For our latest research report, we chose to cover Floor & Decor (FND, ~$8bn market cap).

If you take Costco and mix it with Sherwin Williams and focus on just the hard surface flooring market, then Floor & Decor (one of Berkshire’s more unmentioned stakes) is what you’d get. 

Floor & Decor is a fast-growing specialty chain with 170+ warehouse stores serving the hard surface flooring category. Their larger store format allows them to carry a vastly larger selection than peers, avoid lost business from stock-outs and offer the lowest prices by buying in bulk directly from manufacturers. Additionally, in-store designers help them convert foot traffic and increase average ticket size. 80% of customers who enter a Floor & Decor end up purchasing something.

Each store has incredibly strong unit economics with ~2.5 year payback periods and 50% cash on cash returns in just 3 years. 

With the secular shift from carpet to hard surfaces and a superior value prop, FND thinks they can grow their footprint at least ~3x in the US. If successful at executing their vision, they have scope to grow their intrinsic value to >3-5x their current market value. However, that is not without risk.

In producing our report, we talked to dozens of sources including employees, industry experts, consumers, pros, and competitors. We hope you enjoy learning about the flooring industry and another great company! 

You can find the following (and more) in this report:

1. Business History.
2. Business.
3. Operating Model.
4. Industry and Market.
5. Competitors.
   • The Home Depot.
   • Lowe’s.
   • LL Flooring.
   • The Tile Shop.
   • Other Competition.
6. Peer Metrics.
7. Store Economics.
8. ROIC.
9. Management and Incentives.
10. Valuation.
11. Risks.
12. Summary Model.
13. Conclusion.

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