Operating on the Everyday Low Price (EDLP) model, FND is razor-focused on providing a superior customer experience via better selection, lower prices, larger in-stock inventory, and better service than its competitors. ![]() Their unique supply chain, impressive scale, and relentless customer focus allow them to be the hardwood flooring industry’s low-price leader, inventory leader, and sourcing leader. The company is a category-killer with a differentiated business model, talented management team, and long reinvestment runway.įounded in 2000, FND occupies a single digit percentage (8%) of the highly fragmented and growing $24B hardwood flooring industry. One exceptionally high-quality company I like in this space, due to its long growth runway, increasing market dominance, and significant scale advantages, is Floor and Decor (FND).įloor and Decor is a niche retailer of hard-surface flooring and related accessories. ![]() Additionally, the installed base of homes is always growing – or at the very least, not shrinking – which provides a favorable backdrop for companies specializing in home improvement niches. One physical retail sector that has been especially resilient to the threat of e-commerce has been the home improvement industry, as projects tend to require technical knowledge, materials are bulky and difficult to ship, and customers prefer to see and touch the products in real life before making a purchase decision. Nevertheless, there is a small subset of physical retailers with structural characteristics that allow them to thrive in an era otherwise dominated by e-commerce. In the past five years, however, Amazon and e-commerce has disrupted the physical retailing business and driven countless brick-and-mortar retailers out of business. ![]() When scalable physical retail concepts work well, the returns can be remarkable given the high ROIC per store, the ability to use vendor payables to finance working capital, and the inherent leverage that occurs when you spread supply chain and SG&A costs over a larger store base.
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