Key Highlights

● Floor & Decor's diluted EPS rose 15.1% to $0.61 on net sales of $1.21 billion.

● Comparable store sales fell 1.4% in the fiscal third quarter.

● One brokerage kept In Line, cut its 2027 EPS estimate to $1.90, and flagged margins.

● Floor & Decor plans to open 20 new Warehouse stores this year.

Floor & Decor (NYSE:FND) is under the spotlight ahead of Friday's open after the hard-surface flooring retailer reported a 15% rise in quarterly earnings per share, while one brokerage flagged concerns about the company's long-term margins. The results were released after Thursday's close at 4:05 p.m. ET. A pre-market move for the stock was not confirmed in the sources reviewed.

For the fiscal third quarter ended Sept. 24, net sales rose 3.0% to $1.21 billion, but comparable store sales fell 1.4%. Diluted EPS increased 15.1% to $0.61, with GAAP and adjusted figures the same. Gross Margin improved by 30 basis points to 43.7%, and Operating Margin also rose 30 basis points to 6.4%, according to the company's 8-K filing. Market data showed EPS beat the $0.58 analysts expected, while Revenue was in line.

A brokerage's margin warning

The brokerage maintained its In Line rating and $55 price target on the stock, according to market data. The firm lowered its 2027 EPS estimate to $1.90 from $1.95 and expects flat earnings in 2027, helped by energy cost pass-throughs and buybacks.

The central concern is profitability. The brokerage noted that operating margins have fallen from around 10% to around 5% over a stretch of 20 consecutive quarters of declining comparable traffic, while gross margin remains healthy at about 45%, market data showed. In other words, the company is still earning good margins on its products, but higher operating costs at its stores are eating into profits as fewer customers come through the doors.

"We are pleased with our third-quarter performance, delivering 15% Earnings Per Share growth," CEO Brad Paulsen said in the release.

Guidance and leadership

Floor & Decor's updated fiscal 2026 outlook calls for net sales of $4.77 billion to $4.84 billion, including about $65 million from a 53rd week, comparable store sales down 3.5% to 2.0%, diluted EPS of $2.19 to $2.29 and adjusted EPS of $1.88 to $1.98. The company plans to open 20 new warehouse stores this year.

The company also announced a board Leadership transition on Oct. 29, according to a news-feed headline. Details of the change were not available in the materials reviewed.

Floor & Decor sells tile, wood, laminate and vinyl flooring to homeowners and professional contractors through large warehouse stores. Its sales are closely tied to home sales and remodeling, both of which have been held back by high Mortgage rates.

Market data showed Quarter-to-date comparable sales were down 3.8%, partly because of higher mortgage rates. The 10-year Treasury yield, which mortgage rates track, was near 4.94% to 4.99% early Friday, down from above 5.30% earlier this month, but the Federal Reserve is still seen as likely to hike again in December, with CME FedWatch odds near 85%.

The stock is listed on the New York Stock Exchange and is part of the NYSE Composite. Market data put its Market Value at $5.36 billion and said the shares were down about 17% year to date. Flooring maker Mohawk Industries (NYSE:MHK) also reported Thursday, describing a "weak Demand environment."

Risks and what to watch

Key risks are a prolonged housing slowdown, continued declines in store traffic and pressure on operating margins. Tariffs on imported flooring materials are also a Factor for the industry.

After the 9:30 a.m. ET open, watch whether the EPS beat outweighs the margin worries highlighted by the brokerage. Mortgage rates, next week's jobs report on Nov. 6 and any further details on the board transition are the next items to track. Fourth-quarter results are expected in early 2027.