The Home Depot, Inc. (HD Quick QuoteHD - Free Report) and Floor & Decor Holdings, Inc. (FND Quick QuoteFND - Free Report) operate in the broader home improvement retail space. Home Depot, with a market capitalization of roughly $384.8 billion, is the industry’s dominant player, offering a wide range of products for home renovation, maintenance and construction. The company serves both do-it-yourself (DIY) customers and professional contractors through more than 2,300 stores across the United States, Canada and Mexico, supported by a robust supply chain.

Floor & Decor, by comparison, is a specialty retailer focused on hard-surface flooring and related accessories. With a market capitalization of about $7.7 billion, the company operates more than 260 warehouse-format stores across the United States. The company targets homeowners, designers and professional installers with a differentiated assortment and competitive pricing.

Both companies are operating against a backdrop of softer housing activity and cautious discretionary spending. While Home Depot offers scale, diversification and cash-flow stability, Floor & Decor provides a more targeted growth profile tied to flooring demand. For investors, the key question is whether Home Depot’s market leadership makes it the safer bet or if Floor & Decor’s specialization and store-led growth strategy offer a more compelling opportunity.

The Case for Home Depot

Home Depot’s long-term growth strategy is shaped by its expanding Pro ecosystem, strengthened through the additions of SRS and GMS. These platforms give the company a wider reach into specialty building materials and create natural cross-sell opportunities between retail and wholesale channels. By broadening its exposure to professional contractors and complex project work, Home Depot is better positioned to capture a larger share of Pro spend across repair, remodel and specialty construction categories.

The company is also enhancing its focus on professional contractors by introducing a new AI-powered tool designed to reshape how Pro customers plan and execute complex projects. The company highlighted that its blueprint takeoffs tool utilizes advanced AI and proprietary algorithms to analyze construction plans and generate material estimates with far greater speed and accuracy than traditional methods. This technology replaces the labor-intensive process that earlier took Pro customers weeks to complete. 

By incorporating this advanced technology, Home Depot is reinforcing its position as the go-to destination for all project requirements, from initial planning to material delivery. This development marks a significant step forward in catering to the Pro category. This progress allows Home Depot to differentiate its Pro offerings not only through product assortment but also through digital infrastructure.

However, Home Depot is facing structural headwinds, muted demand and margin pressure. The softness in housing turnover, a key driver of repair-and-remodel spending, remains a notable drag. With management citing housing activity at nearly 40-year lows and consumer behavior pressured by affordability constraints, the company delivered a modest 0.2% increase in comparable sales in the third quarter of fiscal 2025, down from 1% growth in the preceding quarter. This sluggish growth shows that the expected demand recovery in the second half has not materialized.

Home Depot’s heavy reliance on storm-related sales has emerged as a significant vulnerability, as the lack of seasonal storm activity was cited as the primary reason for missing third-quarter expectations. Categories such as roofing, plywood and power generation faced greater-than-expected pressure. For fiscal 2025, Home Depot anticipates comparable sales growth to be slightly positive, down from its previous forecast of 1% growth.

The Case for Floor & Decor

Floor & Decor continues to strengthen its position by steadily expanding its footprint and gaining market share in the fragmented hard-surface flooring market. The company remains on track to open about 20 new warehouse-format stores annually, with a long-term goal of reaching 500 locations across the United States. Recent store classes from 2021 through 2024 have achieved positive comparable store sales growth even after accounting for cannibalization, highlighting FND's ability to capture market share in a contracting industry. The opening of a fifth distribution center in the Seattle area further enhances supply-chain efficiency and port diversification to support growth in the Western region.

The company has significantly reduced initial build-out costs compared with previous store classes. Management has made substantial progress in improving the unit economics of its expansion strategy. The initial investment for the fiscal 2025 class of new stores is estimated to be about $1.5 million less per store than for the 2023 class. Significant improvement is expected for the 2026 class, driven by efforts to optimize store size, reduce costs and utilize more "second-use sites" in the pipeline. Over the past two years, the company has lowered operating expenses across its comparable store base by approximately $50 million, reflecting sustained cost discipline and ongoing initiatives to increase efficiency.

Floor & Decor is also broadening its growth strategy by expanding beyond its core flooring assortment into higher-value adjacent categories and services. The rollout of kitchen cabinets to a large portion of the store base, the expansion of outdoor and pool product assortments, and the scaling of the XL slabs offering all increase average project size and wallet share. Design services have emerged as a particularly powerful differentiator, driving higher transactions, stronger comparable sales performance and improved customer satisfaction compared to the company average. These initiatives allow Floor & Decor to capture a greater share of project spending.

The company’s professional and commercial exposure strengthens its long-term positioning. Pro customers generate roughly half of total sales, providing recurring volume and greater stability. At the same time, the commercial business continues to grow at a healthy pace through the Spartan Surfaces platform, which has expanded into higher-specification end markets such as healthcare, education and hospitality, reducing reliance on residential remodeling. Supported by ongoing investments in distribution infrastructure, including new distribution centers aimed at improving service levels and enabling future growth, Floor & Decor is building a diversified platform capable of supporting sustained sales expansion.

However, Floor & Decor continues to face near-term challenges tied to a sluggish housing and remodeling environment. Comparable sales remain negative, transactions are under pressure, and consumers are prioritizing smaller projects, limiting the pace of recovery. Elevated mortgage rates and weak housing turnover continue to weigh on demand.

HD vs. FND: How Do Estimates Stack Up?

The Zacks Consensus Estimate for Home Depot’s current financial-year sales implies year-over-year growth of 3.2%, while the same for earnings per share suggests a decline of 4.9%. For the next fiscal year, the consensus estimate indicates a 4.4% rise in sales and 4% growth in earnings. The consensus estimate for EPS for the current and next fiscal year has fallen by 14 cents and 45 cents to $14.50 and $15.08, respectively, over the past 60 days. 
 

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The Zacks Consensus Estimate for Floor & Decor's current financial-year sales and EPS implies growth of 5.3% and 3.2%, respectively, from the year-ago period’s actuals. For the next fiscal year, the consensus estimate indicates a 7.9% rise in sales and 12.3% growth in earnings. The consensus estimate for EPS for the current fiscal year has been stable at $1.91, while for the next fiscal year, it has risen by a couple of cents to $2.15 over the past seven days.
 

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HD vs. FND: A Look at Past Month Stock Performance

Home Depot shares have jumped 11.3% over the past month, trailing Floor & Decor, which has advanced 14.6% over the same period.
 

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HD vs. FND: Stock Valuation

Home Depot is trading at a forward 12-month price-to-earnings (P/E) ratio of 25.64, higher than its one-year median of 23.83. Meanwhile, Floor & Decor's forward P/E ratio stands at 32.45, below its median of 37.00.
 

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HD vs. FND: Which Is a Better Bet?

While Home Depot remains an industry leader with unmatched scale, strong Pro relationships and long-term strategic investments, its near-term outlook is constrained by muted housing activity and demand volatility. On the other hand, Floor & Decor appears better positioned at present, as it continues to gain share in a fragmented market, execute disciplined store expansion, and broaden its addressable opportunity through adjacent categories and services. As a result, Floor & Decor holds more promise for investors right now.

While Floor & Decor carries a Zacks Rank #3 (Hold), Home Depot has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.