On Thursday, BofA Securities updated its outlook on Floor & Decor Holdings, Inc. (NYSE: NYSE:FND), increasing the price target to $140 from the previous $125, while keeping a Buy rating on the stock. The adjustment reflects anticipation of improved gross margins for the company, attributed mainly to decreasing ocean and international freight costs.
According to the firm, Floor & Decor expects the most significant year-over-year gross margin improvement to occur in the first quarter, with continued, though more modest, enhancements throughout the year. The company's cost management strategy involves leveraging better product costs from vendors among other factors.
The analysis by BofA also highlighted that while growth in the commercial sector might exert pressure on gross margins over the long term, it is expected to be beneficial to the company's operating margins. Floor & Decor has expressed a commitment to maintaining competitive pricing to ensure market share growth. The company has noted that its prices are, on average, about 30% lower than those of most competitors, which supports its market position.
Floor & Decor's strategy focuses on balancing margin performance with market share expansion. The company has made it clear that it does not intend to compromise on gross margins to the extent that it affects the business negatively. This approach aims to foster sustainable growth while remaining competitive in the market.
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