Floor & Decor Holdings, Inc. (FND) Earnings Call Transcript & Summary

Good morning, everyone. This is Kate McShane again from Goldman Sachs. I'm happy to be with the Floor & Decor management team for our next fireside chat. Floor & Decor is a differentiated high-growth multichannel, a specialty retailer of hard surface flooring and related accessories. At the end of fiscal 2020, they operated over 130 large warehouse format stores across 31 states. Today, we have with us Tom Taylor, Chief Executive Officer; Lisa Laube, President; and Trevor Lang, EVP and Chief Financial Officer. We're also joined by Wayne Hood and Matt McConnell from Investor Relations. And I'll turn it over to Wayne to go through the safe harbor.

Yes. Thank you, Kate, and thanks, everyone for joining us today. Before we get started, I'd like to refer you to the standard safe harbor language included in our press releases as we may make forward-looking statements within the meaning of the Private Ligation Securities Act of 1995 throughout the course of this presentation today. So I'll turn it back to you, Kate.

Thank you, and thanks again for joining us today. I wondered if we could start out with some macro thoughts. There's so much data constantly coming out on the state of housing. And right now, there's a lot of, I think, still positive signs around home sales, but we're starting to feel more questions just on the risk from a lack of overall inventory. How do you think about housing inventory and its impact on existing home sales as a driver of your business?

Yes, I'll start, and Trevor will jump into -- but look, housing inventory increased from June to July, and I think that's a good thing for us. I mean we are -- a lot of our business is driven through existing home sales. And we've had 2 months in a row where we've been able to have positive existing home sales year-over-year. We'll see how August comes out. August is coming out soon. But consumers go through. And when they're selling their home, they fix their floors. When they buy a home, they fix their floors. So existing home sales are certainly important to us. I think that the interest rates remaining low, they've been hovering around 3%, that is a good thing. And then I think housing value continuing to do well also encourages people to invest in their homes. So overall, we feel like we're in a pretty good housing market. I don't know, Trevor, if there's anything you want to add.

I think you hit it.

All right. Very good. Thank you, Trevor.

In the context, though, too, I mean, it's been a strong housing market, of course, but we've also -- all know that there has been a share shift of wallet away from leisure and more towards things that make us comfortable at home, whether it's grocery or home improvement. I just wondered if you could comment at all. As things have reopened up, we haven't really necessarily seen a big shift into away from home and at home. It seems like everything is still fairly healthy, and you have the consumer spending on both. I just wondered if you had any commentary or insight into what you're hearing from customers as they budget for their home projects.

Yes. Trevor, do you want to go ahead and talk to about trend?

Yes. I think Tom hit the macro factors. The other 2 things that maybe I would just add as we think about the future is I think there's 123 million housing units in the United States that are getting old. We're not building nearly enough homes. I think it's all set for the day, where we're something like 5 million homes short of where we would like to be. And now the administration is working on doing something to maybe help out with new home construction. But in the interim of that, that means people are in their homes. And the value of the home has gone up meaningfully, 17% as of the last rebound. They've been going up for a long period of time. If you then take the fact that we're in a good macro environment, our crystal ball is probably not as good as Goldman Sachs', but it appears to me, based on everything I'm reading that people think that this trend could continue for a while. But next year is going to be good. It looks like the mortgage -- interest rates and mortgage rates aren't going to go up. People are still going to invest in the home. We're obviously not through Delta. So people are kind of pulling back a little bit on some of the services. And I think hard surface flooring is just an incredible way to increase the value of their home. Lisa's team does some really good research for us. If you then make it even more centric for Floor & Decor, we serve a higher-end customer. We estimate our customers are $125,000 is kind of where we estimate. And that consumer has got record household value. The value of their house has gone up a lot. They've done a project or 2. They really enjoyed the value that it's added. Maybe they're going to think about doing a third project. And their cash -- they've got the most amount of cash they've ever had. The savings rate as well has come down. It's still at historical highs and just a wealth effect. Those people -- well, it's probably not good for America, it's good for Floor & Decor that those wealthier Americans have record stock market values, cash values and household values. And we think flooring is a great option for people to invest into an appreciating asset.

I wondered, too, if we could talk about just new customers because I know that's been a driver as well, so macro, share of wallet and now new customers. Can we talk a little bit more about the new customers that you've acquired over the last 18 months? Can you compare and contrast them to your returning customers? And what are you thinking about with regards to secular trends in the industry, like more millennial homeownership and a migration to more of the suburban umbrella areas?

Sure. So we've just started collecting data on new versus returning homeowners. So we're really not ready to talk about that in too much detail yet. We do have good data now, though, on consumer or the homeowner versus the Pro. And so we do know that homeowners are still driving about 70% of our business. We are getting increases in both the homeowner business as well as the professional business. If you look at what the professional actually influences though, it's almost 40% of our sales. So both homeowner and professional businesses are very important to us and both are growing at a nice rate. So we're very happy about that. On the millennial piece, I mean, certainly, more are buying homes. And if they're, as Tom said earlier, if there are homes that are turning over, that's a good thing overall for our business.

Since you reported, I think, just because your fiscal year is December and you reported a little bit earlier than some of these other retailers we've heard from recently, it does seem like the state of the supply chain has become maybe a little bit tougher. And so I wondered if you could just give us a more recent update on the current state of Floor & Decor's supply chain. Have things changed meaningfully from when we've spoken to you the last time? And where are you seeing the biggest issues within your own supply chain? Is it on the production side? Is it boats on the water? Or is it domestic transportation?

I'll take a stab, and Trevor can chime in. I'd say it's getting modestly better for us. Our backlog has decreased. I think our supply chain team has done a really good job of going through. We've had dedicated fleet arrangements, but we have been able to add capacity to both Ocean and North American logistics, which has been helpful. We've expanded our points of entry. We've tried noncontainer options. And we started, a while back, diversifying our countries of origin, which has also been helpful. But over -- we have been receiving at a really good rate and our in-stock is still a challenge, but it's improved. But the benefit for us is -- and I'll use one category as an example, because of our model, if we're challenged within stocks and tile, we have 250 tile options within any given store. If we're out of 15 tiles, we still have 235. And with the amount of inventory that we carry within our distribution centers and within our stores, we can try to get something else into the customers' hands. So I think overall, I think our teams have done a good job. It's still a challenge, and it's going to remain a challenge. We're going to continue to have to work hard. Our model lends to help us a little bit more when supply chain constraints are so challenging across the country.

And I think you spoke about on your Q2 call that you are planning to invest a total of $70 million to $74 million in a new DC in Houston and the new transload distribution facility in L.A. that will allow you to use fewer containers. Just can you talk about these 2 investments and what it could mean for the longer term?

Trevor?

Yes. The Houston DC is really just tied to it. It's when you expand it, it was not a bigger DC. Our big DC is Savanna and Baltimore, 1.5 million square feet. We're taking the Houston D.C. to 1.5 million square feet. We just needed for the growth in the markets that are supported in Texas and the surrounding states, where we're adding stores. We're actually going to own that DC. That's why the cost is so high. So we'll get a lot of leverage out of that. DC has cost different amounts, depending on where you are in the country, but anywhere from $3 to $6 a square foot times 1 million -- 1.5 million square feet, right? That's a pretty good savings that we won't have because we'll own this DC versus leasing it. And it's an incredibly desirable area, not that we plan on selling it anytime soon, but we're going to make a very good return on invested capital there. So the Houston one specifically is about growth. We'll get a little bit of savings just because we'll own it versus renting it, but it won't be significant. And then the same thing on the transload. As Tom mentioned, we have a very talented team. We're always thinking about ways to make our supply chain more efficient. We have to -- because of the regulations in that part of the country, we have to bring in containers light. We can add roughly 17% more weight to those containers by coming into that heavyweight corridor. And so it just allows us to have much less containers. And that was going to be really important before this praising is hit on supply chain. Now it matters even more because you just -- you have to bring in 17-plus -- 17% less containers. And as we all know, our container costs are material to everybody, including our container costs are materially higher than they were 6 or 9 months ago. So -- but again, it's only servicing maybe 20% of our stores. So they're really to support our growth. They're modestly beneficial, but then those of themselves aren't going to be meaningful gross margin improvements for us.

And in addition to just the inventory flow, the supply chain disruption is impacting. You also have the cost piece of it. So we wondered if you could talk a little bit about how this could impact your -- the competitive landscape over time. Have you seen price gaps change meaningfully between you and smaller competitors as more of these inflationary headwinds hit? And are you able to benefit from that?

Yes. I think -- there's a couple of things going on. Our price gap between -- in general, against the independents has always been pretty good. We've had a comfortable gap and our prices have been well against them. Everyone's taking price. And we think the gaps are about what they've historically been. They may be a bit better, but I think the independents are going through true struggle. So the one that got that trying to figure out how to offset the cost of the supply chain and getting product, but they're also having trouble just getting product. We hear that the inventory, the in-stock position in those independents is a bit of a challenge. Again, that's anecdotal. You'll hear it from stores and customers. So there's no way to really measure that. But if that is the case, we think that, that is a good thing for us because a lot of people that shop in the independents is because of our relationship. And sometimes, it's hard to get customers to come in and then try our stores. And we think once we get them into our stores that there's a benefit to that. We know once they come in and they see what a Floor & Decor is and they see that it's something that's different, that's unique and they see our pricing, they see our in-stock inventory ready to go, we think we can win those customers over for a long time. So while it's a headache and it's a challenge to deal with, overall, it could help us take share at a faster rate than we've been taking share.

I wondered, too, if you could maybe put into context this period of inflation in general because right before the pandemic, tariffs was certainly something that had hit your business just given the exposure that you had to China at the time. So I wondered if there was any way to compare and contrast how -- what it was like front managing the tariff increase that you saw back in 2019 versus some of the inflationary trends that you're seeing now and how it affects your pricing.

Yes. I'll start, Lisa can chime in. I think like from an inflation standpoint, we're seeing modest inflation from our suppliers. It's much more of the challenges on the supply chain side. The cost of containers, the cost of trucking, is that, that has been where more of the challenge is. But I still think if you button it all up and say, what are we dealing with today versus what we dealt with the tariffs, I think tariffs was much -- was more significant for us because of the amount of products that we were getting out of China. At that point, it made it much challenge, and it was a bit of a moving target. It was 10% at one point, 15% another, up to 25% another. And I think our merchants did an incredible job of negotiating first. We've got our merchant tenure in our companies. We have over 10 years of experience in our departments. So just a team that's been together for a long time, and they have relationships with over 225 suppliers in countries. Those relationships are long and they're good. So we were able to negotiate a lot of that away. And when we could, we had to pass on price. And between the 2, we manage that well. If you look at kind of the performance of our margin in our company during the time of tariffs, we were able to manage through that. And I think that was a more historical -- or not more, it was more difficult to deal with than what we're dealing with today. I don't know, Lisa, if there's anything you think I missed or you want to add.

No, I think that's right. That was -- I also think, while it was awful as we went through it, it set us up for this. And so I think that we are much more able to manage through this. And to Tom's point, it's much more modest. And -- but we kind of have the playbook now of how to move things, where we need to negotiate, what levers we can pull. And so it's actually been a little bit easier for us to manage through it because of that.

I'd say -- sorry. Go ahead, Tom.

I was just going to say the other thing, too, is our merchants are very thoughtful. It's not like we just do a wave of price increases. They're very surgical in their approach and they're very thoughtful. We take price where we have to take price. And it's -- as like Lisa said, it's been modest, but we've been able to manage it well.

Just in the context of inflation, obviously, wage growth is another area that we're seeing more pressure in. It did feel like as we went through Q2 earnings, some of the commentary we are getting from the companies is just how competitive the landscape is for labor and how it does seem like wage growth is maybe a little bit higher than what people had expected starting the year in 2021. You announced market wage increase to take place in Q2 and Q3 of this year, with wages going to above $16. Can you just maybe talk to us how your labor situation has been in your DCs and your stores? And are you expecting to see some alleviation if you've had some pressure given these higher wage rates and maybe the roll-off of some of these unemployment benefits?

Yes. I mean labor continues to be a challenge. As you mentioned, we did in the second and third quarter, we gave broad increases to a good percentage of the population of our hourly associates that took our wage to above $16. We feel good about that in the marketplace. We do associate surveys and take the temperature of how our associates feel in every 3 months. And we just -- we actually reviewed one this week. And we had improved from where we were. I mean we were good before, but we were better in the last round of survey. So if an associate feels good, I think that's a good thing. 92% of our stores in the second quarter, they also received an achieved payout. We bonus our store associates when the stores perform well. So in the second quarter, a lot of people on top of raises has got additional bonuses. So we think all of those things will help. But turnover remains a challenge for us. We've got to continue to work on that. It's not an easy thing to solve in this environment. We still have staffing challenges. It's almost -- it's a little bit like whack-a-mole. We'll get a market fixed and then another market pops up. And we're constantly changing it. We put divisional support into our divisions to help our stores with staffing and giving them -- so they can focus on running the stores. And we can give them support and trying to get more associates in the store, but it's a challenge. I do think it gets better. I think as stimulus goes away and unemployment benefits change, I think that helps and puts more people into the job market. And I think when they find Floor & Decor, we're a good place to work, and that will help us. But it continues to be a challenge, something we have to work through.

Thank you. I guess my next set of questions will focus on store growth, if that's okay. You've always been very transparent about how you think about your more mature stores and how your new store classes are performing. And it does seem like with every new store tranche, they become more efficient and smarter, if you will. So I wondered if you could talk a little bit about your mature stores in contrast and with some of the newer vintages of stores. And how should we think about some of those best practices and some of those newer things that you're introducing into the newer stores? How will that look in the more mature stores over time? Will it take a remodel? Will -- how will you integrate that over time?

I'll take the first one. So yes, our last 2 classes, class of '20 and class of '21, are on target to be our best classes of stores. And I think it's for a number of reasons. I think our real estate team has done a really good job over the last few years. We had a new leader come in to our real estate team back in 2017-ish. And he's done a really good job in having a thoughtful strategy of where our stores would go. And we've gotten better sites. The stores are in better sites. They're better visibility. We've also -- we've done a job. We finally fixed cadence. We're opening the stores at the right amount of the quarter, which gives us more store operating months, which helps the performance of the store. And then I think we execute better in the stores -- in the new stores, our awareness is a lot better than it was when we first started to open and so we've been opening 20% new units now for 8 -- for 9 years plus. And you get good at it. You open that many stores, you kind of -- you learn all the tricks and trade. So I think we're better. We've learned a lot. We've got a good way to open the stores and get customers into the stores early. We know once we get them in, they stay. I would say that the new things we're doing in our new stores, so adjacent categories, probably I think that's what you're referring to. We've added adjacent categories into all of our stores. We've had -- been in the middle of product -- a program called reflow, where we go into our existing stores. And by the end of this year, we'll have all the stores done, where we reflow the stores so that the adjacent categories are where we want them in the store. And beyond that, we've always gone. And if we do something in a new store that we like, we figure out a way to go roll it backwards. So there's not much that we don't do. We remodel a certain amount of our stores every year to keep them fresh and up to date. I think that the historical practice that we've been doing, that won't change. And like I said, the reflows are probably the biggest thing that is important, and we're almost done with them, which we'll present. It's not that the adjacent categories aren't in the store. We just present them in a better way and put them in a better location in the store. I don't know, Trevor, if there's anything on the economics that you want to hit that was in that question.

I mean I think we said on the last call, our stores over 5 years old are doing about $26 million in sales and about 25% 4-wall EBITDA margins. Our new stores, as Tom mentioned, are looking to be ahead of our goals of $13 million to $15 million in first year sales and $2.5 million 4-wall EBITDA. We've obviously got some time to go to the business, things get their first year. Part of that is we're doing a better job. Certainly, there's lots of that, but they're also we're in an incredibly strong backdrop. That's also helping with new stores like it is the comping stores.

Given your stronger cash balance, would you ever want to go faster with your unit growth than what you have already projected, which already is aggressive, but would you ever want to go faster?

I've been asked that question for -- since I've been here, will we go faster? I know we could physically get sites and we have the capabilities between our visual merchandising team and the constructions team to open more stores than we currently operate. But culture is extremely important to us. And we try to promote from within, and we spend a lot of time training our managers so that they're ready training department managers so that they're ready to take the next site. And -- we don't want to push people too fast. I experienced some of that in my early days in my career at Home Depot, where we went to -- I thought maybe we went a little too fast and we promoted people a little ahead of their time. It's not fair to that person and not fair to the customers who shop in that market. So we're very thoughtful on it. So long way around, we're comfortable with what our growth rate is. We can manage this amount of growth and have the ability to open the stores the right way and have the right people running the store. So we won't go faster than we're going today.

I think -- one thing I would mention, though, Tom, I think, what's interesting is when you look at our return on invested capital over the last -- really since we've been here but certainly over the last 4 or 5 years, you've seen that go up every single year. And this year, we -- while we're not going to grow store count faster, we have been more aggressive in investing back into our business, which we think, again, will be a very fortuitous decision because it will drive that return on invested capital higher. So our CapEx is going to be more than double what it was last year. We owned this Houston DC. We're going to own a handful of stores. We bought Spartan. And so being good stewards of capital is an important part of every single decision we make. And I think while we would want to grow more than 20% based on the reasons Tom laid out, there are other areas we can invest in to improve our return on invested capital.

I wondered, Lisa, if I could ask a question around innovation. You've always been very good at highlighting what's new and exciting to your customer. I just wondered if you could maybe preview a little bit what innovation is currently in the pipeline. And just with regards to LVT, it seems to have been a very big driver now for several years. I wondered if you had a thought on if we're in a particular inning. Or is that something that will just continue to be popular over time?

Sure. So as far as innovation goes, we are always working on something new. And the 2 primary focuses are either around trend. So that may be exotic marble, large-format tiles or on durability, which you should see more on the wood side, the waterproofing, even some things on antimicrobial and that kind of things that we're starting to work on. So there's innovation that is always around durability and of benefit to the customer. And then there's also the trend innovation. And I think for us, what we have found is no matter what innovation we add, and we've tended to add the innovation on the higher end in the better and the best categories, they continue to really resonate with the customer. So if you think about OptiMax, which is one of our brand -- new brands that just came in, it's an eco-resilient flooring, it's kind of a hybrid between a laminate and a vinyl. It's at the high end of the price range over there, and it's doing extremely well. We just brought AquaGuard performance in, which is our real waterproof laminate, which is a very hard thing to do, and it's doing extremely well. And it's the highest price laminate that we sell and the customers love it. So we are definitely continuing to innovate and finding ways to add value to the customers so that they understand the features and the benefits of that product. A lot of that innovation does come in the vinyl and the laminate side. And I wish I knew what inning we were in, but we're -- we may be in over time, I'm not sure, but it continues to grow. I mean we are shocked and that team just does an amazing job with our vendor partners to continue to innovate longer lengths, wider widths, different graphics, different benefits. And we just -- we keep finding new ways to innovate that category. So very exciting things to come still.

Great. And I just want to remind the audience, if you have any questions, we are going to be taking questions at the end. So be sure to send them in around now just because there's a little bit of a delay. And before we go to any audience questions, we are asking for common questions of every company that's presenting at this conference yesterday and today, some of which we've already touched on a little bit. But this is supposed to be like a lightning-round, multiple-choice question set. So with consumer demand going forward into the back half of the year, what do you expect of the top line versus the first half? Will it accelerate, decelerate or stay the same?

Trevor?

So our comps were up over 30% in Q1 and over 60% in Q2. So I think we're planning on them to decelerate just a little bit because they were so -- and we're up against much bigger numbers. Just I think the easiest way to think about our business, our Q1 comps on a 2-year basis that takes out some of the anomalies of COVID was up 15.3%. Our Q2 comps on a 2-year basis decelerated slightly to 14.8%, so maybe 50 basis points. And as of our call back in early August, our 2-year comps were kind of in the mid-13s and so down maybe 140 basis points. So just some context, but just because we're up against record high numbers from previous year, we would expect some modest deceleration.

The second question is about digital penetration in 2022 relative to what we saw in 2021. Do you expect it to be higher, lower or about the same?

It will definitely be lower because in 2021, we had the stores closed. And so we were running like in the second quarter -- or excuse me, for the year, we ran almost 33%. So we are seeing so far -- before COVID, if we just go back and compare to before COVID, we were running about 12%. We've settled then at about 16% now. So we've seen solid growth. If you look on a 2-year basis, our e-commerce sales are up 70%. So we're very happy with the growth there. But I think as we continue to improve the website and our customers continue to use our stores and our website interchangeably, that there is certainly room for that to continue to grow. But we're happy where we've kind of settled in the 16% range right now.

And then the third question, I know you're not a very promotional retailer because of where your price points are or how you manage your price points. But in general, how should we think about the promotional environment in 2022? Will it be higher, lower, or about the same versus what we're seeing in '21?

Same. I mean we don't promote...

[indiscernible].

Sorry? Yes. No, we don't promote -- I expect the environment to be very similar than it's been.

Okay. And we did talk about supply chain and inventory. But if you had to pick one biggest lever you have to mitigate supply chain pressures, what would it be? And do you expect your inventories to grow faster or slower than sales in the second half?

Yes. I mean we're doing a little bit of everything. So I don't know that there's one lever that I could just say that, okay, this works -- shifting production probably where we're the best. But when we started that as tariffs came, I think we've done a good job of shifting, projecting and we're bringing more manufacturing into the U.S. So I think we've done a good job of that. And I think we said on the call, Trevor, right, that inventories will grow as we get to the back half of the year. We're accelerating some Chinese New Year's product coming in towards the back half of this year, too.

Yes. I think as we get to the of the year, we would expect inventory to grow at a faster rate than sales.

And while we're waiting for questions from the audience, I'm going to interject just one more. We didn't yet talk about your acquisition of Spartan Services. And just had a few questions around that. We just were curious about the acquisition and the timing of the acquisition, why now is the right time to get into the commercial flooring space and why does it present a great opportunity for Floor & Decor?

I'll talk about the timing, I'll let Trevor talk a little bit about the market. Look, for years, we've known that commercial was an opportunity, and I had been cautious, right? So we've got a full-time job opening up, going from where we were at, going to 400 stores. That is a full-time job. But we started with the RAMP strategy, regional account manager strategy a while back. It's been really successful. We've known since we've been here that commercial customer has been walking into our stores and saying, hey, about your prices are incredible, you've got inventory, and we've done hotels before we had any efforts going into commercial. So as we added the RAMP, we were really fluent about what was going on with them. And as we saw the success of that, we knew that there was a certain part of the market that we wouldn't be able to penetrate on our own or wouldn't be easy. So I felt like now is the right time to go through it and make that investment and go through and try an acquisition. So we've spent a lot of time. I would say my team that really works on it may want to go faster, but we've been unable to -- or not unable to, I have been unwilling to until this year. And now I'm glad we've done it. It's been really good. And Trevor, why don't you talk a little bit about the market and kind of how it breaks up?

Yes. I think we are expecting the global $13 billion commercial hard surface floor markets to grow nicely. That's where the most of the research tells us. There is a bit of delay and it's just the first cycle period that has to happen. When you break apart that $13 billion market, we think about $7 billion is what we call upstream, the architectural and design community. That's where Spartan shines and does a fantastic job. As Tom mentioned, we thought that it would be harder for us to get to a different set of sales skills. It's a different person to go after that business so we thought Spartan has done such a fantastic job. And if we can get them grow their business better, why not make 1 and 1 be more than 2. So we are going to ramp up their growth. We're -- they've just historically added, anywhere from 2 to 4 sales reps year. We think we can get that up to at least 10 next year, maybe a bit more than that and grow from there. On the Floor & Decor side, we're going to focus on what we call the downstream business, the business that is a little further away from any architectural design firm. That's someone who owns a couple of hotels, they may be on the strip center, they have a small business. They're a commercial flooring and seller or commercial and general contractor. That's where we're focusing on what we call the $60 million downstream, about $13 billion business. We're going to add about 15 RAMs this year. We'll kind in somewhere around 35 to 38 RAMs this year and then probably we'll try to add another kind of mid-teens number of new RAMs next year. And we feel good about the acquisition and what we're doing internally to continue to grow in the commercial area as well.

In these last couple of minutes here, we did get one question from the audience. It says, historically, you've had about a 400 basis point tailwind to comps from new stores maturing. As stores have opened up at higher productivity levels, what is the new tailwind? And what does this mean for your long-term steady-state comp expectation?

We haven't come out with a new number yet. We're just because of -- it's been such a unique environment with COVID, where you're going up against negative comps and then you're massively increasing comps. But what we have said is our new stores, the class of '20 and the class of '21 that are now opening and getting through their first year, they're likely to be the best class of new stores that are open both from the top line and the bottom line perspective. And so I do think that 400 basis points is going to come down and that's a good thing because our sales and profitability are higher because it's just hitting those numbers quicker. But I would expect that 400 basis points to come down. To be fair, I've been wrong for a bunch of years because we've been doing fairly well in those new stores and densely populated markets so probably can do higher volumes. But just mathematically, if we used to open a store in a $13 million and then we get to $16 million, ultimately get to $22 million, which is what our mature store volumes were pre-COVID with now our stores opening or doing north of $15 million, and they're still going to get to maybe $26 million. It's possible, I would say mathematically, I feel like that rate is going to come down soon.

Great. Thank you. And it doesn't look like we have any more questions. So I think I'll wrap the fireside chat up. I want to thank everybody for joining us today, and thank you to the Floor & Decor team for speaking with us.

Thanks for having us.

Thank you.

Thank you.