Greetings and welcome to the Floor & Decor Holdings, Inc third quarter 2025 conference call. At this time, all participants are in the listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Wayne Hood, Senior Vice President of Investor Relations. Please go ahead. Thank you, Operator, and good afternoon, everyone. Welcome to Floor & Decor fiscal 2025 third quarter earnings conference call. Joining me on our call today are Tom Taylor, Chief Executive Officer; Brad Paulsen, President; and Bryan Langley, Executive Vice President and Chief Financial Officer. Before we start, 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 risk 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 our earnings release and in the company's SEC filings. Floor & 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 conference call, the company will discuss certain non-GAAP financial measures. We believe these measures enable investors to better understand 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 Tom. Thank you, Wayne, and everyone for joining us on our fiscal 2025 third quarter earnings conference call. During today's conference call, Brad, Bryan, and I will discuss our third quarter earnings highlights. Bryan will share our thoughts about the remainder of fiscal 2025. Before we get started, I want to share some exciting news that was announced this afternoon alongside our earnings release. I am thrilled to announce that our Board of Directors has appointed Brad Paulsen, currently serving as President, to succeed me as Chief Executive Officer and become a member of the Board of Directors effective at the start of our fiscal 2026 year. I am looking forward to transitioning into the role of Executive Chair of the Board, where I will focus on shaping our long-term strategic vision and unlocking new avenues for growth. I am incredibly proud of what we accomplished over the past 13 years. We have even greater opportunities ahead. Brad is an excellent partner for that journey. From day one, his deep experience across retail, commercial, and services has been evident. He's bringing strengths and perspectives that complement mine and, more importantly, align with the needs of our future. He's a trusted partner, a proven leader, and someone I'm confident will lead our exceptional teams and guide our company forward with clarity and purpose. Let me now pass the call over to Brad. Thanks, Tom. Over the past eight months, I've had the privilege of working closely with Tom and our incredible team and gaining a deep understanding of Floor & Decor's unique culture and business model. I'm excited and honored to step into this role and lead our next phase of growth, scaling towards 500 warehouse-format stores and accelerating our commercial flooring distribution expansion. Our associates are at the heart of this company, and together we'll continue delivering exceptional value and service to homeowners and pros across the country. I'm excited about what's ahead and grateful to the Board and Tom for the opportunity to help shape our future. Let me now turn the call back to Tom. Thanks, Brad. Let's now turn to our third quarter earnings results. We are pleased to report fiscal 2025 third quarter diluted earnings per share of $0.53, a 10.4% increase over the prior year, prior year's $0.48. This result exceeded the high end of our guidance range and marks our second consecutive quarter of double-digit earnings per share growth, underscoring our operational discipline amid persistently soft demand in the hard surface flooring industry. Total sales grew 5.5% to $1,180 million, while comparable store sales declined at 1.2% from the same period last year, approaching the low end of our expectations. We're proud of our disciplined expense management and gross margin performance, which reflect a successful execution of our tariff mitigation strategies. We believe these efforts enable us to maintain healthy merchandising price gaps on like items compared with our competition, protect our profitability, and position ourselves strategically for accelerated growth when the hard surface flooring market rebounds. I want to acknowledge the focus, agility, and operational excellence our teams have demonstrated throughout this quarter and year. We are especially pleased to share that in September, our stores achieved their highest net promoter scores ever, a clear reflection of the outstanding service they continue to deliver every day. Their ability to execute our strategies in an uncertain and complex environment has been a key driver of our performance and continues to reinforce the strength of our operating model. We remain confident that existing home sales and demand for hard surface flooring will recover over time. When that happens, we believe we'll be well positioned with more stores, lower costs, greater market share, superior customer experience, and a leaner operating model. We're playing the long game with discipline and intention as we build long-term earnings power. Let me now discuss our new warehouse-format store growth. During the third quarter of fiscal 2025, we opened five new stores, with most opening later in the quarter. This expansion included re-entering the Charlotte market with our first store opening there in over two years and establishing our presence in Myrtle Beach, South Carolina, our first entry into this market. Year to date, through the third quarter, we opened 12 new locations and closed one, ending the period with 262 stores, a 9% increase from 241 stores in the same period last year. We're on track to open 20 new stores in fiscal 2025, primarily across markets where we already have a presence, and plan to maintain this pace with another 20 openings in fiscal 2026. To support our growth in the Western region, we opened our fifth distribution center during the third quarter, a 1.1 million square foot facility in the Seattle, Tacoma metropolitan area. This addition enhances our supply chain capacity, further diversifies our ports of entry, and enables faster, more efficient service to our stores. These openings, along with our expanded distribution capabilities, reflect our broader store growth strategy. We are deliberately maintaining flexibility to adjust the pace and location of new store openings in response to any near-term shifts in the economic and housing landscape while capitalizing on emerging site opportunities. This agile, responsive approach enables us to optimize capital deployment amid the decline in the hard surface flooring category and reinforces our commitment to delivering sustainable long-term value for shareholders. We're steadily advancing towards our long-term goal of operating 500 warehouse-format stores across the United States. Our development pipeline reflects a strategic mix of store sizes and market types, including tier one locations such as North Scottsdale, Arizona, which opened in September, and Staten Island, New York, scheduled to open next year. We're also expanding into smaller volume markets like Winston-Salem, North Carolina, and Boise, Idaho, where we've successfully tailored store footprints and assortments to meet expected local demand. Capital spending and operating expenses in these smaller volume markets are calibrated to meet our return thresholds. While these smaller volume locations have always been a deliberate part of our growth strategy, they are not expected to represent most of our store footprint as we scale towards 500 locations. Most of our locations are expected to be in large and mid-sized markets. We are pleased to have made meaningful progress in reducing our overall new store construction cost. The initial investment for our fiscal 2025 class of new stores is estimated to be about $1.5 million lower than our fiscal 2023 class, with further meaningful improvement expected for the class of 2026. The class of 2026 will benefit from our efforts to reduce costs and optimize the store size over the past year, as well as more 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. Our disciplined approach to expansion and capital allocation is validated by the performance of recent store classes. Despite persistent macroeconomic pressures and a prolonged downturn in the hard surface flooring industry, our 2021 through 2024 store classes have achieved comparable store sales growth even when accounting for cannibalization. This performance highlights the resilience of our business model and our ability to grow our market share in a declining market. It's important to contextualize our results with the broader industry backdrop. We've been operating in an environment marked by sustained softness in consumer demand and limited category growth over the past few years. In addition to these macroeconomic pressures, we encountered construction and permitting delays in some large and mid-sized markets. As a result, we elected to open more stores in small markets to mitigate these headwinds. Taken together, these factors have reshaped short-term performance benchmarks for first-year store openings, and we recognize that we are not immune to their effects. While our new store classes are achieving comparable store sales and market share growth, average first-year sales among classes of 2023, 2024, and 2025 are approximately $11 million, which is below our long-term target of $14 million- $16 million. Nonetheless, this performance aligns with what we would anticipate in a contracting industry and what we believe could be trough-level performance. As a relatively young company, we're gaining experience with the full spectrum of flooring cycles. While we've seen what peak performance can look like coming out of the COVID-19 period, with first-year store sales exceeding our long-term target range of $14 million- $16 million, this is our first time operating through a sustained downturn in the category. We know what trough-level ROI metrics look like, and importantly, how they continue to exceed our weighted average cost of capital. The actions we have taken strengthen our strategic edge and position us to accelerate growth and return metrics as the industry recovers. Let me now turn the call over to Brad. Thanks, Tom. I want to echo your appreciation for the incredible work our teams have delivered this quarter and year to date. In an environment marked by persistent housing market pressures and evolving consumer preferences, their ability to stay focused, agile, and customer-centric has been nothing short of exceptional. Achieving our highest-ever net promoter scores in September is a clear signal that our focus on experience and engagement is resonating. It's also a reminder that even in a tough macro backdrop, excellence in execution drives loyalty, trust, and long-term growth. Let me now discuss our fiscal 2025 third quarter and early fourth quarter-to-date sales. Comparable store sales declined by 1.2% in the third quarter compared to the same period last year. On a monthly basis, comparable store sales decreased by 0.6% in July, 0.4% in August, and 2.2% in September. Reflecting sustained pressure on discretionary spending from elevated 30-year mortgage rates, which remained stubbornly above 6% in stretched housing affordability. Existing home sales continue to hover around an annualized pace of 4 million units, showing little meaningful improvement. These persistent housing market challenges, combined with a modestly tougher year-over-year October sales comparison and continued consumer preference for smaller projects, contributed to a 2% decline in our comparable store sales for the fourth quarter to date. As a reminder, the fiscal 2024 fourth quarter benefit to our comparable store sales from Hurricanes Helene and Milton was approximately 110 basis points, which makes for a more difficult fourth quarter sales comparison in 2025. This is expected to contribute to a fiscal 2025 fourth quarter decline in comparable store sales. From a performance driver perspective, the third quarter decline in comparable store sales was driven by a 3% decrease in transactions, partially offset by a 1.8% increase in average ticket. The decline in transactions aligned with the midpoint of our expectations, while average ticket was at the low end of our guidance. The sequential decline in average ticket is primarily due to changes in our product mix. Regionally, third quarter comparable store sales in the West division continued to outperform the company average for both the quarter and year-to-date, underscoring the relative strength of that division. Looking ahead, we remain committed to delivering a strong value proposition through our low prices and differentiated high-quality range of flooring solutions and services that inspire our customers and drive sustainable long-term growth. Throughout the year, we've continued to launch innovative products and programs tailored to meet the evolving needs of our diverse customer base. These offerings feature fresh designs, expanded color palettes, enhanced textures, and heightened realism, authentically capturing the look and feel of natural materials. Some of our core strategic priorities for the year remain unchanged and include rolling out kitchen cabinets to approximately 200 stores by the end of 2025, expanding our outdoor and pool product assortments to around 80 stores, and growing our XL Slab program to nearly 200 locations. Turning to our design services and connected customer pillars of growth, design services continue to deliver robust year-over-year sales growth fueled by sustained increases in customer transactions. Both total and comparable store sales for design services significantly outperform the company for the quarter and year-to-date. We view design services as a competitive moat, a differentiated capability anchored in deep customer engagement, project-based selling, and operational excellence. Our top-performing stores consistently demonstrate strong leadership involvement, collaborative team culture, and disciplined execution across staffing, training, and task management. Some of the biggest wins come from following up on open quotes, where our sales teams actively connect customers with designers to drive conversion and attachment. Looking ahead, we expect continued momentum by prioritizing quote follow-up and enhancing our sales mix across adjacent categories and installation materials. In the third quarter, connected customer sales rose 2% year-over-year, representing 18.8% of total sales. Connected customer average ticket continued to grow from last year, while transactions remained under pressure. Turning my comments to Pro and homeowner sales, sales to Pro customers rose year-over-year in the third quarter, modestly outpacing overall company growth and representing approximately 50% of total sales. Comparable store sales for Pros were essentially flat versus the same period last year, driven by a slight decline in transactions and a small increase in average ticket. These results align with direct feedback from our Pro customer base, who cite economic headwinds and reduced activity in remodels. Reflecting these dynamics, we continue to see a shift toward smaller projects such as tile-focused bathroom projects, kitchens, and restoration work. Pro satisfaction remains high, with strong engagement across tile, installation materials, and wood categories, underscoring their loyalty beyond a single category. Our product quality, service, and in-stock reliability remained strong with Pros. Meanwhile, comparable store sales among homeowners, though still negative, showed meaningful sequential improvement in the third quarter. This was fueled by improvement in new and returning customers, supported by targeted campaigns, and data-informed meetup planning. Finally, let me discuss our commercial business. Amid ongoing softness in commercial multifamily housing projects, Spartan Services delivered 13.3% year-over-year sales growth in the third quarter. Many multifamily developers have sequentially paused or delayed purchase orders due to tighter financing, elevated construction costs, and cautious capital markets. This slowdown has contributed to elevated promotional activity in luxury vinyl tile, a category heavily used in multifamily applications. Spartan's growing presence in high-specification sectors such as healthcare, education, hospitality, and senior living helps mitigate some of these headwinds. Let me now turn the call over to Bryan. Thank you, Tom, and Brad. Our third quarter results underscore the strength of our operating model and our disciplined approach to growth and expense management. Our balance sheet remains a source of strength. We ended the quarter with $893.5 million in unrestricted liquidity, including $204.5 million in cash and cash equivalents, reinforcing our financial flexibility and capacity to invest in growth, capture market share, and deliver long-term value for shareholders, even amid a challenging demand environment. Now, let's walk through the key changes in our third quarter income statement, balance sheet, and statement of cash flows. Our fiscal 2025 third quarter gross margin rate decreased by approximately 10 basis points to 43.4% from 43.5% in the same period last year, in line with our expectations. The year-over-year decrease is primarily due to an increase in distribution center costs from the opening of our Seattle distribution center and costs related to the future opening of our second Baltimore distribution center. These costs impacted the third quarter by approximately 90 basis points, partially offset by favorable product margin. The sequential decrease in our gross margin rate from 43.9% in the second quarter was primarily due to the increase in our distribution center cost. Our fiscal 2025 third quarter selling and store operating expenses increased by 7.3% to $363.8 million from the same period last year, better than our expectations. The growth in selling and store operating expenses is primarily driven by an increase of $30.1 million from non-comparable stores. As a percentage of sales, these expenses rose approximately 50 basis points to 30.8%, a modest increase that came in better than expected. This deleverage was mainly due to new store openings and a decline in comparable store sales. We were pleased with how we diligently managed expenses among our mature stores compared to the same period last year. Our fiscal 2025 third quarter general and administrative expenses of $67.6 million were flat compared to the same period last year, slightly better than our expectations. As a percentage of sales, general and administrative expenses decreased by approximately 40 basis points to 5.7%, primarily driven by the leverage of our general administrative cost on higher net sales. We are pleased that our expenses were flat to last year while we continue to open stores and see sales growth. Our fiscal 2025 third quarter pre-opening expenses decreased by 32.2% to $8.6 million from the same period last year, in line with our expectations. The decrease was primarily due to a decrease in the number of stores that we opened and lower relocation expenses compared to the corresponding prior year period. Our fiscal 2025 third quarter net interest expense increased by $0.4 million- $0.6 million from the same period last year, better than our expectations. The increase in interest expense is due to a decrease in interest capitalized, partially offset by lower average interest rates and lower average outstanding borrowings. Our fiscal 2025 third quarter effective tax rate decreased to 19.8% from 21.8% in the same period last year, better than our expectations. The decrease is primarily due to lower state income taxes and higher federal tax credits. The favorability to our expectations in interest expense and tax expense contributed approximately $0.02 of benefit to diluted EPS below operating income. Our fiscal 2025 third quarter adjusted EBITDA increased 4.4% to $138.8 million. Our third quarter adjusted EBITDA margin rate was 11.8%, a decline of approximately 10 basis points, primarily due to expense deleverage from the decline in our comparable store sales. Moving on to our balance sheet and cash flow. At the end of the third quarter, inventory increased by approximately 2.8% to $1.2 billion compared to December 26, 2024, and was up 11.3% year-over-year. The year-over-year increase was primarily driven by new stores and the need to support the opening of our new Seattle distribution center. Despite the inventory build and the decline in trade accounts payable, we generated $257.8 million of net cash from operating activities year-to-date. Turning to our fiscal 2025 outlook, with two months left in fiscal 2025, we anticipate little divergence from the prevailing housing sector trends. Consumer spending is likely to remain restrained, particularly on big-ticket discretionary durable goods, with a preference for smaller-scale projects. Recent indicators suggest that the existing home sales market may be stabilizing as mortgage rates have moved lower and may continue to ease. September existing home sales rose 1.5% month-over-month and 4.1% year-over-year, holding steady at approximately 4.06 million units. This consistency may signal an inflection point as we head into 2026. While signs of stabilization are emerging, we believe the strength and slope of any recovery remain uncertain, reflecting broader macroeconomic cross-currents and evolving customer sentiment. Let me now discuss our updated fiscal 2025 earnings guidance. Total sales are expected to be in the range of $4,660,000,000 to $4,710,000,000, or increase by 5%- 6% from fiscal 2024. We are planning to open 20 new warehouse-format stores. Comparable store sales are estimated to be down 2% to down 1%. Average ticket comp is estimated to be up low single digits. Transaction comp is estimated to be down low to mid-single digits. The gross margin rate is expected to be approximately 43.6%- 43.7%. As a reminder, our gross margin rate is expected to be adversely impacted by approximately 70 basis points for fiscal 2025 from the two new distribution centers, which is incorporated into our guidance. The impact was approximately 30 basis points in Q1, 60 basis points in Q2, and 90 basis points in Q3, and estimated to be approximately 100 basis points in Q4. Selling and store operating expenses as a percentage of sales are estimated to be approximately 31.5%. The guidance assumes our first and fourth quarters are the most pressured from a rate perspective due to the timing of new stores. General and administrative expenses as a percentage of sales are estimated to be approximately 6%. General and administrative expenses include approximately $9 million related to our finance and merchandising ERP implementation. As a reminder, the fourth quarter of fiscal 2024 included a benefit of $6.8 million, or $0.05 of earnings per share, related to a derivative litigation settlement. Pre-opening expenses as a percentage of sales are estimated to be approximately 0.6%. Interest expense net is expected to be approximately $4 million. Tax rate is expected to be approximately 21%. Depreciation and amortization expense is expected to be approximately $240,000,000. Adjusted EBITDA is expected to be approximately $530,000,000 to $545,000,000. Diluted earnings per share is estimated to be in the range of $1.87- $1.97. Diluted weighted average shares outstanding is estimated to be approximately 108.5 million shares. Moving on to our capital expenditures, our fiscal 2025 capital expenditures are planned to be in the range of $280,000,000 to $300,000,000, including capital expenditures accrued. We intend to open 20 warehouse-format stores and begin construction on stores opening in fiscal 2026. Collectively, these investments are expected to require approximately $180,000,000 to $200,000,000. We plan to invest approximately $20,000,000 in new distribution centers in Seattle and Baltimore. We intend to invest approximately $45,000,000 in existing stores and existing distribution centers. We plan to continue to invest in information technology infrastructure, e-commerce, and other store support center initiatives using approximately $35,000,000. Additionally, we anticipate incurring approximately $30,000,000 in deferred SaaS ERP implementation costs, which are included in other long-term assets and not in capital expenditures. Before we turn it over for questions, I'd like to take a moment to recognize and thank our associates across the organization. The results we've discussed reflect their continued commitment to operational excellence and to delivering outstanding service to our customers. Their efforts remain pivotal to our success and are fundamental to the strength of our current performance and in driving our long-term growth. Operator, we would now like to take questions. Thank you. Ladies and gentlemen, if you would like to ask your question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, we'll wait for questions. The first question comes from the line of Christopher Horvers with JP Morgan. Please proceed. Thanks. Good evening. Tom, you're rightly viewed by investors as a founder CEO for Floor & Decor. The business model and culture really took off when you got involved, and it got better as you built. Whether valid or not, the extended period of subdued sales and the impact on lower new store productivity that you talked about is also coincident with the timing of you stepping back to the Executive Chair role. While there's a bigger emphasis on growing commercial as a company growth driver, how do you respond to investors that might perceive the timing as something more concerning regarding the timing of a potential recovery or the core store growth opportunity? Chris, I would say, look, I appreciate your opening comments. It's been, yeah, that Floor & Decor is certainly near and dear to my heart, but I'm not going anywhere. We were fortunate to find Brad. Brad has come in and hit the ground running. He's got a proven track record. He's been accepted by our team. We've got an excellent team in place. I felt like now is the right, you can't thread the needle on when the market's going to recover perfectly, but I'm not going anywhere. Brad and I are a partnership, and we're going to work side by side to continue to grow the business. I explained my thoughts on the new store productivity. We tried to outlay it as the best that we could. We know what a trough period looks like. We've got a good group of stores for next year. We've taken more cost out. We think the class of next year, the cost will be less than they are even this year, which is significantly down since 2023. I said a couple of calls ago that we were going to start to make sure that we're pivoting into more mid-tier and top-tier markets, and our class of 2026 represents that. We're a young company, as I said in the script. We're learning what a peak period looks like, what a trough period looks like. I am comfortable at the time of the transition. Brad's the right guy to lead the next chapter of our company. This gives me plenty of opportunity to work on what's next. There's a lot to do on the growth side, and I'm excited to roll my sleeves up and spend more time on that side of the business. Thanks. I appreciate that response. As you think about, if you just take mortgage rates now and think about what that might do to existing home sales in 2026 versus where we are year-to-date, to your point on maybe we are at trough, it looks like maybe existing home sales could be up 3%- 4%, even if we hold around a low 6% mortgage rate. How do you think about what does the comp look like? What does the business look like in that environment? On one hand, does a new store waterfall make that a bigger number than the 3%- 4%? On the other hand, there's some big markets of yours, like Texas and Florida, where there's actually home prices are going down, affordability, maybe overbuilding, and that could be a headwind. How do you wrap that all in a hypothetical 3%- 4% existing home sales environment next year? Yeah, I mean, I think it's first, I'll preface my comments with it's too early to talk about next year. I've said over the last couple of quarters, or at least that, I believe that if existing home sales are comping positive, that gives the company a good shot to comp positive. I mean, we're modestly up, and we're modestly up for one month. Let's see how sustained that is. We do feel good that existing home sales are starting to show a little signs of life. We'd like them to show more signs of life. I believe if in the country, across the country, if existing home sales are comping positively, then we have a good ability to comp. We still are opening new stores, and that does have a little bit of a benefit on the waterfall. It's not what it was four years ago, five years ago, but it's still a benefit. As I said in my comment too, the class of all the stores we've opened in the last three classes, even with us opening stores around some of them, they're all still comping as a class. Each class is comping positive. The fact that almost 50% of our stores are less than five years old, if we can get a little bit of benefit of existing home sales and the newness of those stores, I believe we can post a good comp. We're not ready to talk about 2026. We're still in the planning process, but that's my early read. Thanks so much. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed. Hi, this is Zachary for Simeon. Thanks for taking our questions. Home equity lines of credit are starting to rise. Are there any signs the funds are being used or deployed towards flooring or may be able to do so in the near term? When home equity lines increase, this is Tom. When home equity lines increase, that's usually good for home improvement. I'd say it's too early to say. We are seeing, when you look across the country, we are seeing good green shoots in lots of our regions where we're seeing positive same-store sales growth. That could be some benefit of it, but it's really early to tell. Historically, that would say if home equity lines are increasing and people are taking money out of their homes, they're going to reinvest in home improvement, that should be good for us over the long term. That's helpful. Just as a quick follow-up, appreciate the color you've given on the new store performance by vintage. Can you speak to how you're able to attribute the slowdown to a contracting industry versus something else, like potentially greater competition or something like that? I would say it's much more a contracting issue when you look across the competitive landscape, the publicly reported flooring retailers to the manufacturers of hard surface flooring. Everyone's been in a negative environment, and our total growth has been positive. It's just we're opening stores in small, over the last few years we've opened stores in smaller markets, the declining market, and where the competitors seem to be doing worse than Floor & Decor is. That's why I feel confident that as the market turns, our new store performance will improve from where it is today. That's a portfolio number. We still have new stores, even the past three classes, that have performed very well in their first-year sales in highly competitive markets. We know that we still see that even today, and we do believe it's the market backdrop. Got it. Thank you. The next question comes from the line of Michael Lasser with UBS. Please proceed. Good evening. Thank you very much for taking my question. The narrative for a long time is the longer the downturn that goes on, the more likely it is that F&D was going to gain share from the independents and regional chains closing. There have been some store closings like LL Flooring. You now have Tile Shop delisting. You're attributing the weakness just to malaise across the flooring category. It does seem like your comparable store sales are getting worse. Why, in light of all of that, are you seeing a degradation in the trend? Yeah, I don't believe, Michael, they're getting that much worse. I mean, we're kind of bouncing along the bottom. Last quarter, we posted a positive comp. This quarter, slightly down at 1.2%. I mean, it's all the data points that we look at from the standpoint of how hard surface flooring is doing. We seem to be doing better. To be able to grow last quarter as a total company over 5%, and when hard surface flooring continues to be like in a recessionary period, I think we're doing better than the people we're competing with. Michael, when you look at it on a two-year stack, every quarter is sequentially improving. That's something to keep in mind too, is that as we continue to go through this and things start to stabilize, we've been on a downward trajectory. The comps have become a much harder compare as we move throughout this process. I think Q1 was a - 13.3% on a two-year stack. Q2 was a - 8.6%. Q3 was a - 7.6%. Even at the low end of guide, it's implied that will improve into Q4. Your guidance does imply quite a significant improvement in the two-year stack. What is driving your optimism? Are you seeing any signs that the big boxes are becoming more aggressive in the flooring and related categories that would necessitate you responding and sacrificing some gross margin in the process? Thank you. I mean, look. We pay attention to how the big boxes compete with us all the time. They're worthy competitors. I don't believe they're any more irrational than they were a quarter ago or a quarter before that. We adjust prices across the country for different competitors every single week. Our stores are fanatic on who they compete with, whether it's an independent or a big box, and prices fluctuate across the country. I don't feel like we're giving up gross margin because of that. I think we've done, in fact, I've done just the opposite. Living through the tariff environment, mitigating that. Transitioning SKUs from around the world. In a continuing tough environment, to be able to grow gross margin in that environment, I feel pretty good about what we've been able to do. Like I said, from a competition standpoint, yes, it's a desperate market out there, but we feel good about our pricing spreads, and we feel like we're able to handle who we're competing with. When you look at our gross margin, we were down 10 basis points year- over- year with 90 basis points pressure from our distribution centers. That tells you that our product margin was up 80 basis points year- over- year. The teams are doing an incredible job to actually push that even in this environment. From a comp perspective, Michael, I'll actually just the very first kind of part of your question. Whenever we build it, we don't build it to a comp. We're looking at sales trends. We're building it that way. At the midpoint of our guide, sales would kind of continue the way they were through Q3 and kind of through that exit rate. Even though the comp on a two-year stack is implying it's improving, on a three-year, it's kind of in line. For us, it really is just looking at the sales trends, continuing those trends, and we're expecting things to basically be steady kind of through Q4 from the exit rate of Q3. The next question comes from the line of Seth Sigman with Barclays. Please proceed. Thanks. Tom, Brad, congrats to both of you guys. I wanted to follow up on the distribution of your store performance. You alluded to some green shoots that you're seeing across the store base. I guess with comp still down overall across the company, I'm curious how concentrated are the declines, perhaps among a small subset of problem stores? Obviously, I'm adjusting or excluding for the hurricanes here, just trying to figure out the concentration of the declines, and is there a small group of stores that are dragging down the rest of the base? I wouldn't say. Yes, it is more isolated today than it's been over the last three years. I think Chris mentioned it when he was in the first question about the kind of the pressure in housing in Texas and in Florida. We've got high volume, large concentration of stores there, and they're under a lot of pressure because of what's going on with existing home sales. When you look across the rest of the country, the West has been pretty good for a while now, and we've seen the northern markets get better and other markets across the country get better. Some of our oldest, most mature markets are the ones where existing home sales are under the most pressure, and we have to try to offset that. Hopefully, as we see some benefit in lowering interest rates, we see some improvement of existing home sales. Hopefully, that transfers to those states in due time. Okay. Thank you for that. Just thinking about pricing for a second here, there have been some growing concerns across retail about elasticity as other retailers have taken price up, not just in your category, but broader. Can you quantify the price changes that you've made to date and the consumer response? Thank you. We've taken modest price increases as the year has gone on. Our better and best products continue to outperform our good products. I think when customers are electing to do the job, they still continue and they buy what they want. If that's in the better end of the spectrum, that's better value for them. They still get it. I have said for a couple of quarters now that I don't know how inflation is going to affect, as consumers have to stomach tariff pricing going up and other retailers and other categories, how that's going to affect their consumer confidence and how that's going to affect the category. I think that's been a bit of an unknown. Within our store, and when I see what's selling in our store when customers are coming to buy, they're buying the more expensive products and the better products, they're just doing less square footage and less projects. The next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed. Good evening and congrats, Tom and Brad, as well. Tom, this transition to sort of bigger picture, shaping the long-term strategic vision, I'd love to maybe hear you share some words with us on where you're sort of going to prioritize your time as you think about the greatest opportunities for Floor & Decor. For Brad to take over, is there anything you're sort of willing to share with us on how you sort of think about customer mix opportunities, product mix service opportunities? We'd love to just hear high-level thinking here. Sure. I would say, first off, I've kind of got three segments of growth objectives that I really think are worthy of mentioning and that we're paying attention to. In the short term, we've got an outdoor department that we're rolling out across the country. We've got a kitchen cabinet opportunity that we're rolling out across the country. We've got slab opportunity that we're rolling out across the country. We're in the middle of kind of rethinking about our loyalty program and how that works. Those are short-term objectives that I look forward to leaning in on and really working side by side with Ersan and Steve and the team and helping them get off and running. They're all a little bit different businesses, but they all can give us the benefit in our existing stores too, regardless of what's going on with hard surface flooring. It gives us an opportunity. Those categories can grow and be incremental and help grow same-store sales next year. In the midterm, the initial focuses are those. In the midterm, we can go faster in commercial. Brad's brought some tremendous expertise and he's got some good ideas, but he'll need help in thinking about that with Kevin Javellana. I plan on trying to help us go a little bit faster in the commercial space. We've got some larger ideas in our outdoor. Even though we're rolling out a department within the store, we've got some bigger ideas on that. Adjacent categories seem to be an incredible opportunity. We can increase our TAM, and if we do them better, get more out of the store. I plan on leaning into that. Finally, over the long term, we've got a design studio concept, which we haven't really been paying much attention to. We've been trying to keep our head above water. We're going to get back focusing on that. We've got international opportunities. We know that we can go outside of the United States. Again, that's something that just takes time and commitment. We've got opportunities outside the lower 48 that we're looking into that will also take some extra work. I'm energized by that kind of stuff. I look forward to rolling up my sleeves with the team. I think my goal, I'm not the founder here, but I came in really early when there was a small store base. We've got an identified plan to get us to 500 stores. We've got a commercial starting, but I'm really hoping to get us to be much larger than that and to create the second chapter of growth for Floor & Decor that's outside of just the 500 stores. I appreciate that. Maybe just a quick follow-up on one of the short-term initiatives, kitchen cabinets in particular. We'd love to hear sort of how we should think about this rollout, right? The current vignette or display in the stores. Is there a plan in place to sort of maybe expand that, create a bigger showroom or experience for the customer, or even thinking about, is 2026 a period of time where maybe there's some remodel capital or existing store capital as well? Yeah, certainly. Because the cost of our new stores are coming down, we can put some investment behind certainly our outdoor strategy and our kitchen strategy. We do have things that we're working on. We'll talk more about them as they get up and running. Certainly, a broader display of kitchen cabinets and more space within the design center and the kitchen cabinets. We're in early stages of getting a pilot up and running so that we can monitor that. It's a tremendous opportunity in the store. We don't even have the initial display up. It's supposed to go one in the pro area, one in the kitchen, and one in the decor department. That's not even up in all of our stores yet. We've got to finish getting that rolled out. We've got some larger ideas that we'll be working on and sharing as we get into next year. Thank you. At this time, we ask that each analyst limit themselves to one question and one follow-up. Thank you. The next question comes from the line of Zachary Fadem with Wells Fargo. Please proceed. Hey, good afternoon. I guess I just missed the cutoff here for two, but Brad and Tom, congrats to you both. Actually, I got a question for Bryan. You talked about the 80 basis points of core margin improvement when you exclude the DC impact. Maybe you could walk us through expectations on that line for 2026. Hey, Zach, it's probably a little too early for us to talk about 2026 at this point. Whenever we look at it, I guess the guidance that we'd give you is I don't really see a reason why that would go backwards. We're still in the planning process to figure out what next year is going to look like. We've got a lot of things in the hopper, as Tom just talked about, a lot of things to kind of figure out. As we model those and get those incorporated, we'll have more to communicate. From where we sit today, we feel really good about where our gross margin rates are running from a product perspective. There'll be a little bit of DC headwinds still to come as we fully operate our second Baltimore distribution center. When you're thinking about modeling from a product margin perspective, where we sit today, which we'll come from with, there may be slight movements within that. What you will see a movement in is when we start to fully operate our second Baltimore distribution center because in Q3, we started to operate Seattle. That's fully embedded within our numbers. As you step into next year, there is a slight step investment, but that really is just for the people to operate the building. We're already getting hit with a lot of the rent and other kind of fixed costs that you see within that. As you think about gross margin and stepping into next year, still a lot of planning to do, as Tom mentioned. I'm not ready to talk about 2026, but hopefully that can help give a little bit of guardrails. Appreciate it. Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed. Hey, thanks. Congrats to both of you guys. Questions on commercial. You've talked about moving faster. Curious if you could discuss how you're evaluating the build versus buy decision while also taking advantage of the retail opportunity as well. Yeah, I'll start on Spartan and then you can talk a little bit about the commercial opportunity within the store. This is Tom. I would say we challenged Kevin, our CEO of Spartan. As we ended last year and were going into this year, we wanted this year to be a year of investment in that business. We know him being a little bit more aggressive and incurring some cost in the beginning to add more sales folks will turn into a greater return as we get towards the end of the year and into next year. We saw that in the initial stages of our investment, and we're going to see it again, we believe, going forward. We pushed him on the internal side. After Brad got here, and I would say probably 90 days into Brad's tenure and spent a little bit more time up there, we told him, "Bring us more opportunities and bring them quicker." When we're ready to share more, we will share more. We think that Kevin can do both. We think that we have the ability to grow Spartan by doing some acquisition like we did when we originally bought the company and added a couple of bolt-ons and growing internally with our sales force. This year, it's been much more about the salespeople being added to the organization. As we get towards the end of this year and into next year, our hopes are that we'll be bringing a little bit more acquisitive and inquisitive environment. We know we've got the right team in there to handle both. Yeah. When we think about the kind of total commercial umbrella, we always talk about three segments. Tom just talked about Spartan, and that customer, again, is high complexity, high specification. That is going to be a combination of build and buy, like he just described. We then have our pro desk in the store that serves a professional customer that's generally lower complexity, low specification. That's going to be built. We feel really good about our experience there. We're at the right maturity level, but we're also excited about the share of wallet gains that we think we're going to get over time with some of the initiatives that we've talked about externally over the past few months. All the space in between Spartan and our pro desk is what we've targeted for our RAM team, regional account managers. That also will be a build. We've brought new leadership into the organization over the last 90 days. As I've shared with many of you, right now, the focus is building the right foundation, kind of the go slow, the go fast, ensuring that we have the right people, process, and technology in place. We're really excited. We think that's a big opportunity. It's a huge market for us where we have currently a really small share. The next question comes from the line of David Bellinger with Mizuho Securities. Please proceed. Hey, guys. Thanks for the question. Congrats, everybody. I want to ask about design services. That seems to be performing well. What do you need to do in order to get that more top of mind for customers? Do you need installation capabilities? Is it a higher advertising intensity? What do you need to do, and what are the plans to unlock a higher level of design services? Okay. This is Tom. I will start. I think we can tell our story better, and I think we can do that through better marketing and communicating with our customers directly on how our design services work. I do not think it has to do with installation. We do not install today. We don't have any plans to get into the installation business. We think the relationship with our professional customers is important, and we want our professional customers sending their customers into our store and be comfortable that we're not going to lose a sale too because Floor & Decor installs something. We won't see that change. We can do a better job of telling the story. We have lots of efforts where we're getting our designers out of the design center, where they're roaming around the store, looking for customers and engaging and explaining our design services to them. We think it is a big part of the moat around our castle, the service that those designers provide. When we look at our service scores, when our designers are with them, it's better. The ticket's higher. The margin blends better. We just got to continue to tell the story. We have hired. That announcement's gone out? No. Okay. We're excited about the design business. Yeah. The only thing that I would say, and Tom hit the nail on the head when we talk about design, just telling the story, driving awareness. Also, Steve Denny, who's responsible for that organization, is really focused, and that's being thoughtful around how we can increase the frequency of interactions between designer and customers that come into the store. That's both homeowner and pro. I agree with Tom's point. We think it's a differentiator from a service perspective. If you look at other competitors like us, they don't offer that service, especially free service. You're going to hear more about that in the future, but we're certainly encouraged by what we're seeing right now. The next question comes from the line of Peter Keith with Piper Sandler. Please proceed. Thank you very much. Tom, congrats. You've done a great job during your tenure there. Glad to be able to work with you more closely. Maybe to follow up on the last question, I'm curious what you guys are doing from a brand awareness and advertising standpoint. We're seeing a number of other companies in home-related areas that have advertised consistently start to bounce off the bottom. Are you guys increasing or decreasing ad spend, and then looking to raise awareness? Are you looking at other channels like social media, and what are you doing to lean in there? Great question. That's a part of our business that we're always looking at. We're blessed with a very good team here, and I think our capabilities continue to get better and better. When we think about how we allocate our spend across our total budget, that's changed over the last couple of years. As a brand that's not well-known like other competitors in the space, a big part of where we spend our money is telling the story and who is Floor & Decor. That's going to be an area that we continue to invest in because we think we've got a great story to tell. At the same time, in this environment where we know there's limited demand, we've got to be really tactical and technical about getting as much of that demand as possible. I think we've executed well. Always room for progress. The other piece is that's a space where technology feels like it's changing every day on how you talk to customers, and we're doing our best to stay in front of that. Thank you. The next question comes from the line of Jonathan Matuszewski with Jefferies. Please proceed. Great. Good afternoon, and thanks for taking my question. It was on labor inflation. Curious what you're seeing there in terms of wages for industry tradespeople. Anything you've been hearing from IME in the second half that may be different from the first half, again, on the labor side versus the product side. Thanks so much. I'll start, and I guess, Bryan, you can weigh in. This is Tom. I have not heard of labor inflation or the cost of the install going up because of lack of labor. That could be the case in some markets, but overall, I would say that that's not something that we're dealing with. In fact, I think because of the pressure in the category, on the installation side, the contractors are being very aggressive themselves to kind of keep a book of business, so they're probably a little less expensive than they've been. There may be pockets in the country where there's been some impact where they've lost some professional flooring installers, and that may be causing an issue. I think, in general, for the company, that's not the case. Thank you. The last question will come from the line of Steven Zaccone with Citi. Please proceed. Great. Thanks very much for squeezing me in. Congrats, Tom and Brad, on the changes there. My question on average ticket. You said it was at the low end of your expectations. You cited mix. Can you elaborate a bit more what that means? Are you seeing any signs of trade down out of the better and best? What's embedded in your outlook for fourth-quarter comps transactions versus ticket? Thanks. I'll take the first half and then hand it over to Bryan for the second. As a reminder, ticket came in at +1.8%, low end of our guidance. There were really kind of two primary drivers of that. One was a mix in product or shift in product mix, excuse me. The primary headwind that we saw there was in laminate and vinyl. We saw a slower growth in that category, and that is a higher ticket category inside of our stores. The second, and Tom talked about this in his answer, we have seen a slight tick down in job size, which puts pressure on average square footage for each job. Those two together put a little bit of pressure on the average ticket. Bryan, you want to take the second half of that? Yes. Steve, the implied guide for ticket is essentially flat for Q4. When you take that implied in transactions, it's kind of low to mid single digits. For Q4, that'll wrap up for the full year in the guide that I gave earlier. That concludes the questions. I want to thank you all for joining. In closing, I want to just take a minute for a couple of words. I want to underscore our unwavering commitment to playing the long game with discipline, focus, and a clear strategy to build long-term earnings power. Over the past two years, we reduced operating expenses in our comparable stores by approximately $50 million and continue to identify new opportunities to scale with greater efficiency. We've meaningfully lowered new store construction costs, created a more leverageable growth model that allows us to expand faster and more profitably as the market strengthens. With nearly 50% of our locations less than five years old, the fleet is modern, requiring no major reinvestment to support growth. These efficiencies are not temporary. They're foundational, allowing future revenue to scale. As industry conditions improve, we'll be growing with a larger fleet of stores, lower operating expenses, stronger market share, and a superior customer service experience, all powered by a leaner, more agile operating model. We're not just preparing for the future. We're actively shaping it. Thank you for your interest in the call, and we look forward to talking to you next quarter. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.