Floor & Decor closed fiscal 2025 with full year diluted EPS of $1.92 (up from $1.90) and sales up 5.1% to $4.684 billion, though comparable store sales fell 1.8% for the year and 4.8% in the fourth quarter amid soft existing home sales, a shift to smaller projects, and a tough hurricane-aided prior-year comparison. Full year gross margin expanded 30 basis points to 43.6% on favorable product margin, and the company opened 20 stores, ended at 270 locations, and cut new store capital costs. With Brad Paulsen now CEO, 2026 guidance assumes 20 new stores, sequential comp improvement (Q3 the high mark), and modest tariff-driven cost increases, while February storms and continued laminate and vinyl pressure pose near-term risks.
Thank you, operator, and good afternoon, everyone. Welcome to Floor and Decor's fiscal 2025 fourth quarter and full year earnings conference call. Joining me today are Tom Taylor, Executive Chair, Brad Paulsen, Chief Executive Officer, and Bryan Langley, Executive Vice President and Chief Financial Officer. Before we begin, I want to remind everyone of the company's Safe Harbor language. Comments made during this call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. These statements are subject to risks and uncertainties that could cause actual future results to differ materially from those expressed in these forward-looking statements for any reason, including those listed at the ending of the earnings release and in the company's SEC filings.
Floor and 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 call, the company will discuss certain non-GAAP financial measures. We believe these measures enable investors to understand better our core operating performance on a comparable basis between periods. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings press release, which is available on our investor relations website at ir.flooranddecor.com. The recorded replay of this call and related materials will be available on our investor relations website. Let me now turn the call over to Tom.
Thank you, Wayne, and thanks to everyone joining us today for our fiscal 2025 fourth quarter and full year earnings conference call. During today's conference call, Brad, Bryan, and I will be walking through the key highlights from the quarter and the full year. Then Bryan will share how we're approaching fiscal 2026 and the priorities that are shaping our outlook. We're pleased to deliver fiscal 2025 fourth quarter diluted earnings per share of $0.36, which was in line with the midpoint of our earnings guidance provided on our third quarter earnings conference call. For the full fiscal year, diluted earnings per share was $1.92, compared with $1.90 in the prior year.
As a reminder, last year's results include $6.8 million, or $0.05 per share of net benefit related to the derivative litigation settlement in the fourth quarter of 2024. Our fourth quarter sales increased 2% to $1.13 billion, while comparable store sales declined 4.8%. For the full fiscal year, sales grew 5.1% to $4.684 billion, and comparable store sales declined 1.8%, which was near the low end of our expectations. I'm incredibly proud of what our teams accomplished in 2025. Despite pressure on comparable store sales, driven by softness in existing home sales activities and the shift to smaller flooring projects, we expanded our market share, navigated tariff complexities, increased our gross margin rate, opened 20 new stores, and delivered year-over-year earnings growth.
This performance reflects our unwavering commitment to disciplined execution and strategic investment in our future. It also reinforces our confidence in our long-term strategy and in the opportunities ahead for our customers, our associates, and our shareholders. With that said, let me now turn the call over to Brad.
Thanks, Tom. I want to begin by also recognizing our more than 13,500 associates across the company. Their customer-focused commitment throughout 2025 enabled us to execute effectively in a complex and challenging environment and deliver an exceptional customer experience. We are proud to have achieved record Net Promoter Scores in 2025, which underscore and validate our associates' efforts. The progress we made by expanding our footprint, strengthening our capabilities, controlling expenses, and gaining market share demonstrates the strength of our operating model and the discipline of our teams. As we enter 2026, we have a clear set of initiatives designed to further grow our market share and drive sales and profitability in any economic environment. Our priorities are aligned with the areas where we see the greatest opportunity. New store productivity will remain a major focus.
We opened 20 new warehouse format stores in 2025 and plan to open 20 more in 2026. Ensuring these locations ramp efficiently and deliver stronger early results is a top priority, and I'll speak more about the actions driving that performance in a moment. We are investing in initiatives that deepen customer loyalty and translate directly into greater wallet share with our PRO customers. A key priority is accelerating our PRO market share by advancing our supply house capabilities in key categories, such as installation materials, and by relaunching an enhanced PRO loyalty offering. In fiscal 2026, we will focus on the design, development, and testing required for a PRO Loyalty 2.0 relaunch in early 2027, which is expected to introduce a differentiated PRO experience with expanded personalization capabilities.
To further strengthen our supply house value proposition, we are piloting enhancements to PRO pricing, supported by an improved delivery offering for this customer segment. Together, these and other initiatives build long-term capabilities that are expected to significantly increase switching costs and deepen our strategic advantage with PRO customers. Maintaining strong gross margin performance will continue to be a priority in fiscal 2026. We are prepared to take modest retail pricing actions to help offset the expected impact of tariffs and to manage both margin rate and dollars. As a reminder, we have made meaningful progress in diversifying our product sourcing. China represented 3% of our fourth quarter receipts, down from 12.5% in the prior year. Our teams have consistently executed well in navigating difficult environments, and we remain confident in our ability to manage through these dynamics with discipline and success.
We are building a scalable, strategic, account-driven, B2B foundation that supports the phase expansion of our regional commercial account managers. This team, which totaled 67 at the end of 2025 and operates outside our stores, enhances our ability to capture additional commercial market share through our stores in key markets. Collectively, we believe these asset-light growth investments will increase engagement, improve retention, and expand lifetime value among our highest value commercial customers. Driving annual supply chain productivity improvement is a top priority over the next few years. We are piloting an initiative over the next several months that is designed to deliver a meaningful reduction in distribution center to store lead times by improving network responsiveness, inventory flow, and store service levels. This work is expected to strengthen our ability to move product through the network more efficiently, support better in-stock performance for our customers, and increase inventory turns.
These are just some of the initiatives that give us confidence that we can continue to grow ahead of the market, even in a year when industry demand may face ongoing headwinds. Our priorities remain clear: stay disciplined, invest where we have structural advantages, and execute with even more operational rigor. Let me turn to our new warehouse store expansion. In the fourth quarter of fiscal 2025, we opened eight new warehouse stores. For the full year, we added 20 new locations and closed one, ending the period with 270 stores, an 8% increase from 251 a year ago. We remain on track to open 20 new stores in fiscal 2026, with development primarily concentrated in markets where we already have a presence. Our pipeline reflects a strategic mix of store sizes and market types based on market potential thresholds.
In fiscal 2026, we expect the vast majority of openings to be in Tier 1 and Tier 2 markets, which positions the class for a meaningfully stronger first-year volume. For example, we plan to open a store on Staten Island, New York, in 2026, which we consider a tier one market, whereas our Fayetteville, North Carolina, opening in 2026 would be an example of a tier three market. Additionally, we expect more than half of 2026's openings to occur in the first half of the year, compared with 35% last year, providing more operating weeks and further supporting stronger first-year productivity. Looking ahead, we expect to have a footprint in every major U.S. market by the end of the first quarter of fiscal 2027, positioning us for continued share gains and improved operating leverage.
We're steadily advancing toward our long-term goal of operating 500 warehouse format stores across the United States and retain the flexibility to adjust our store opening cadence as market conditions change. Relatedly, we are pleased to have made meaningful progress in reducing our overall new store construction costs. Capital spending per store for our 2025 class of new stores was $10.2 million, which is $1.2 million, or 11% lower than our fiscal 2023 class. Our 2026 class of new stores will benefit from our efforts over the past year to reduce costs and optimize the store size and achieve non-customer facing cost reductions, as well as from a greater number of second use sites in the pipeline. We are managing these costs diligently while continuing to invest in our stores, store experience, and associates to drive returns as industry conditions improve.
Turning to our fiscal 2025 fourth quarter, full year and early fiscal 2026 sales performance. Comparable store sales declined 4.8% in the fourth quarter. For the full year, comparable store sales declined 1.8%, which was at the low end of our guidance of down 2% to down 1%. As a reminder, our fiscal 2024 fourth quarter benefited by approximately 110 basis points from Hurricane Helene and Milton, creating a tougher comparison for fiscal 2025. This dynamic was a key driver of the expected decline in fourth quarter comparable store sales. We are pleased to see our Better and Best categories continue to outperform, reflecting customers' strong appetite for quality, technology, innovation, and trend-forward design.
On a monthly basis, comparable store sales decreased 1.5% in October, 6.1% in November and 6.7% in December. On a two-year stack basis, the decline in comparable store sales sequentially improved each quarter in 2025, providing some context to the underlying momentum in the business. From a geographic standpoint, our West region continued to outperform the company average for both the quarter and the year, highlighting the continued relative strength and resilience of that region. Turning to early fiscal 2026, we were pleased with the broad-based improvement we saw in January. Comparable store sales increased 0.4%, marking our first January increase since 2022, and reflecting a meaningful step forward in underlying demand, consistent with the gradual improvement we saw in existing home sales in December.
That said, early fiscal February sales have been meaningfully impacted by the severity of Winter Storm Fern that disrupted operations across more than half of our stores and our Baltimore distribution center. In the markets where weather was not a factor, we continued to see sustained momentum, particularly in the West, underscoring the strength of underlying demand, where operating conditions remained stable. We are pleased to now be working our way out of the disruption through the remainder of the first quarter, and the pace of recovery is improving as conditions normalize across the network. That said, the improvement will take time. January existing home sales declined 8.4% sequentially and 4.4% year-over-year to 3.91 million units, and we do not expect to fully recover the sales lost during the storms within the first quarter.
Our fiscal 2026 first quarter to date, comparable store sales declined 3.5%. Turning back to our fourth quarter performance, comparable store sales reflected a 4.2% decline in transactions and a 0.6% decline in average ticket. Transactions were at the lower end of our expectations, while average ticket finished below our expected range. For the full year, transactions declined 3.5% and average ticket increased 1.8%. By comparison, fiscal 2024 transactions declined 4.7%, while average ticket declined to 2.5% from the previous year. In the fourth quarter and full year, connected customer sales rose approximately 2% from last year and represented about 18.5% of total sales. Connected customer average ticket continued to grow, while transactions remained under pressure.
Fourth quarter sales to PRO customers grew slightly year-over-year and 9% for the full year, continuing to represent approximately 50% of total sales. We are pleased to see further evidence that our focus on understanding PRO needs is paying off, as total and comparable store sales and installation materials, a critical PRO category, grew in the fourth quarter and for the full year. This performance reflects the success we are having in expanding PRO wallet share in an important category, and demonstrates the strength of our supply house strategy with PROs. Turning to tile, where both PROs and homeowners look to us for industry-leading elevated aesthetics, we continue to invest in trend-forward designs and more realistic visuals that differentiate our assortment in the market. The successful launch of our U.S.A.-made Vetta Elements Luxe Collection in 2025 is a strong example of this strategy.
Thank you, Brad. As we wrap up fiscal 2025, our financial performance underscores the resilience of our business model and the effectiveness of our financial discipline, despite ongoing pressure in the hard surface flooring category. I'm extremely proud of how the entire company continued to effectively manage our profitability, inventory, cash flow, and balance sheet, playing a key role in supporting our financial performance in 2025. Importantly, we were able to maintain this discipline while continuing to invest in expanding our capabilities to support long-term growth. Now, let me discuss some of the changes among the significant line items in our fourth quarter and full year financial statements, as well as our outlook for 2026. We continue to be pleased with our gross margin performance. Our fourth quarter gross profit increased by $9.8 million, or 2.0%, compared to the same period last year.
Our gross margin of 43.5% was flat year-over-year and up 10 basis points sequentially, landing within our expected range. Gross margin benefited from favorable product margin, inclusive of higher duties and tariffs starting to impact us, offset by the expansion of our distribution center network in Seattle and Baltimore, which, as anticipated, added gross margin pressure of approximately 90 basis points year-over-year. These distribution center investments position us to support the next phase of growth with greater speed, efficiency, and reliability. While they create some near-term gross margin pressure, they meaningfully strengthen our long-term operating capabilities and enhance the value we deliver to customers.
For the full year, gross profit increased $115.7 million, or 6.0%, driven by 5.1% sales growth and a 30 basis points improvement in gross margin to 43.6% from the same period last year. Our gross margin expansion was driven by a favorable product margin due to lower supply chain costs, partially offset by higher distribution center costs. Our distribution center investments impacted gross margin by approximately 70 basis points, consistent with our expectations. Turning to operating expenses, you'll notice in today's press release and Form 10-K that we've consolidated operating expenses into a single selling, general, and administrative line for the quarter and the year. This allows us to conform to industry peers and reflects the way our business is evolving and the way our leadership team manages performance day to day.
As we transition to this new presentation, I will provide both our new and historical breakouts so you can compare our results to prior periods. This bridge is designed to support year-over-year analysis during the changeover and ensure continuity as we move to a consolidated SG&A line going forward. With that context, let me walk you through the fourth quarter and full year SG&A performance. Our fourth quarter selling, general, and administrative expenses increased by 4.0% to $439.2 million from the same period last year. The increase in SG&A expenses was primarily driven by the eight new stores that we opened during the quarter. SG&A expenses for non-comparable stores increased $24.4 million, and for comparable stores, decreased $14.2 million.
As a percentage of sales, SG&A deleveraged by approximately 80 basis points to 38.9%, primarily due to the addition of new stores and a decline in comparable store sales, partially offset by a decrease in pre-opening expenses. SG&A expenses also included approximately $3 million of expenses related to our ERP implementation. For the full year, selling, general and administrative expenses increased by 6.1% to $1.7738 billion from the same period last year. The increase in SG&A expenses was primarily driven by the 20 new stores that we opened during the year, which increased compensation costs, occupancy costs, and depreciation and amortization expense. SG&A expenses for non-comparable stores increased $126.8 million, and for comparable stores, decreased $24.8 million.
As a percentage of sales, SG&A deleveraged by approximately 30 basis points to 37.8%, primarily due to the addition of new stores and a decline in comparable store sales, partially offset by a decrease in pre-opening expenses. SG&A expenses included approximately $9 million of expenses related to our ERP implementation, in line with our expectations. For comparability, here are the historical breakouts of operating expenses. Our fourth quarter selling and store operating expenses increased by 3.8% to $360.7 million from the same period last year. As a percentage of sales, selling and store operating expenses increased by approximately 50 basis points to 31.9% from the same period last year.
For the full year, selling and store operating expenses increased by $107.1 million, or 7.9% to $1,469.5 million compared to last year. As a percentage of sales, selling and store operating expenses deleveraged by approximately 80 basis points to 31.4% from last year. The deleverage of these expenses in the fourth quarter and the full year period is primarily due to the addition of new stores and a decline in comparable store sales. Our fourth quarter general and administrative expenses increased by 10.7% to $70.9 million from the same period last year. As a reminder, 2024 fourth quarter benefited from $6.8 million, or $0.05 per share, related to the derivative litigation settlement.
2025's results include one-time costs associated with our efforts to streamline the organization and enhance long-term operating efficiency. As a percentage of sales, general and administrative expenses deleveraged by approximately 50 basis points to 6.3% compared to the same period last year. For the full year, general and administrative expenses increased by $10.9 million, or 4.1% to $277.0 million compared to last year, driven primarily by higher personnel expenses and the comparison to the $6.8 million benefit from the derivative litigation settlement in 2024. As a percentage of sales, general and administrative expenses leveraged by approximately 10 basis points to 5.9% from the same period last year. Our fourth quarter pre-opening expenses decreased by 28.6% to $7.6 million from the same period last year.
As a percentage of sales, pre-opening expenses leveraged approximately 20 basis points to 0.7% compared to the same period last year. For the full year, pre-opening expenses decreased by $16.3 million, or 37.3% to $27.3 million compared to last year. As a percentage of sales, pre-opening expenses leveraged by approximately 40 basis points to 0.5% from the same period last year. The decrease for the fourth quarter and full year is the result of a decline in the number of new stores that we opened compared to the same period last year. Those expense breakouts reflect the historical presentation are intended to support year-over-year comparisons during the transition. Let me now touch on our effective tax rate.
Our fourth quarter effective tax rate increased to 24.0% from 19.9% in the same period last year. Our fiscal 2025 full year effective tax rate increased to 21.8% from 18.8% in the same period last year. The increase for the fourth quarter and full year was primarily due to a decrease in excess tax benefits related to stock-based compensation awards. The year-over-year effective tax rate change impacted 2025 by $0.08 per share. Turning to the balance sheet and liquidity, our financial position remains a core strength of the company. Net cash provided by operating activities was $381.8 million in 2025, compared with $603.2 million in 2024.
The year-over-year decline was driven primarily by changes in trade accounts payable due to the timing of inventory receipts. As of December 25, 2025, inventory totaled $1.1 billion, essentially unchanged from the same period last year. 2025 capital expenditures, including amounts accrued at the end of the period, were $300.4 million, down from $376.3 million in 2024, which was at the high end of our guidance. The decrease from last year reflects fewer new store openings and fewer future construction projects underway. We ended the year with $249.3 million in cash and cash equivalents and $198.2 million in debt associated with our term loan facility.
Unrestricted liquidity at year-end was $909.8 million, consisting of $249.3 million in cash and cash equivalents and $660.5 million available under our ABL facility. This level of liquidity provides meaningful flexibility to navigate the current environment, support working capital needs and invest in our growth initiatives. As we look ahead to 2026, we expect the U.S. housing and hard surface flooring markets to continue to be shaped by the same macroeconomic forces that have influenced the industry since late 2022. We are encouraged by the trend towards lower mortgage rates, but housing affordability and economic uncertainty remain key constraints on large discretionary purchases. Compounding this, the severe winter weather in the early first quarter makes it difficult to clearly assess the underlying demand until we are further into spring.
Thanks, Bryan. Let me offer a few closing remarks before we take your questions. With Brad stepping into the CEO role, he'll now be leading these calls going forward, and I'm excited for you to hear from him in that capacity. As I transition into the Executive Chair role, I will remain closely involved in the business, focusing on the long-term strategic initiatives Brad and I have been developing to support our growth. I'm energized by the opportunity to concentrate even more on these long-range priorities and the work that will drive our next chapter. Brad and I are fully aligned on our long-term vision, our culture, and the associates who make this company exceptional. Floor and Decor has been a meaningful part of my life, and I look forward to continuing to contribute to the work that will shape our future. Operator, we'll now take questions.