Floor & Decor Holdings, Inc.: Initiation of Research Coverage

Wednesday, June 6, 2018

William Blair & Company initiated research coverage of Floor & Decor Holdings, Inc. (FND $48.53), the leading specialty retailer of flooring products in the United States and the third-largest retailer of flooring products in the country  (behind Home Depot and Lowe’s).

Analyst Daniel Hofkin estimated that Floor & Decor Holdings would earn $1.02 per share in 2018 and $1.30 per share in 2019.

“We estimate that Floor & Decor can continue to gain substantial market share over the long term,” Hofkin said. “Main factors include a significantly underpenetrated store base, much bigger stores relative to competitors that enable a large in-stock product selection, and superior product displays. Also key are its highly competitive pricing helped by a direct-sourcing model (comparable items are at least 17% below competitors, on average), a differentiated focus on the professional customer, and recent/upcoming developments and initiatives, such as a shift to national advertising and the expected launch of a loyalty program.”

He added, “We estimate that over the long term Floor & Decor can expand to over 400 locations (from 84 today) and achieve average annual revenue growth in the high-teens to low-20% range (helped by contribution from 20% annual store growth and high-single-digit comps) and average annual EPS growth in the low- to mid-20% range. We believe our estimates could prove conservative over the next several years.”

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William Blair or an affiliate beneficially owns or controls (either directly or through its managed accounts) 1% or more of the equity securities of Floor & Decor Holdings, Inc. as of the end of the month ending not more than 40 days from the date herein.

William Blair or an affiliate is a market maker in the security of Floor & Decor Holdings, Inc.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from Floor & Decor Holdings, Inc. or an affiliate within the next three months.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in securities of Floor & Decor Holdings, Inc.

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Current Ratings Distribution (as of 6/5/18)

Coverage Universe
Outperform (Buy): 65%
Market Perform (Hold): 32%
Underperform (Sell): 1%

Inv. Banking Relationships*
Outperform (Buy): 22%
Market Perform (Hold): 10%
Underperform (Sell): 0%

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