Floor & Decor Holdings, Inc.

Hello, and welcome to the Foreign Decor Holdings Inc. Fourth Quarter 2023 Conference Call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. It's now my pleasure to turn the conference over to Wayne Hood, Vice President, Investor Relations. Please go ahead, Wayne.

Thank you, operator, and good afternoon, everyone. Welcome to Florida Corps' fiscal 2023 Fourth Quarter Earnings Conference Call. Joining me on our call today are Tom Taylor, Chief Executive Officer, Trevor Lang, President, and Brian Langley, Executive Vice President and Chief Financial Officer. Before we get started, 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 meeting of the Private Securities Litigation Reform Act of 1995 and are subject to risk 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. Lauren, of course, has 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 measure can be found in the earnings press release, which is available on our investor relations website at ir.flooranddecor.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 Tom.

Thank you, Wayne, and everyone for joining us on our fiscal 2023 fourth quarter earnings conference call. During today's call, Trevor and I will discuss some of our fiscal 2023 fourth quarter and full year earnings highlights. Then Brian will provide a more in-depth review of our fourth quarter and full year financial performance and share our thoughts about some of our financial projections for fiscal 2024. We are pleased to deliver better than expected fiscal 2023 fourth quarter diluted earnings per share of 34 cents, primarily due to total and comparable store sales that exceeded our updated expectations we communicated on our third quarter earnings call. For the fiscal 2023 year, we delivered diluted earnings per share of $2.28, exceeding our updated guidance of 214 to 224 per share. Throughout the year, we are proud to have grown our market share and effectively managed our profitability, balance sheet, inventory, and cash flow while continuing to make significant long-term growth investments towards our goal of operating 500 warehouse stores in the United States over time. As Brian will discuss in more detail, we generated $238.6 million in free cash flow in fiscal 2023. We achieved these physical 2023 results despite the headwinds caused by existing home sales declining to a seasonally adjusted annualized rate of 3.8 million units in December, a decade low as 30-year mortgage rates spiked higher to 8% in October and personal consumer consumption expenditures continued to normalize to services and away from large-ticket discretionary goods. Against this backdrop, we executed what we can control in 2023 by opening 31 new stores, successfully executing our sales driving initiatives, strategically growing our gross margin rate by 160 basis points year over year, maintaining our competitive price gaps, continuing to deliver exciting innovation and newness in our merchandising assortments, and further diversifying our countries of origin to reduce costs and mitigate risks. Importantly, we are prudently managing expenses without sacrificing the customer experience. We are thrilled that our customer service scores remain near record high levels and are building on our excellent service scores in early 2024. We are particularly pleased to receive high scores for service, selection, and professional staff. These attributes are essential when consumer spending in the category slows, resulting in declining transactions. We find that typically an assisted customer's average ticket is significantly higher than unassisted customers. Achieving and building on these results over any housing-related spending cycle requires us to make ongoing commitments to investing in our associates, finding ways to simplify store processes, and deploying technology in-store and online to provide a seamless customer experience. We proudly promoted approximately 1,550 associates and created 2,000 new jobs in 2023. Our commitment to our associates resulted in notably higher associate retention in 2023, which we believe will help us control costs and support our growth for years to come. We believe that by making these long-term investments, we will further build our competitive moat and grow our market share. As we look to fiscal 2024 and beyond, we remain focused on executing our key growth strategies. We are fortunate that the strength of our business model, balance sheet, and cash flow allows us to prudently invest in new and existing stores, merchandising growth initiatives, technology, and our commercial business in the face of challenging industry fundamentals. As Brian will discuss in more detail, we're approaching fiscal 2024 with continued rigor in our expense and inventory management and prudent discipline in our growth investments and capital spending as we navigate industry headwinds. We have a long history of overcoming challenges with a strong and agile execution, and we believe this period just represents another challenge to overcome in our journey to 500 stores. We will continue to make prudent investments that we believe will well position us for accelerated sales, market share, and strong earnings growth when industry fundamentals improve. Let me now turn the call over to Trevor.