Floor & Decor: Flywheel Dynamics Powering Market Share Expansion

Andrew Macken of Montaka Global Investments presented his investment thesis on Floor & Decor Holdings (NYSE: FND) at Wide-Moat Investing Summit 2025.

Thesis summary:

Floor & Decor is a specialized US retailer of hard surface flooring products, offering approximately 4,400 SKUs per store across 254 large-format locations. The company was founded in 2000 and operates a differentiated business model characterized by extensive in-stock inventory, low prices, and high service levels. Led by CEO Tom Taylor, a seasoned executive formerly of Home Depot, Floor & Decor leverages a highly efficient retail model that emphasizes cost efficiency, simplicity, high inventory turnover, and significant scale advantages.

The US housing market is currently in a cyclical trough, marked by historically low home sales and significant pent-up demand, suggesting robust future growth in home improvement expenditure. Given the median age of US homes is now around 44 years, demand for renovation and maintenance remains structurally high. This scenario positions Floor & Decor favorably within the substantial \$40 billion annual US hard surface flooring market, which itself is gaining structural share from carpet flooring.

Floor & Decor employs a potent economic flywheel that strengthens its market position and economic moats over time. The company’s specialization in flooring enables scale economies, leading to advantageous procurement costs and efficient operations. These benefits translate into lower prices and improved customer experience, which in turn drive market share gains and reinforce the competitive advantage. This cycle has significantly grown Floor & Decor’s market share over recent years and is expected to sustain continued market leadership and profitable expansion.

Despite the company’s recent robust expansion, Floor & Decor’s current earnings appear depressed relative to their normalized potential, largely due to a younger store base and cyclically low US housing market activity. As the housing market rebounds and newer stores mature into profitability, a meaningful margin expansion is anticipated. The company recently traded at an enterprise value of approximately $10 billion, presenting a compelling opportunity given the substantial earnings growth trajectory implied by management’s store rollout plan and the industry’s long-term tailwinds. Floor & Decor represents a high-quality, advantaged business poised for sustained earnings growth and market leadership in the years ahead.

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About the instructor:

Andrew Macken is the Co-Founder and CIO of Montaka Global Investments, a global equity manager based in Sydney and New York. Prior to establishing Montaka, Andrew worked as a senior member of Jim Chanos’ research team at Kynikos Associates, a global equity long/short fund based in New York. Andrew holds a Master of Business Administration (Dean’s List) from the Columbia Business School in New York. Andrew also graduated with High Distinction with a Master of Commerce; and First Class Honours with a Bachelor of Engineering from the University of New South Wales in Sydney.

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