Floor & Decor (FND) is facing persistent macro headwinds and a lack of near-term catalysts, which will weigh on its path to positive comparable-store sales growth, Morgan Stanley said in a Friday note.
Floor & Decor has had four consecutive years of declining comparable-store sales, but pressure on revenue is mainly driven by weak housing activity, and the company is "well positioned to outperform the industry" once housing conditions improve, Morgan Stanley analysts said.
The company's market-share position is strong, and comparable-store sales can potentially rebound to mid-single-digit to high-single-digit growth when the macro environment improves, the analysts said.
They pointed to a recent AlphaWise contractor survey indicating that Floor & Decor improved its position as a preferred flooring destination over the last four surveys, reaching a record high of 42%.
However, the market is pricing in a longer period of industry pressure than expected, including the possibility of negative comparable-store sales through the end of 2027, according to the note.
Morgan Stanley maintained the company's stock rating at equal-weight and lowered the price target to $56 from $88.
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