Floor & Decor opened fiscal 2026 with a weaker-than-expected first quarter, as diluted EPS fell to $0.37 from $0.45, sales declined 0.7% to $1,152 million, and comparable store sales dropped 3.7% on a 5.5% transaction decline that included 150 to 200 basis points of weather pressure plus a sharp drop in consumer sentiment. Gross margin still expanded 20 basis points to 44.0% on strategic pricing timing, and the board authorized the company's first share repurchase program of up to $400 million funded from excess cash. Management lowered full-year EPS guidance by about $0.10 to $0.15 and widened the range, citing an uncertain demand environment, continued laminate and vinyl pressure, and building tariff and freight costs, while reaffirming 20 store openings.
Thank you, operator, and good afternoon, everyone. Welcome to Floor & Decor's fiscal 2026 first quarter earnings conference call. Joining me today are Bradley 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 end of the earnings release and the company's SEC filings.
Floor & Decor assumes no obligation to update any such forward-looking statements. Please note that past performance or market information is not a guarantee of future results. During this conference call, the company will discuss certain 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. A recorded replay of this call and related materials will be available on our investor relations website. Let me now turn the call over to Brad.
Thank you, Wayne, and thanks to everyone for joining us on our 2026 first quarter earnings conference call. During today's call, I will walk through the key drivers of our performance this quarter, including the operational progress that continues to reinforce our long-term strategy. After that, Bryan Langley will discuss our updated outlook for the remainder of 2026 and how we are positioning the company to advance our strategic priorities, remain resilient in a dynamic environment, and deliver sustained long-term shareholder value. Before I turn to our first quarter earnings, I'd like to discuss our capital allocation framework and the actions we announced today. Consistent with our disciplined capital allocation framework, we announced that our board of directors has authorized a share repurchase program for up to $400 million of the company's outstanding common stock.
This action reflects the continued strength of our operating model, the durability of our cash flows, and the increasing efficiency of our new store investment. As we continue to expand our store base, we are optimizing our capital spend per location, which should drive strong returns, enabling us to both fund growth and generate meaningful excess cash flow. This positions us to flex our pace of openings over time while returning capital to shareholders, all while supporting our long-term opportunity to operate 500 warehouse format stores across the United States. The repurchase program is a natural extension of our capital allocation philosophy, which prioritizes capital allocation based on returns that exceed our weighted average cost of capital. First, we prioritize opening new stores and investing in our existing stores with initiatives that are expected to grow and support our core business.
We continue to invest in our commercial flooring platforms and new growth concepts, including our outdoor and unfinished flooring offerings. Once these priorities are met, we intend to return excess capital to shareholders in ways that are designed to enhance long-term value while maintaining a strong balance sheet. We do not expect to use incremental debt to support the share repurchase program, and there is no defined timeline for the share repurchase program's completion. Guided by this disciplined framework, we believe the current uncertainty across the broader economic and capital markets landscape, particularly within home improvement, has created a clear disconnect between our long-term intrinsic value and our share price. This dislocation provides us with an attractive opportunity to repurchase our shares at valuations we view as compelling.
That opportunity is underscored by the strength of our business model, as we are uniquely positioned in the marketplace as the only national pure-play hard surface flooring retailer with a warehouse format model that delivers the broadest in-stock job lot assortment, everyday low prices through direct global sourcing, and industry-leading customer service. Our differentiated business model resonates with both pros and homeowners, driving consistent market share gains in a highly fragmented category. With just over 55% of our U.S. store opportunity built out and a large under-penetrated opportunity in commercial flooring, we believe we have a substantial runway for growth ahead.
As we scale, we believe our model becomes more efficient, our value proposition strengthens, and our competitive advantages deepen, creating what we believe is a durable foundation for long-term value creation and making us an attractive investment for shareholders with a multi-year horizon. Turning to our fiscal 2026 first quarter results, I wanna begin by thanking our more than 14,000 associates across the company. We are proud of how our teams executed our strategy in a challenging demand environment for big-ticket discretionary purchases amid adverse weather mid-quarter, elevated 30-year mortgage rates, geopolitical tensions in the Middle East that contributed to higher gas prices, and a further decline in Consumer Sentiment. These dynamics resulted in first quarter earnings coming in weaker than we anticipated. For the quarter, we delivered diluted earnings per share of $0.37 compared to $0.45 in the same period last year.
Total sales decreased 0.7% to $1,152,000,000 from $1,161,000,000 last year, and comparable store sales declined 3.7%. On a monthly basis, comparable store sales increased 0.4% in January, declined 6.9% in February, and declined 4% in March. Our second quarter to date comparable store sales declined 4.5%. The decline in our first quarter comparable store sales was driven by a 5.5% decrease in transactions, due in part to adverse weather, which accounted for 150-200 basis points of pressure, partially offset by a 1.9% increase in average ticket.
Our average ticket was negatively impacted by the decline in the laminate and vinyl sales mix, as well as customers taking on smaller projects resulting in meaningfully lower square footage purchases. We continued to see strong sales growth when the designer was involved, which reinforces the value of this free design service and its ability to drive higher quality customer engagements and average ticket growth. From a geographic standpoint, our west region continued to outperform the company and delivered positive comparable store sales, excluding the impact of new store cannibalization. Our east region, followed closely by the south region, was the weakest, reflecting adverse weather and broader softening demand. As a reminder, the south region is comparing against Hurricane Helene and Milton, which benefited sales by approximately 100 basis points in the first quarter of last year.
From a merchandise category standpoint, four departments outperformed the company's comparable store sales, including installation materials, tile, decorative accessories, and wood. Installation materials continued to generate year-over-year growth as we expand our share of wallet and market share with pros. That momentum translated into a 1.4% increase in first quarter pro sales, supported by our supply house merchandising strategies. Tile also remained a consistently strong performer, supported by the continued success of our new Vetta collection. In the vinyl flooring category, we introduced a series of straightforward, value-driven offers, including special buys and enhanced in-store displays that group more than 20 in-stock styles priced under $2 per square foot. These additions, coupled with refinements to our price bands, are designed to meet pros where the demand is shifting and to position us to capture market share in a category that continues to contract.
Although still early, results from our price band refinements are encouraging, with positive elasticity and improving square footage purchase trends. We have plans to expand this to additional stores in the second quarter. That said, we do expect the category to be under pressure for the remainder of 2026. Turning to our connected customer performance, first quarter sales grew 5.4% year-over-year, representing approximately 19% of total sales. Connected customer remains one of our highest priority strategic growth initiatives, and we are investing accordingly in talent, technology, and process enhancements. With a defined roadmap in place and a new digital leader who has successfully executed similar transformations, we are laying the groundwork for a differentiated and more personalized online experience. Our goal is to build a platform that complements our store experience and drives stronger customer engagement and conversion.
Let me now turn to our new warehouse store expansion. In the first quarter, we opened six new warehouse format stores compared with four stores last year, including Staten Island, New York, Dallas, Texas, Detroit, Michigan, Pittsburgh, Pennsylvania, Vacaville, California, and Fayetteville, North Carolina. These locations strengthen our presence in several large Tier I markets where household formation, population growth, and home improvement activity remain attractive over the long term. We are encouraged by the early sales performance of these new stores, which reflects both our focus on opening in Tier I and Tier II markets and the benefits of our improved new store operating processes and consistent execution. We remain on track to open 20 new stores in fiscal 2026, with development primarily concentrated in Tier I and Tier II markets where we already have a presence.
We expect approximately 50% of 2026 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. We expect the class of 2026 new stores to average approximately 55,000 square feet, and while smaller in size, we believe this format allows us to enter more dense markets without sacrificing sales productivity. Looking ahead, our teams are aligned around the opportunities with the greatest potential to drive growth. We are focused on improving new store productivity and investing in initiatives that strengthen customer loyalty and expand wallet share with our pro customers. Our team continues to be excited about the development work being done on our new pro loyalty program and remain on track to launch this new program in the first quarter of 2027.
We are also building a scalable strategic account-driven B2B platform that supports the phase expansion of our regional commercial account managers. We were pleased with the first quarter sales performance of our regional account managers, which number 76 today, and we are continuing to expand our presence in large strategic markets with additional hires. These multi-year asset-like investments are delivering early results and position us to win in this segment of the commercial market. Turning to Spartan Surfaces. Spartan's first quarter sales and earnings performance reflect the ongoing difficult conditions in the commercial market. While we anticipated a soft start to the year, results were weaker than expected. That said, customer engagement remained solid, supported by rising quoting activity and stable sample volume. As these opportunities convert and the solid backlog begins to be released, the business is positioned for gradual improvement over the coming quarters.
Thanks, Bradley. Before we discuss the first quarter results, I want to begin by thanking each and every one of our associates across the company. Their commitment to serving our customers, focusing on execution, and staying resilient in this dynamic environment continues to be the foundation of our performance. We continue to achieve all-time high service scores, thanks to what they do every day in our stores to better serve our customers. Let me discuss our first quarter income statement, balance sheet, and statement of cash flows, as well as our outlook for the remainder of 2026. We continue to effectively manage our gross margin, with our first quarter performance exceeding our expectations. Gross profit decreased $0.7 million or 0.1% compared to the same period last year.
The decline was driven by the 0.7% decrease in sales, partially offset by 20 basis points improvement in gross margin, which increased to 44.0% from 43.8% in the prior year period. Our gross margin expansion primarily reflects the timing benefit of our strategic pricing initiatives, partially offset by higher supply chain costs that continue to work their way through our system. The growth in our distribution center network in Seattle and Baltimore was a headwind to gross margin of approximately 60 basis points year-over-year, in line with our expectations. SG&A expenses for the first quarter increased $11.1 million or 2.5% compared to the same period last year. The primary driver of the increase was the 22 new stores we've opened since the first quarter of 2025, which increased personnel and occupancy costs.
SG&A for non-comparable stores increased $21.4 million, while SG&A for comparable stores decreased $9.0 million as we continue to tightly manage expenses. As a percentage of sales, SG&A delevered by approximately 120 basis points to 39.5% from 38.3% in the same period last year. This was mainly due to the impact of new store openings and the decline in comparable store sales. I am pleased to share that we successfully completed portions of our ERP implementation and are now live with financial systems and certain merchandising portions in the first quarter, which is a clear example of the investments we are making to enhance productivity and build a more scalable platform to support future growth.
We will still incur implementation costs throughout 2026 as we continue to implement other merchandising portions that will go live later this year or early next year. Our first quarter operating income declined 18.4% to $52.4 million from the same period last year, reflecting the impact of new stores and expense deleverage driven by the 3.7% decline in comp sales. Adjusted EBITDA declined 6.4% to $121.5 million from the same period last year. Our first quarter Adjusted EBITDA margin was 10.5%, compared with 11.2% in the prior year period.
Our first quarter net interest expense decreased $0.4 million or 26.8% to $1.1 million compared to the same period last year, primarily due to higher interest income as a result of higher cash balances. Our first quarter income tax expense was $11.6 million, compared to $13.8 million during the same period last year. The effective tax rate was 22.5% for the first quarter, compared to 22.0% in the same period last year. The year-over-year effective tax rate increase was primarily due to a decrease in excess tax benefits related to stock-based compensation awards. Turning to the balance sheet, our financial position remains a core strength of the company.
In the first quarter, we generated $109.2 million in cash from operating activities, compared with $71.2 million in the same period last year, primarily driven by changes in inventory and trade accounts payable. We ended the quarter with $1,007,200,000 in unrestricted liquidity, consisting of $293.6 million in cash and cash equivalents, and $713.6 million available under our ABL facility. This level of liquidity provides meaningful flexibility to navigate the current environment, support working capital needs, invest in other growth initiatives, and as we announced today, our board of directors has authorized a share repurchase program for up to $400 million. As Brad mentioned, our capital allocation framework priorities remain intact. First, we will continue to invest in new stores and reinvest in our existing stores.
Second, we will continue to invest in commercial flooring platforms and new growth concepts. Lastly, we will utilize excess free cash flows to repurchase common shares while maintaining sufficient liquidity and a healthy lease-adjusted leverage ratio. Our repurchase program is discretionary, and how we execute will be dependent upon the environment through both programmatic and opportunistic purchases. As of March 26th, 2026, inventory increased 1.4% to $1.1 billion compared to December 25th, 2025. This increase reflects store growth and our proactive efforts to stay ahead of demand and ensure we're well-stocked to serve our customers. We closed the quarter with $198 million in debt associated with our term loan.
Before I walk through our fiscal 2026 earnings guidance, I want to frame the dynamic macro environment our teams continue to navigate and how it informs our updated earnings guidance. Consumers remain cautious about big-ticket discretionary purchases, a trend reinforced by an increase in 30-year mortgage rates, higher gas prices, persistent housing affordability challenges, and unexpected geopolitical tensions in the Middle East that have all further weighed on consumer sentiment. The University of Michigan's Consumer Sentiment Index declined sharply to 53.3% in March 2026, near all-time lows. In housing, the National Association of Realtors reported March existing home sales were $3.98 million, down 3.6% sequentially and 1% year-over-year, which continues to pressure demand for hard surface flooring.
Against this backdrop, our teams remain agile and are proactively mitigating portions of both direct and indirect cost pressures stemming from the recent tensions in the Middle East while continuing to strengthen our ability to gain market share. We are seeing rising energy costs and domestic logistics expenses. However, we believe we can effectively mitigate some of the increases and manage the residual through our disciplined approach. This positions us to navigate the uncertainty with confidence while continuing to deliver value to our customers and shareholders. Given the unexpected events that emerged following our fourth quarter earnings release, we believe it is prudent to reflect a wider range of potential outcomes in our fiscal 2026 guidance. If existing home sales further deteriorate and consumer reluctance towards big-ticket discretionary purchases persist longer than previously expected, we would expect to be at the low end of our updated guidance range.
At the same time, we remain focused on the elements within our control, executing with discipline, managing expenses thoughtfully, and prioritizing investments that will support profitable growth while maintaining the agility needed as conditions evolve. We are confident in our ability to continue gaining market share, effectively managing expenses, and generating strong cash flows. I want to remind everyone that fiscal 2026 includes a 53rd week, which will be reported in the fourth quarter. I will highlight the expected contribution from the 53rd week as part of our guidance. Sales are expected to be in the range of $4,770,000,000-$4,990,000,000, or increase by 1.8%-6.5% from fiscal 2025. The 53rd week is expected to contribute approximately $65 million to sales.
Comparable store sales are estimated to be flat to down 4%. Comp average ticket is estimated to be flat to up low single digits, and comp transactions is estimated to be down low to mid-single digits. Gross margin is expected to be approximately 43.6%-43.8%. The first quarter gross margin of 44.0% is likely to represent the high point for the year. From there, we anticipate slight to modest sequential pressure as we move through the remainder of the year, driven by tariff-related costs, the approximately 25 basis points incremental wraparound effect from our distribution center openings, and reinvesting into value-driven pricing strategies. SG&A, as a percentage of sales, is estimated to be approximately 38.0%, with the first and fourth quarters being the most pressured from new stores.
Interest expense net is expected to be approximately $4 million. Tax rate is expected to be approximately 22.5%-23.0%. Depreciation and amortization is expected to be approximately $250 million. Adjusted EBITDA is expected to be approximately $545 million-$580 million. The 53rd week is expected to contribute approximately $11 million to Adjusted EBITDA. Diluted earnings per share is estimated to be approximately $1.83-$2.08. The 53rd week is expected to contribute approximately $0.08 to diluted EPS, which implies our 52-week diluted EPS to be approximately $1.75-$2.00. Diluted weighted average shares outstanding are estimated to be approximately 109 million shares. CapEx is estimated to be approximately $250 million-$300 million, unchanged from our prior guidance. Operator, we would like to now take questions.