obviously, we just came off of Q1 of 42.8%. You could see slight improvement from there. The one caveat to that is we still need to sit back and think about what the impact could be to the Baltimore distribution center that we have. And so that's one of the things that we're looking at that could be a headwind to those. But we still feel good about the high end. And so you could see it steps slightly higher than what we alluded to in the 42.6%, 42.8 % but I wouldn't expect meaningful improvement from there.
Operator: And the next question comes from the line of Greg Melich with Evercore ISI. Please proceed.
Greg Melich: Thanks, guys. I'd love to follow-up on what gets comps better through the year. I think you said that you thought both traffic and ticket would get better. So I'd love to know what if transaction counts are going to go from negative 7% to flat, what existing home sales do you think would need to be there to get that? And then on the ticket side, how much of the expansion from negative 4% to flat is that project size? Or is it a mix shift or deflation turning to a little bit of inflation? Just help us give a little more guidepost on those two factors.
Bryan Langley: Yes, this is Bryan. I'll take a stab at it and then get Tom and Trevor can jump in if they need to. Majority of it is actually just your compare. So the majority of the expectation of the improvement quarter-over-quarter is on an easier compare. When it comes to transactions, there is a slight improvement needed from existing home sales. So if you're asking us that without pinning down an exact number, you need it to at least maintain where it is today, coming off of Q4 and then slightly improving. If you remember the original guidance around 4 million units to 4.3 million. And so I would say to be flat to slight improvement in transactions, you'd have to see things get slightly better from where they are today as we exit the year. And again, we'd have to have that tight correlation as well. We alluded to it earlier, but one of the disconnects that could happen is if spending is harder on discretionary spending for consumers if they're pressured, you could see that lag actually kind of fan out a little bit more and take more than that three months. And so that's one of the things as we need the lag to stay compressed to that kind of two to three months, and we need slight improvement from there. Average ticket is really just the strategic retail reductions we took last year. We're lapping those. And so that is the biggest thing that's going to happen for us as we get throughout the year, that should help us get back to that flat. It's not going to take a lot in the project size, maybe just a little bit of improvement there, but not a lot for us to get back to kind of flat in Q4 average ticket.
Trevor Lang: Yes. Like Q1, we were down 9% or call it, 10% in transactions last year. When we – by the time we get to Q4, we go down to 4.9%. So as Bryan mentioned, we're just – we do – we've got easier comparisons. And our thesis when we originally gave guidance that we didn't really change in this one, is that existing home sales will continue to improve throughout the year. So we are expecting the macro to help us some and then going up gives those easier comparisons.
Operator: And the next question comes from the line of Seth Basham with Wedbush Securities. Please proceed.
Seth Basham: Thanks a lot and good afternoon. My first question is if you guys have any updated thoughts on price elasticity related to those retail price reductions? Any changes in your viewpoint there?
Tom Taylor: We're always testing. We're – we'll drop prices on a product or a product category and across the flooring categories themselves. We don't see much of an improvement when we do it or a consistent enough improvement to where – we'd say, all right, that's automatically going to be beneficial. We do see benefits in the installation materials category, when we take prices down, we have taken prices down installation material, our penetration has gone up. That's a product that is brand recognition. It's easier for the pro to compare and they buy it on a weekly basis. So we know that, that one is a benefit. And we'll continue to drive that category meaningful throughout the year. And we won't stop testing. We're always testing and adjusting prices and kind of seeing if we can get benefits from one direction or the other. But we just haven't seen enough benefit. Our spreads versus the competition are significant enough that lowering the price usually just transfers a customer from one SKU to another in our store versus changing the volume of the store.
Operator: And the next question comes from the line of Robbie Ohmes with Bank of America. Please proceed.
Robbie Ohmes: Hey guys. Maybe a follow-up on that question. I think last quarter – this quarter, you kind of talked about the opportunity buys and deals of the week and value at the front of the stores and things. Last quarter, I think you guys said you were still seeing the consumer leaning towards better and best. Is that still the case?
Tom Taylor: Yes. The same trends, customers when they're buying, we're still leaning towards the better and best products across all of our departments. So it's when the – when they're opting to do the project, they're getting what they want. Now look, we – we're a company that's compositive it's whole life. So we're trying everything, and that's why you go in the front of the stores, we're staying aggressive at the front of the stores that are opening price points. We're doing – trying to make deals, trying to get customers to engage and close on sales. So and we'll continue to do that. We'll continue to stay aggressive and try to drive that message. But that is when someone is doing a flooring job, they're still stepping up to the better in best.
Operator: And the next question comes from the line of Chris Bottiglieri with BNP Paribas (OTC:BNPQY). Please proceed.
Chris Bottiglieri: Hey, guys. Thanks for taking the question. This is a cost question. So if your whole exist since you've been a growth company. So imagine this downturn has been filled the stomach internally. Can you talk about the ways you've taken costs of the business or slowed investment as sales has declined. How do we think about incremental SG&A? When existing home sales does return to normal and comps go up? Like is there a rule of thumb you could think about when the comps go up 10%? What does SG&A do in that scenario?
Tom Taylor: If comps go up by 10%, we're going to flow through incredibly well. Because if we learned anything – we have taken cost out. We have been much more aggressive across every line of our P&L, trying to execute upon a plan when sales aren't working in our favor. So and we don't plan on adding back. There's a – you'll add back some costs as sales go up. But in general, we should flow through incremental sales pretty well. .
Bryan Langley: And just as a reminder, we're – a typical time period we're 55% fixed cost, 45% variable within the stores. That's going to drive a lot of that flow through as well.
Trevor Lang: Our cost structure has gone down, our gross margin rate has gone up. So our flow-through should be better [indiscernible] positive comping.
Operator: And the next question comes from the line of Jonathan Matuszewski with Jefferies. Please proceed.
Jonathan Matuszewski: Good evening and thanks for squeezing me in. Just a question on your most valuable Pros. I think you mentioned the top 20% of Pros were increasing their order frequency year-over-year. So maybe just if you could elaborate on that. Presumably, they're more integrated into your ecosystem with Pro Premier and training classes and designer services, but maybe beyond that, what are you hearing from those Pros? Do they skew to a certain region? Any more color you can give us on what's driving them to actually increase transactions with you year-over-year? Thanks.
Trevor Lang: Sure. There is a significant component of that successful Pro strategy that's frankly just relationship. And making sure that Pro is taken care of in a way that they're not being taken care of somewhere else. All of the other ancillary services that we have are good and sort of the flywheel approach if they add features and benefits to why they would shop with us. I just think it has a lot to do with the relationship and making sure we take care of that Pro in a way that nobody else does is probably the most important aspect that we call out for those Pros. And – but because we have good technology and just good business practices, we know who those Pros are and we do an exceptional job of taking care of them.
Operator: And our last question will come from the line of Joe Feldman with Telsey Advisory Group. Please proceed.
Joe Feldman: Hey, guys, thanks for taking the question. It was actually somewhat similar to what Jonathan has just asked, but I wanted to take a different approach. In terms of the other 80% of the Pros where – I feel like that's a little bit of a change from the last call or two, where Pros had been holding up pretty well as a broad category. Now you're kind of isolating it to the best Pros that are holding up. I'm just curious what you're seeing and hearing from those other guys, presumably, it's just more of the same, like it's just people aren't doing projects, but anything you can share on that?
Trevor Lang: We do, do that a lot. I mean there's just not as much business out there. Again, we're the best performing of all the businesses and we'll see what our reports, but historically, we've been the best performing by a long shot. And we went from having sales up in the mid to low single digits for most of last year to actually having total sales be lower. And our Pros tell us, they're just not having as many jobs. And we were – Steve and our Head of Store Operations was what we were in a store and they were talking about how they were doing plumbing work and doing fences and other things just to stay busy during this period of time. There's just less flooring work to be done in this environment where existing home sales are down 40% from the peak.
Tom Taylor: Look, I appreciate the good amount of time for question and answer today. We appreciate that. We appreciate all of your interest. We look forward to giving you a more thorough update as we get to the end of this quarter. Thanks, everybody.
Operator: Thank you. This concludes today's conference. You may now disconnect your lines. Enjoy the rest of your day.
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