Floor & Decor Holdings Inc (FND) 2017 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

This is Floor & Decor's Fourth Quarter 2017 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded today, Thursday, March 1, 2018.

(Operator Instructions)

I would now turn the call over to Matt McConnell, Manager of Investor Relations at Floor & Decor.

Please go ahead.

Thank you, Stacy.

Good morning, everyone.

I'm Matt McConnell, Manager of Investor Relations.

Joining me on our call today are Tom Taylor, Chief Executive Officer; and Trevor Lang, Executive Vice President and Chief Financial Officer.

Also in the room is Lisa Laube, Executive Vice President and Chief Merchandising Officer, who will join us for the Q&A session.

Before we get started, I would like to remind you 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 may discuss non-GAAP financial measures as defined by SEC Regulation G. 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 the Investor Relations website, ir.flooranddecor.com.

A recorded replay of this call, together with related materials, will be available on our Investor Relations website, ir.flooranddecor.com.

Now let me turn the call over to Tom.

Thank you, Matt, and thank you, everyone, for joining our call.

Fiscal 2017 marked our ninth consecutive year of double-digit comp growth, averaging 15% per year.

We believe our strong financial results are a reflection of our unique business model and disciplined culture of innovation and reinvestment that has disrupted the residential hard surface flooring industry.

We're excited to carry this momentum into 2018.

We would like to thank all of our associates for their hard work and dedication to our customers throughout the year.

Now turning to our fourth quarter results.

They were exceptional.

Sales increased 40% to $390 million, driven by a comparable same-store sales increase of 24.4% and adjusted diluted earnings per share growth of 72.7% to $0.19.

We had broad-based growth, including double-digit comparable store sales increases across all 6 regions.

From a category perspective, all categories had positive comps, with laminate LVP tile installation accessories above the company average.

Our comparable store sales increase was aided by an estimated 800 basis points related to the increased sales in our 5 Houston comparable store sales due to Hurricane Harvey.

The entire Floor & Decor team from all 21 states reacted quickly to serve the Houston market.

Excluding the 5 comparable stores impacted by Hurricane Harvey, fourth quarter comps increased 16.2%, which speaks to the underlying strength of our core business.

Trevor will provide more details on the impact from Harvey as it relates to our 2018 outlook in his remarks.

During the fourth quarter, we successfully relocated our Savannah distribution center to a new 1.4 million square foot facility, which was our second DC relocation in 2017.

Along with the move of our Los Angeles DC in the first quarter of 2017 and expanding our Houston DC in the third quarter of 2017, we expanded our total DC square footage capacity to 2.9 million square feet in 2017, 2.4x where we started the year.

This was a significant task, and credit goes to all of our associates involved as this was a great accomplishment.

In the first quarter of 2018, we expanded our Houston DC 150,000 square feet and plan to complete the transition from our Miami DC to our newly expanded Savannah DC.

Also in the second half of 2018, we plan to expand our current L.A. DC footage by an additional 350,000 square feet.

These are great examples of how we're reinvesting back into the company to support our future growth.

Fiscal 2018 sales grew 31.8% to $1.4 billion.

Comparable store sales increased 16.6%, and adjusted diluted earnings per share grew 53.3% to $0.69.

In 2017, we opened 14 new stores, ending the year with 83 warehouse format stores averaging 73,000 square feet.

We remain committed to grow our store base by approximately 20% annually for the foreseeable future as we have for each of the past 5 years.

We successfully opened in multiple new markets, including in 4 new states, Alabama, Kansas, Kentucky and Wisconsin, while maintaining the healthy mix of new store openings in existing markets where we already operate successfully.

While these new stores have not yet hit their 1-year anniversary, we are very pleased with their performance as a group.

We're also pleased with the performance of our categories, which all comped positive in 2017.

Categories performing above the company average for the full year included laminate LVP and decorative accessories.

2017 was another year of innovation across multiple fronts like waterproof vinyl and water-resilient laminate, higher-end deco products and innovative installation solutions that save our Pros time and money.

Turning to the key drivers behind our strength in our financial results.

As I mentioned on prior calls, there's not just one solution or strategy that drives our ninth consecutive year of double-digit comp growth.

Our business model and our unparalleled customer value proposition is just different from anyone else's, allowing us to continue to gain market share as consumers become aware of our concept.

The combination of our business model, core values and a growing hard surface flooring market in the U.S. has led to our double-digit growth over the last 9 years.

Now let me briefly outline our key strategic priorities and share our goals for 2018.

As a reminder, our priorities are new store growth, increasing comparable store sales growth, expanding the connected customer experience and continuing to invest in the Pro customer.

New store growth.

We have signed leases for 16 of the 17 planned new stores for 2018.

This year, we plan to open stores in Boston, Long Island and Seattle as new stores in existing markets that have already successfully -- as well as in markets with -- that have successful stores operating today.

As Trevor will touch on, while the new cities we are targeting are more expensive to enter, my experience in the residential repair and retail industry indicates that the stores in these cities will be more productive over the long term.

We are excited to enter these new markets and plan to put our best foot forward to serve these communities.

We believe they will provide a good return on investment.

The 12-store class of 2016 and 14-store class of 2017 are both exceeding our expectations, and their financial results are meaningfully exceeding the early results of previous new store vintages.

Our improving economics of new stores opened in new and existing markets gives me the confidence that this is the right time to enter these larger markets.

Over time, we look forward to building our presence in these important geographies and introducing more new customers to the Floor & Decor brand and experience.

Our cadence of new store openings this year will be back-end weighted, and we expect to open our first new store to open at the end of fiscal March.

Our next goal of increasing comparable store sales.

We're pleased with our momentum, but we believe there are always opportunities to improve.

Our 2018 initiatives are centered around continued product innovation, newness, improved localized assortments, more productive inventory as well as strategies to improve the experience for our Pro and DIY customer.

We continue investing to enhance our customer experience by focusing on our service, optimizing marketing strategies, improving visual merchandising both in-store and online, plus providing free design consultation and further integrating our connected customer experience.

As we continue to increase the awareness of Floor & Decor brand, we believe there is significant opportunity to gain market share.

Our studies indicate if we can get a customer to experience the Floor & Decor brand in-store or online prior to making a purchase decision, we convert them 80% of the time.

With the benefit of tax reform, which lowered our effective tax rate and provided additional opportunity for investment, and the insights from recently completed -- from a recently completed customer purchasing path study we mentioned in our last call, we're accelerating investments in 3 broad areas.

One, marketing.

We will pilot increased marketing campaigns in selected markets to see if additional advertising focused on TV and digital can drive higher sales and increase brand awareness.

Two, sales.

We're accelerating investments in our website and customer call center and improving technology tools to enhance micro merchandising.

We also plan to invest in new solutions for delivery, which we believe is a large opportunity for us.

And finally, people.

We're fortunate to have a talented team of associates committed to serving our customers.

We intend to reward them by promoting our best leaders into key positions, enhancing our benefits, implementing an employee stock purchase plan subject to shareholder approval and provide better training.

We believe these investments will help retain our best and brightest.

Next goal is expanding the customer -- connected customer experience.

We know that our customers and potential customers look to flooranddecor.com for hard surface flooring inspiration and education that they often research the category, sometimes before even visiting a store.

We continue to invest in our website, call center and new technologies to enhance the overall functionality and to improve our customer experience regardless of where they shop with us.

One example we are piloting is our project estimator tool, which helps both associates and customers select installation accessories.

We are consistently increasing content like how-to videos and inspirational vignettes.

We're interacting with customers on Instagram, Facebook and Pinterest.

Our buy online, pick up in store program continues to drive traffic not just to our website, but also back to our stores as approximately 85% of online purchases are picked up in the store.

In 2018, we'll also implement technology solutions to lower freight cost and get products to our customers faster.

Our customers have expressed that they like an integrated social, store and online experience, and we're making strides to improve upon early successes.

Currently, our sales procured online are about 6% of total sales and growing at a faster rate than our total sales growth.

The next goal of continuing to invest in the Pro customer.

Given the importance of our Pro customer over the last several years, we have invested across multiple facets to improve the Pro experience, including our stores now have rebranded in-store Pro desks strategically located to make it easy for the Pros to get in and out of the store fast.

Our stores are staffed by a Pro sales team with dedicated phone lines and direct access.

We offer free storage and design services to help with any project.

We have better delivery option than in prior years.

And in 2017, we rolled out a world-class CRM tool to our Pro teams.

Finally, we invested in industry-specific marketing and industry trade shows to stimulate brand awareness and clearly articulate the benefits of shopping with Floor & Decor.

We're always focused on how to get better, and we have spent a lot of time researching our Pro customers and developing clear strategies to improve our business.

Several initiatives in the pipeline include a Pro app, better and faster delivery options, rewards programs and improved credit offerings.

It will take time to roll out these initiatives, and we look forward to updating everyone on our progress throughout the year.

We're still in the early innings of maximizing our Pro business, and we see strong growth runway ahead.

Finally, we have made investments in both technology and talent in our commercial initiative.

And while it is small, I believe it can be a meaningful business for us.

In fact, in 2017, just 2 years after starting this business, it already has sales above an average mature store.

I believe we have laid the foundation for success in commercial in large and growing markets.

In summary, 2017 was a very successful year for Floor & Decor, in which we accomplished many key milestones.

We delivered our fifth consecutive year of over 30% sales growth, our ninth consecutive year of double-digit comp growth, and our store footprint has more than doubled in the last 5 years.

Over 70% of our new store management positions were filled via internal promotion, which is something I am very proud of and hope to be able to continue for years to come.

In April 2017, we also made the important transition from being a private to a public company.

It has been a tremendous experience for all of our associates.

But our focus now is on 2018 and beyond.

As mentioned before, we have a number of strategic priorities to execute, and we must remain disciplined on the cost front while maintaining our philosophy of thoughtfully reinvesting back in the business to drive growth.

We expect 2018 to be another great year for Floor & Decor, and we're confident in the team we have in place.

Trevor will go through the details of our guidance in a moment.

Before I end, I want to thank all of our associates.

It's their hard work and passion that keeps our customers coming back and drive our operational and financial performance.

I'll now turn the call over to Trevor, our CFO and head of Pro Services, to go over our financial results and guidance.

Thanks, Tom.

Good morning, everyone.

I will review our fourth quarter and full year 2017 results, and then discuss our outlook for fiscal 2018.

Fiscal 2017 was our best year on record with our highest sales and profit.

Our positive fourth quarter and full year 2017 growth was broad-based.

We posted double-digit comparable store sales increases in all 6 regions, and all of our product categories posted positive comparable store sales gains.

Our investments in people, innovative products, a connected customer experience, visually inspiring stores, Pro, along with our unique large-format stores, in-stock inventory model continues to resonate with both consumers and professional customers.

Net sales in the fourth quarter of 2017 increased 40% to $389,500,000 from $278,300,000 in the fourth quarter of 2016.

We ended the quarter with 83 total warehouse-format stores, an increase of 14 stores or approximately 20% versus the 69 stores at the end of the prior year period.

During the quarter, we opened 3 new stores in Alexandria, Virginia, Austin, Texas and Overland Park, Kansas, and we continue to be very pleased with the performance of our new stores opening during the year.

Our fourth quarter comparable store sales increased 24.4%, and this was on top of a 14% comp store sales increase in the prior year period.

Our fourth quarter comp store sales were driven by a combination of post-hurricane demand in the Houston market as well as continued positive momentum in our other markets outside of Houston.

Excluding our 5 comparable stores in Houston, our comparable store sales increased 16.2%.

Similar to the rest of the year, the fourth quarter comp increase was driven largely by transaction growth, though both transactions and average ticket increased for the year.

Now onto profitability.

Gross profit increased 41.5% to $162,400,000 in the fourth quarter from $114,700,000 in the fourth quarter of fiscal 2016.

Gross margin increased approximately 50 basis points to 41.7% in the fourth quarter of fiscal 2017 from 41.2% in the fourth quarter of fiscal 2016.

This increase in gross margin was driven primarily by a 70 basis points increase in product margin, which was the result of favorable product mix and higher product margins, slightly offset by 25 basis points due to the increase in higher distribution costs as a result of the substantial expansion in our distribution center network, as Tom previously mentioned.

As a percentage of sales, total SG&A leveraged 70 basis points to 33.4% compared to the fourth quarter of 2016.

SG&A leverage came entirely from leveraging our stores on -- store expenses on higher sales.

Our expense leverage on higher sales was partially offset by the 14 new stores we've opened during the year, given our new stores operating expenses generally run about 50% higher as a percentage of sales in their first year of operation than our mature stores.

Since we're growing our store base by approximately 20% a year, this will partially mitigate any operating leverage we are getting from our more mature stores.

Our strong sales growth, gross margin expansion and leveraged SG&A drove a 62.2% increase in operating income during the fourth quarter to $32.4 million as compared to $20 million in the fourth quarter of fiscal 2016.

Our reported provision for income taxes in the fourth quarter was a benefit of $18 million compared to a benefit of $3,800,000 in the fourth quarter of 2016.

The tax benefit was primarily driven by a $10,600,000 excess tax benefit related to the exercise of stock options in the fourth quarter of 2017 in accordance with ASU 2016-09 as well as a $17,800,000 benefit from revaluing our deferred tax liability in connection with the new tax legislation passed in December 2017.

We have adjusted both onetime benefits out of our calculation of adjusted diluted earnings per share in today's release.

Before I discuss net income and guidance, please note that I will discuss both GAAP and non-GAAP measures as described in our earnings release.

We believe our non-GAAP disclosures enable investors to better understand our core operating performance on a comparable basis between periods.

A reconciliation of these non-GAAP metrics to their most directly comparable GAAP financial measures can be found in our earnings release issued in connection with this call.

Adjusted net income and adjusted diluted earnings per share were $19,900,000 or $0.19 per adjusted diluted share for the fourth quarter of 2017 as compared to $11,300,000 or $0.11 per adjusted diluted share in the fourth quarter of 2016.

This represents an increase in adjusted net income of $8,700,000 or 77%.

Adjusted EBITDA for the fourth quarter increased 54.5% to $43.5 million compared to adjusted EBITDA of $28,100,000 in the fourth quarter of fiscal 2006 (sic) [2016].

For the year, net sales grew 31.8% to $1,400,000,000 compared to $1,100,000,000, and comparable store sales increased 16.6%.

For the year, we estimate that Hurricane Harvey added just over 200 basis points to our comps, almost all of that coming in the fourth quarter of 2007 (sic) [2017].

Adjusted net income for 2007 (sic) 2017 increased 58.8% over the prior year to $71 million or $0.69 per adjusted diluted share as compared to $44,700,000 or 45% per diluted adjusted share for fiscal 2016.

Our full year adjusted tax rate was 35.9%.

Adjusted EBITDA in 2017 increased 46.5% to $158,800,000 as compared to $108,400,000 in fiscal 2016.

Overall, we are very pleased with our full year and fiscal 2017 results.

We believe we are striking the right balance between growing our sales and earnings while investing for the long term.

We ended the quarter with $146,700,000 in cash and available liquidity under our revolving credit facility and $193,500,000 of borrowings outstanding.

Our inventory balance at the end of fiscal 2007 (sic) 2017 was $428 million, up $134,200,000 or 46% from fiscal 2016.

As described previously, the increase was driven by an additional 14 new stores opened in 2017, as well as previously mentioned strategic investments as we completed our large Savannah distribution center relocation in the fourth quarter, combined with continued preparation for the Miami distribution center shutdown in 2018.

We also decided to make strategic investments to improve key in-stock positions in anticipation of the Chinese New Year shutdown.

Now turning to first quarter and full year fiscal 2018 guidance.

There are 3 unique events I want to explain before giving guidance.

First, as it relates to post-Harvey hurricane demand in Houston, we have said our experience with prior hurricanes and flooding events as well as others in the industry suggest the lift in sales in Houston should continue through the third quarter of 2018 but moderate in each successive quarter as we get further away from the hurricanes.

Therefore, we are planning for elevated comparable store sales in our Houston market over the first 3 quarters of 2018, moderating in each successive quarter.

Given our fourth quarter 2017 comparable store sales were 24.4%, an estimated 800 basis points of which was due to the Houston demand because of the hurricane, our model assumes fourth quarter 2018 comparable store sales will moderate to the mid-single-digit range.

We expect our comparable store sales, excluding Houston, to be in the high single digits to low double digits for all of 2018.

Second, as Tom mentioned, we have made the strategic decision to enter Boston, Long Island and Seattle.

Our success in Chicago, New Jersey, Washington, D.C. and Los Angeles, along with improved performance from our class of 2016 and 2017 new stores, gives us confidence now is the right time to step into these larger markets.

However, since there are more -- since these are more expensive markets relative to prior new store openings, we estimate this will require an additional investment of slightly more than $10 million in operating and preopening expenses compared to what we invested in fiscal 2017 and previous years.

We are confident that these more expensive markets will have a positive return on investment and be more successful in the long term, but in the initial year of opening, these stores will have an incremental cost.

For example, our store start-up expense in 2018 is expected to increase approximately 75% to $29 million versus fiscal 2017.

I would also point out that our new store opening cadence will be back-end weighted in 2018 relative to the previous years, so we are not getting as much sales from the new stores as we have historically simply due to our opening stores later in the year relative to the prior years.

Third, as we previously noted, we expect to see significant benefit in 2018 and beyond due to tax reform passed in December 2017.

We estimate our effective tax rate will decline by about 1,200 basis points in 2018 to an estimated 23.7% versus 2017.

We were already reinvesting back into the business at a high rate even before tax reform.

However, as Tom already outlined, as a result of the tax reform, we have taken this opportunity to accelerate our high priority strategic investments that we believe will further drive sales and further strengthen our strategic position.

These incremental investments are estimated to be about 25% of the tax savings we expect to receive due to tax reform.

We expect these initiatives will cost us about 30 basis points to operating margin.

As a result of the investments, along with our new stores planned to open in Boston, Long Island and Seattle, we expect our operating margins will be about flat for fiscal 2018, even though we are forecasting accelerated net income growth.

We are confident these investments are the right thing to do for the business, will further distance our model from the competition and will position us for further growth in 2019 and beyond.

Taking these factors into account, with the strong economy and tax reform as a net positive for the residential repair and remodel market, for the first quarter of 2018, we expect net sales to be in the range of approximately $397 million to $402 million, an increase of 29% to 31% versus the first quarter of fiscal 2017.

This growth outlook is based upon a comparable store sales increase of 14% to 15%.

We are planning on a 100 to 110 basis points increase in operating margin to a range of 8.4% to 8.5% in the first quarter.

GAAP diluted earnings per share for the first quarter of 2018 is expected to be in the range of $0.22 to $0.23, an increase of 69% to 77%.

We are assuming 105 million weighted average diluted shares outstanding for the first quarter of 2018.

We expect adjusted EBITDA for the first quarter of 2018 to be $45 million to $46 million, an increase of 41% to 45% over the first quarter of fiscal 2017.

Turning to our full year outlook.

We now expect sales for fiscal 2018 to be in the range of $1,690,000,000 to $1,730,000,000, an increase of 22% to 25% versus fiscal 2007 (sic) 2017 . This net sales growth outlook is based on 17 new warehouse store openings and an assumed comparable store sales increase in the 8.5% range to the 11.5% range.

We expect modest improvement in gross margin due to higher product margin and leveraging our supply chain costs on higher sales.

We expect our store selling and operating expenses to remain about flat as a percentage of sales versus last year.

While we plan to get leverage out of our comping stores, this is largely mitigated by higher costs in new stores, as previously discussed.

We expect our store start-up expenses to increase by about 75% due to entering these higher-cost new markets as well as an increased number of store openings.

We expect modest leverage out of our corporate general and administrative expenses.

Diluted earnings per share for fiscal 2018 is expected to be $0.91 to $1 a share.

Diluted weighted average shares outstanding is estimated to be a 105,300,000, and fiscal 2018 tax rate is estimated to be 23.7%.

As a reminder, this guidance does not consider the tax benefit due to the impact of stock option exercises that may occur in fiscal 2018.

We expect fiscal 2018 adjusted EBITDA to be in the range of $189 million to $201 million, an increase of 19% to 27% over fiscal 2017.

With respect to capital expenditures in fiscal 2018.

We expect to spend about $140 million to $150 million in total, with $89 million to $93 million of this capital budget spent on the 17 new store openings in 2018.

$28 million to $32 million is earmarked for store remodels and distribution centers.

The remainder of our CapEx, approximately $23 million to $25 million, will be directed towards IT, infrastructure, e-commerce and store support center initiatives.

For all of the details to our -- for our results and guidance, please refer to our earnings release.

I think with that, operator, we'd like to turn it over to the Q&A portion of the call.

(Operator Instructions) Our first question comes from Elizabeth Suzuki with Bank of America Merrill Lynch.

Just as you ramp up your investments with the benefit of tax reform, first, can I -- am I correct that you said you'd invest about 25% of the savings?

Did I catch that number correctly?

That is correct.

Yes.

Okay, great.

And when do you think the benefits of those investments really start to be seen?

And are those investments being a little more back-end loaded in the year?

Or are they just going to kind of flow throughout?

I mean, the benefits are -- it's -- we're investing in 3 areas.

We've mentioned marketing.

We're going to invest and do some marketing initiatives to see if we can drive sales with that, if we can improve awareness.

We're not doing that across the company.

We're doing it in markets so we can test, pilot, learn and then roll out going forward.

Our whole goal -- our awareness is still at a level that we'd like to improve.

We want to get more people to understand the Floor & Decor brand, and we think turning that up and learning from that will be beneficial.

The people investments are focused around retention, continuing to reduce turnover in our stores, making this a great place to work.

And then the initiatives are -- you don't get -- we can improve delivery option.

It doesn't have an immediate impact on sales.

We can improve technology and micro merchandising.

It doesn't have an immediate impact.

But over time, we'll get benefits of it.

So we think all of the things that we're doing are right.

We could see some modest benefit towards the back half of this year and into the next part -- and into the beginning part of next year.

And just to add a little bit, Liz.

Some portion of $9 million, and we're not just spending that immediately, right?

So those costs will come kind of throughout the year.

And we do think because of those costs, once they get up and running and our consumers and our employees get the benefit of it, we'll start to see hopefully more of that benefit in kind of later part of this year and into 2019.

Okay.

And then similarly, on the store openings, which you said are going to be a little bit back-end loaded in the year, so I would assume that the cost associated and the CapEx going into those stores is also going to be back-end loaded.

So we should expect more of the margin impact to be then later in the year?

Yes, I think that's right.

If you look at our store start-up expense for Q1, it's actually going to be below last year.

We opened 3 new stores in the first quarter of last year versus really only opening 1 on almost the last day of the quarter.

So we are getting a benefit from the timing in the first quarter of the year.

But you're right, as we get to the back half of the year, that's when we plan to see the increase in some of that spending.

So we will have a stronger first half of fiscal 2018 relative to the back half.

Also, because of the hurricane, that will also add to the fact that the first half of 2018 will be stronger than the back half.

Both -- all will be very good.

But as Tom was very clear over the last 2 earnings releases, the Houston hurricane is going to make things a little unique for the fourth quarter of last year and the first 2 to 3 quarters of this year.

Our next question comes from Michael Lasser with UBS.

More and more of your specialty peers are talking about the impact that promotions and new competitors are having on the market.

Presumably, that's you.

How do you see that having -- and their response to that having an effect on your business?

We think we have a unique business model, a unique value proposition that's just different than everybody else's.

And every competitor has their unique strengths and things we try to learn from and try to improve our business the way we do things.

But we're going to continue to stay focused on what we do.

We think our value proposition is different.

And so we're going to keep doing what we do and learn from them what we can.

And we don't see a huge difference in kind of what's going on within the marketplace that's affecting us.

So Tom, you're not expecting the environments to get more promotional in response to the disruption that your model's having on the marketplace?

I mean, I don't think so.

It's not like -- we've been growing at this rate, entering new markets for -- the whole 5 years I've been here, we've been opening 20% new stores per year.

So we're adding markets.

We've seen our competitors try lots of different things.

And it's just -- we're different.

They all do things that are good, but our value proposition -- our total value proposition is just different.

So I'm not expecting things to be any different than we've faced over the last few years.

Michael, this is Trevor.

The only thing I would add, too, is if you think about the level of investment, we've invested most of our free cash flow back into the business for a long period of time.

I think, Lisa, Brian, Tom and I feel better about the talent and the technology and the infrastructure than we ever have, and we've got a good economic backdrop as well.

So we feel very good about where we are strategically positioned, and we feel really good about where the economy is.

And we think we are further distanced than we've ever been from our competition.

My follow-up question is you're going to make some investments in trying to increase your awareness this year.

Where do you think your awareness is in some of your more mature markets?

And where do you think it is overall?

Yes.

I'll let Lisa answer that question.

Yes.

So for overall -- and we look at it differently.

We look at -- this is Lisa, by the way.

We look at consumer versus Pro.

So from a consumer perspective, our awareness is about 64%.

But it's only 10% unaided.

So we still have a huge opportunity in front of us from a consumer perspective to know who we are and to think of us first.

On the Pro side, it's higher, of course.

We're around about 80% market awareness, of which about half is aided and about the other half is unaided.

And we also know from our research, we still don't get the share of wallet that we would like to get from our Pros.

So we think we've still got a very long runway in front of us.

Certainly, our more mature markets, markets like Atlanta, Dallas and Miami, where we've been longer, those numbers are stronger.

But even in those markets, it is still a huge opportunity for us.

Our next question comes from Matt McClintock with Barclays.

If I could just take a different take on Michael's question.

We've seen much more subdued results in this most recent quarter at a number of your competitors.

And your business continues to run along at a -- at its extremely high rate, if not accelerate.

And I was just wondering, is there anything specific to the last quarter that had changed competitively or that you're doing differently?

Or anything like that for the industry that's changed that you can call out that would create such a dramatic difference in performance for one quarter?

Not really.

I mean, as I've said kind of, Matt, all along, it's not one thing we can point to that has driven this kind of performance over this amount of time.

We have improved everything from the product within our stores.

We've improved the way we service our professional customers.

We've improved the way we market.

We've improved the way we train.

There's no one thing that's different, and no one thing got different towards the end of the year that drove the separation in performance.

Again, I just think that people are becoming more aware of us.

We're entering markets where the stores are -- when you're opening stores at this pace, you're increasing the awareness of your brand by just opening stores.

And I believe as we continue to increase awareness and get customers in our stores -- remember, if we can get a customer in the store that's buying the category, we're going to convert them 80% of the time because our total value proposition is just different.

So as our awareness gets better and as we open more stores -- and we opened a lot of stores, by the way, in the third and fourth quarter, that helps our awareness and that helps drive performance.

Matt, this is Trevor, too.

The other thing -- I know Wall Street will focus on our publicly-traded competitors.

But you have to remember, that's not our biggest competition, right?

We are the independents.

We're much more Pro-focused than they are, and they're much more consumer-focused.

Our consumer is just very different, right?

We have a more stable consumer in the sense that 60% of our business is influenced by the professional customer versus the DIY customer.

And because we service that professional trades person, I think we just have a much more consistent business, and that's another very differentiating factor when you think about us versus our publicly-traded competitors.

And just as my follow-up question, the commercial business, you talked about that, Tom.

It seems like that business is coming along nicely, growing nicely.

And you're talking about taking 25% of your savings and reinvesting back into the overall business.

Is a portion of that going to be dedicated towards commercial?

And how do you see the commercial business ramping from here over the next couple of years?

I'll let Trevor handle the ramping part.

But we've already -- yes, there'll be some investment because of corporate tax reform into the commercial, but we were already investing at a pretty aggressive rate.

Over the last couple of years, we've continued to add resource to that department.

There's a long tail in commercial, I'm sure you're aware.

If you're bidding on buildings and projects like that, you don't just get them and turn them into delivered sales automatically.

There's a long time lag with that.

But we're pleased with what our -- the jobs that we're landing and kind of what's in the pipeline of what's coming in the future.

I'll let Trevor talk a little bit about the ramp.

Yes.

And when we talk about commercial, we talk about commercial sales both coming from in our stores and then the true commercial division together.

We get big jobs, both out of our stores and our commercial division.

So it's above 1% of sales today, which is great from nothing 2 years ago.

I think more to come on that as we go throughout the year.

We are investing a lot in technology and people for those folks.

It's still fairly immaterial.

But when you look at the overall market, that commercial market, some portion of 20% to 30% of the entire market, and the same value proposition that has made us successful in the residential repair market, we have those same benefits for the commercial space.

And it's a very disaggregated space with competition that is not large competitors.

And because of our sourcing abilities, we think we will continue to grow market share there.

So more to come in the future as we continue to grow that business.

We do think it'll continue to grow for the next few years at a faster rate than the total sales of the retail business.

Our next question comes from Christopher Horvers with JPMorgan.

Can you talk about -- you're assuming that your stores outside of Houston, I think, are up high single digit to low double digit.

You've talked about the mid-teens growth rate in the market over the past few quarters.

Is there something that's changing there?

Are you seeing something different in the business?

Or are you just sort of looking at the lapse and saying, "Hey, let's try to be prudent here"?

Certainly, a little bit of the latter.

But I do think if you look over the last 4 or 5 years, the overall market's been pretty good in residential repair, hard surface flooring.

We and the market are planning to grow, but not grow at the same rate just because the last few years have been so strong.

So we think our positioning, we will continue to grow at a faster rate than market.

I think our mature stores will continue to grow at a faster rate than the market.

But just as we and everybody else forecasts a slightly lower growth in the overall market, we're kind of bringing our sales along with that slowing of the overall market.

Relative to what sort of, I guess, third-parties are saying about expected growth for '18.

Yes.

I think most of what I've read, Chris, is that we are expecting the overall macro R&R market as well as the overall macro flooring market to be great, but not to be as great as it has been for the last 3 or 4 years.

Understood.

We get a lot of questions in terms of your ability to be the price leader in the market, certainly, versus specialty.

But you've talked about versus your -- the big-box competitors being a price leader.

Can you talk about what drives that?

Do you think you buy better?

And as you think about the long term, as you grow the number of stores, I think some specialty competitors have run into issues in terms of not -- it becoming cumbersome sourcing from more vendors rather than fewer vendors.

So is there sort of a diseconomies of scale as you grow?

Yes.

I mean, look, I -- look, it's -- certainly, we buy -- if you look at independent flooring stores, generally, we buy different than them, right?

We're direct to the source.

We've got a lot of merchants dedicated to the category.

We have an agent sourcing office that assists those merchants with finding the right suppliers.

We have a complex supply chain.

We've had over 200 suppliers for a while.

So it's -- we don't anticipate that number to grow much, but they change out over the course of time.

We have -- we're very -- we work very hard to partner with our suppliers, so they're investing right side-by-side with us.

And we posted a huge comp last year, and our in-stocks, as a company, were never better.

So our suppliers are doing a good job of keeping up with those investments side-by-side.

From a price standpoint, I mean, look, it's -- we do our best to make sure that we're giving our customer the best value that they can possibly have.

And we certainly are -- we watch the competition.

As Trevor mentioned, the competition is broad.

It's more than just the home improvement centers.

It's the independent flooring stores.

And we try to watch and make sure that we're maintaining that price perception within our customers and our Pros can trust us.

So the only other thing I would say is that our assortments are broad in every category that we sell at.

And so we're able to -- when you look at the total value proposition across the whole line of products, that's where we try to continue to be better.

You can't just look at opening price points.

You have to look across the total line.

And we tend to be able to offer a very good opportunity -- a good value for our customers.

Chris, Trevor.

There's just one thing I'd add to that.

We've spent a lot of time and resources certainly over the last 5 years but a lot in the last 6 or 7 months.

And what we've found from our customers, price is in the top 4 reasons they buy from us but, as Tom mentioned, it's the total value proposition.

The biggest thing that matters to our customers is selection of product, right?

Having that 73,000 square foot box with in-stock inventories, combine that with super great quality products that people can trust with an educated sales force and an integrated technology, and we're going have the lowest price, that's the way to think about it.

So people don't just buy from us because we have low -- the low prices.

We do.

People buy from us because they have confidence that we have the selection, the quality, and we can educate them to make a really good decision for what's a fairly expensive complicated purchase.

So price is important, but I wouldn't say it's the very most important thing for the decision-making process.

Got it.

And then, Trevor, just a real quick one on the model.

Anything about the gross margin cadence this year, considering the supply chain investments?

No.

The overall gross margin throughout the year, our plan is to have kind of sort of modest growth in gross margin every single quarter.

Our next question comes from Matt Fassler with Goldman Sachs.

Two high-level questions really about the market as you see it.

First of all, obviously, you have great efforts in Pro and in commercial.

If you think about the underlying drivers of the business from the market level, what do you see happening to DIY demand relative to Pro demand to the extent that you can discern that bottoms-up from your numbers?

Matt, it's hard for us to separate DIY demand versus Pro demand.

If you look at the fourth quarter, when you're comping double digit in every region across the country, demand's coming good from both our customer segments.

So as you look at what we're guiding in the first quarter, that takes -- puts context from kind of what we're seeing in the business.

So we're seeing continued demand for product.

I think the innovations last year -- but not just last year but over the last few years in durability in vinyl and laminate have continued to drive people to want to change maybe more quicker than they have.

And innovations around fashion within porcelain ceramic tile, I think, have also driven people to change.

So I think the demand is still good.

I think it's still a project that people are going to do in their homes.

And Matt, just from a -- quickly, from a macro perspective, if you think about we've got higher job growth, higher income growth, the value of people's households, which is, generally speaking, the most important attribute, we see obviously how growth factors because the value of the household is going up.

The only headwinds we see is obviously mortgage rates are planning to go up a little bit.

The average mortgage right now, I think, is 4.2%.

People expect that to go up a little bit.

Tax reform net is a positive for us, but there could be some headwinds with the loss of the tax deduction for your mortgage interest and taxes.

But net-net, from a macro perspective, we -- as I mentioned previously, we think it's going to be good.

I'm just not sure it's going to be the very high growth we've seen over the last 3 Years.

Understood.

And then secondly, as you think about e-commerce, and you detailed some of the investments that you're making, what's your observation in consumers propensity to shop online?

Are there any changes to technology or display or anything like that, that you would see as incremental triggers to drive that channel shift more so?

Yes.

We -- I mean, we have seen, as we -- both I think Tom and Trevor mentioned, our e-commerce business continues to grow at a faster clip than the total company.

And we continue to see the customer more and more comfortable shopping online.

I think the best thing about our e-commerce business is that we have our brick-and-mortar stores as well.

So for us, it really is about a connected customer experience.

And we know that our customers go back and forth between the website and the stores.

And so for us, it's about creating inspiration.

It's about educating the customers.

It's about giving them a great experience online that helps them to understand why we're the best place to shop and really to help the stores complete that purchase as well.

Our next question comes from Seth Basham with Wedbush Securities.

My first question is around CapEx.

Could you provide a little bit more color there?

Is any of the tax reform reinvestment going into CapEx, first of all?

Yes.

The -- we -- the biggest piece of our CapEx investment, for tax reform specifically, is in technology solutions.

Technology solutions for our call center, technology solutions for our web, technology solutions to do workflow solutions to all our corporate and stores to more easily understand what we want them to get done.

The biggest increase in our CapEx over -- so that's for corporate tax reform.

That wasn't that much.

That was probably $3 million or $4 million in total that we spent on CapEx.

The bigger investment we're making in CapEx, much like I talked about the operating expenses increasing, as we're entering some of these more expensive markets, the cost of construction is going up as well.

And we're investing more in our stores because we've seen a nice return in some of those investments.

So we are planning on higher cost of CapEx for our new stores.

But as Tom mentioned and I mentioned, we've seen a meaningfully higher -- versus where we were 2 years ago in sales and operating profit.

So it warrants the investments that we're making there.

Got it.

That's helpful.

And then following up on the reinvestment of the tax savings.

In terms of the buckets of marketing people and other, how would you break those down?

Would they be about equal?

TV versus -- it's really TV and digital.

No, he's saying, when you look at what you're spending in each, are they equivalent?

Marketing, (inaudible), people.

The 3 things.

I think they're close.

I think they're about equal.

I think that's a fair assumption.

Our next question comes from Peter Keith with Piper Jaffray.

I was curious on the delivery initiative, if you could maybe give us a little more details around that.

Is that something that you plan to charge a fee for?

If so, could you frame that up and maybe put that in the context of where your average ticket is running right now?

So the first part is we know that our delivery capabilities, they've certainly improved over the last 5 years from where we started.

But we understand our -- we're so much like a supply house that being able to get products to customers quicker, more efficiently, more predictable is an opportunity for us.

So we are going to invest in improving the service.

It's not so much about -- I wouldn't say it's a cost of doing business.

We're not looking to make a lot of money on delivery.

We're just looking to provide the best solutions for our customers to get the product to their house in a quicker fashion.

So we're going to invest more in resource into those markets -- into a few markets to try to understand how high is up and if it has a benefit on our top line.

And yes, it should help average ticket, right?

If we can deliver better, there should be a benefit that comes out of average ticket because more Pros will buy more, and Pros tend to have an average higher ticket.

Okay, all right.

Great.

And then maybe another question on the advertising.

So we've seen the new TV commercial.

Wondering if that's something that you guys now will be running at a national level.

And as well as have you noticed any initial impact from that in terms of brand awareness?

Well, I think it's too early to tell on the brand awareness as this new campaign has just started.

It's very similar to the campaign we've had in the last couple of years.

And yes, our awareness over the last few years has continued to go up.

We just still have a very long runway.

As far as the local and the national, we do run mostly local.

But this year, just from an efficiency perspective, we were able to put some of the dollars into national and actually leverage that cost.

So yes, you will see a little bit in national, but we are still primarily in spot local in TV.

Okay.

One quick follow-up (inaudible) then.

I think you've run historically at about 2% of sales with advertising.

Is that something that now will tick up as a percent of sales?

So just to be clear, in total, it's closer to 3%.

The mature stores are just under 2%, but our new stores are much higher than that.

It will be -- our marketing is going to go at a slower -- grow at a slightly higher rate than sales this year, again, tied to those new stores in those new markets.

And the initiative.

And the initiatives, yes.

Next question comes from Alan Rifkin with BTIG.

With such significant DC capacity added in 2017, can you maybe share a little bit of color on what the contributions to your operating margins will be for the year?

I know that you said that operating margins would be flat.

But specific to supply chain and DC costs, where should that shake out in '18?

Alan, most of that DC capacity came on in December of 2017.

The Savannah was the big expansion.

So we're not going to get a lot of leverage next year, next year meaning 2018, I should say.

Because 11 months, we didn't have the majority of that expansion.

So we won't get quite as much.

We are going to get some just because we're planning on 20 -- mid-20 sales growth.

But we're not going to get as much as you might think because the vast majority of that expansion came on in 2007 -- late 2017.

Okay.

And if I could, just play devil's advocate for a minute.

So your stores, excluding Houston, in this quarter comped 16%.

And so you folks have spoken about you should benefit for 1 year, which gives you 3 quarters of benefit in 2018.

And certainly, we understand that the benefit will be lower than the incremental 800 basis points we saw in Q4.

Taking all of that together, why would your comps only be 8.5% to 11.5% for the year?

You have such a significant contribution from Houston.

I think just -- if you think about the math of it, we are -- the comp in Houston was unnatural in Q4.

It was exceptionally high.

And customers reacted fast there, and they came in and they got what they needed.

An now they're on -- back to their lives.

So we do think Houston will be a lot lower in Q1 relative to Q4.

Still very strong and above what would be a normal run rate, and then Q2 and Q3 will be even less than that.

So we're 63% through with the quarter.

We have very good visibility.

We've taken that all into consideration.

So I would just say that we've put a lot of thought in this plan, and we have good visibility.

Yes.

And I think as we've said on other calls, we -- if we're fortunate to beat on the line then we'll flow through at 25% -- 20% to 25%, and we're pleased with the momentum in the business as reflected in our first quarter guidance.

And as Trevor said, it will moderate each quarter.

Houston is still doing terrific, but it is going to moderate the further we get away from the storm.

Our next question comes from Zach Fadem with Wells Fargo.

Could you walk us through expectations for gross margins just in a little more detail?

And maybe comment a little on some of the moving parts beyond product margins and mix.

I mean, you said a modest benefit from DC.

But are there any other expenses like rising freight costs that we should keep in mind this year?

So this is Trevor, Zach.

Our model is pretty simple.

We're expecting all of that improvement in gross margin -- or the vast majority of that improvement in gross margin, I should say, coming from better product.

And within that, we do think it's going to be mostly a mix benefit.

And give the teams credit.

They've taken cost out both from a product perspective and a supply chain perspective.

That being said, incorporated in our guidance is higher fuel costs, higher domestic trucking costs.

We're fortunate we put in a technology and we have really talented people in the supply chain that entered into long-term contracts, so we're not as exposed to people who don't have long-term contracts.

Big credit to our supply chain for being forward-thinking on that.

But we do plan on some inflation in the gross margin line as well as our labor costs, right?

We've also planned for increased labor costs there, and that's all contemplated in the guidance we've given you.

So our model is not that complex.

The vast majority of our gross margin is in product.

It's a very small percentage of our gross margin that's fixed costs, DC supply chain costs.

So that modest gross margin improvement we talked about is almost all going to come from product margins.

Got it.

That's helpful.

And you mentioned the '17 vintages had been your best performing.

How much of this do you think goes to macro?

And how much is just simply the fact that you've gotten better at managing the new store process?

And with the latest '17 vintages, is there anything new that you've learned that you would plan to tweak with the '18 stores?

So '16 and '17 were equally better than we thought they were going to be, and there's lots of reasons for that.

I think we've absolutely -- we've learned a lot opening this many stores since 2012.

And that 20% rate every year, we've kind of learned a little bit more and we've implemented our learnings into it.

Our awareness is getting better, so that certainly helping how the new stores ramp.

The stores we're opening in existing markets are absolutely opening quicker than they have historically opened.

But there's no learnings (inaudible).

We're not going to tweak much of what we've done.

We think what we did is working pretty well.

So for me, I think it's -- we've gotten a lot better at it.

We've implemented the changes, the way we open the store, how early we put people into the market, how we survey to get new Pros, how we do the grand opening events, how we market to the customers.

All of that has improved over the last couple of years.

We kind of like where we're at.

And I -- but I -- and I think a lot of the reason the stores are getting better is just awareness continues to improve across the country.

Now it's -- we open stores in new markets, and they've heard of us.

And that's beneficial, and that only gets better the more stores that we open.

So sure, a little bit, the macro environment when there's a demand in our category, that's going to have benefit, but I think most of our benefit is -- has been things that we've done.

Our next question comes from Dan Binder with Jefferies.

You talked a little bit about the hurricane benefit earlier.

I was just curious what -- within a range, being 2/3 through the quarter, what roughly do you think that hurricane benefit will look like in Q1?

And is it fair to assume that you're tracking in line with the plan right now or a little bit better?

We're absolutely in line with what we thought was going to happen.

Yes.

Somewhere between 400 and 500 basis points impact.

Okay.

My second question was around the Pro initiatives.

You mentioned a rewards program.

I'm not sure if that's underway yet.

But just curious how you think about what that might look like and if there's any kind of margin considerations around that.

I think if you're a Pro at the big-box guys, you get access to this bid room.

You get some discounts, and that seems to have helped them a bit.

I'm just curious if you're thinking something along the lines there as well as you want to go to that next level on Pro penetration.

Dan, this is Trevor.

So discounting is a 4-letter word at Floor & Decor.

We don't discount.

What it's really designed about is how do we be a better business partner with them.

So we do much better job in those markets of training our Pros.

We offer them business solutions, things like payroll and workers' comp.

We try to expedite their delivery to get them in and out of the back of the store faster.

A dedicated Pro team to servicing them.

But there is a points-based element to it as well.

And it's designed as a win-win type solution.

The more they spend with us, the more of the wallet we get with them, the higher points they get, and then they can redeem those points for kind of anything they want, vacations, golf clubs, that type of solution.

So we're -- we've been testing it now for well over a year.

We didn't enter into this lightly because we do want to make sure that we were doing it an appropriate way.

The test results in the 30-or-so stores that we have been doing it versus the control markets have been very encouraging.

We'll talk to you guys more about it this summer.

But the test versus control market have been very encouraging, and we do plan on rolling it out in kind of the mid- to later part of 2018.

And again, we'll talk to you guys more about that as we get throughout the year.

So presumably, those rewards have some costs to them as you scale it.

Is that -- do you think that's going to really move the needle a lot on the gross margin?

Yes.

Those points are there.

They're not that much.

And again, you only get the points to the extent you spend incremental sales.

And because our store operating flow-through is such, it's a net -- a very accretive incremental spend for us because, again, you only get the points to the extent you give us more sales.

So there is a slightly higher cost.

But as I mentioned, you only get them when you drive sales increases.

Our next question comes from Chuck Grom with Gordon Haskett.

It's Andrew Minora on for Chuck.

I had a quick question on inventory.

It's up 45% on the year versus 40% sales growth.

I was wondering if, looking ahead, you guys continue to expect inventory growth to outpace the sales growth.

And then I just have a quick follow-up.

This is Trevor again.

No, we do not.

We expect each of the quarters' inventory growth to slow as we go throughout.

And by the time we get to the end of the year, we expect our inventory to grow at a rate slower than our sales growth.

We just had really 3 unique events this year that, as I mentioned, moving our biggest and most important distribution center.

We just did not want to run out of inventory as we moved out Savannah in the kind of late November-December time frame.

Concurrent with that, we're shutting down our Miami DC, which is, frankly, our second most important DC.

We want to have plenty of inventory as we shut down that Miami DC.

We're ostensibly done with shutting down that Miami DC.

And then our sales were up 40% in the fourth quarter, right?

We had substantial sales growth, and we're going after product to make sure we improve our in-stocks.

And then finally, I would say we were -- we've done a better job in Lisa's 6 years here now with us.

But we were more methodical in Chinese New Year purchases, and we knew we had some in-stock opportunities for key categories that we could improve upon.

So long answer to a simple question, but no, we think our inventory relative to our sales growth will continue to get better as we move throughout 2018.

Great.

That's very helpful.

And then just a quick question on the percent of store managers you guys hire from within.

Obviously, that's very helpful from an associate knowledge standpoint.

How has that number trended over time from the 70% you guys talked about today?

Is it going up?

Or I guess, any color on that would be helpful.

It's going up.

It's gotten better in each of the last 3 years.

But it's -- when -- over the last 5 years, we built out a training department.

We've -- as we've grown like this, we've had to pull people from the field into the store support center.

So there was a point where we were taking up a lot of talent and we had to bring more people in from the outside than we'd like to.

But the number's stable.

My goal is to get it -- keep it between 70% and 75%.

We want to be able to create opportunities for people to move ahead in their lives.

We think that's something unique that's here.

And we continue to invest in our training department to make our training more robust to make sure when our managers, that as we're moving them along internally, that when they get to the store, they're ready to run the store.

So the number has gotten better, and we hope it continues to get better.

Our next question comes from Joseph Feldman with Telsey Advisory Group.

I wanted to ask a question about -- product innovation was a big driver of sales last year.

How should we think about product innovation going forward?

Are you -- are there other things coming?

Or are there any new trends inflowing that we should be watching out for in the coming year?

I'll start the answer, and then I'll let Lisa answer a little bit.

There's always innovations coming.

We've seen a lot over the 5 years that I've been here, and I've seen a lot over my long history in home improvement.

So there's always new things coming.

We'll introduce new innovative products as the year goes on, both on the fashion side and both on the durability side, and it will be across departments that we have.

So I think it continues.

And I think -- but I still think it's in the early innings.

I think water-resistant laminate, waterproof vinyls, those are the things that are relatively still in the early ages of what they can be.

And more and more consumers are getting to understand what the benefits of those products are.

So I still think there's good upside benefit in stimulating customers to change out their flooring because of those innovations that have been introduced.

I still think we're in the early innings of what the initial innovations are going to deliver, and there is more coming.

I don't know, Lisa, if there's anything you want to add.

No, I think that's exactly it.

We have an excellent merchandising team.

They have a lot of experience.

They go to every show in the world in flooring.

We have great vendor partners.

And so we are always working on the next new thing.

So I think we can definitely expect to see more new and more innovation.

Got it.

And if I could just follow up.

As you do keep opening new stores, which, obviously, is what we're all expecting, but how do you maintain the culture?

I understand you can promote managers and -- that have been with the company for a while and put them in new places.

But how do you maintain that with so many new employees starting, and especially in new markets, maintain the culture that you have that has driven the growth for so long and really keep it going, keep it sort of that entrepreneurial spirit and that small but big kind of thought process?

It's incredibly important to us.

I believe our culture is a unique differentiator from us and our competition.

I'm sure every CEO is going to say something to that effect, but I really believe we have something special here.

I was fortunate to grow up in a company that had a terrific culture led by terrific leaders.

And I was there when we went from a handful of stores to thousands of stores.

And I learned what we did right and learned what we did wrong, and I try to apply that here in the way we do things.

And we are -- we have a super -- we have a very robust regional support team that keeps leaders in our company close to our associates.

We do videos to our -- the executive team does videos to our stores.

We communicate -- every manager, before they get promoted, has to come for full training time in Floor & Decor University here at our store support center, where they get exposure to our founder and to the executive team of the company.

It's incredibly important in that we'll -- it's something that we won't allow to change.

And we try to make sure that we promote the right people and make sure that they embrace the leadership styles and qualities that we have.

And so far, we've done good.

I feel like the culture here today is as good as the day I started, and we've doubled our size.

So we're going to keep that going.

I'd like to turn the call over to Tom Taylor for closing comment.

Yes, thanks.

I appreciate everyone's interest in our business.

I appreciate you participating in our call, and we look forward to talking to you.

Thanks.

This concludes today's teleconference.

You may disconnect your lines at this time.