Boot Barn Holdings reported net income more than doubled in the fourth quarter ended March 31 as sales grew 12.1 percent.

For the 13-week fourth quarter ended March 31, 2018:

  • Net sales increased to $170.8 million, driven by a 12.1 percent increase in same store sales, with double-digit same store sales growth in both retail stores and online. This compares to $163.0 million in the prior-year period, which was a 14-week quarter.
  • Net income was $6.9 million, or $0.24 per diluted share, compared to net income of $2.6 million, or $0.10 per diluted share (and compared to adjusted net income of $3.3 million, or $0.12 per diluted share) in the prior-year period, which was a 14-week quarter.

For the 52-week fiscal year ended March 31, 2018:

  • Net sales increased 7.6 percent to $677.9 million, compared to $629.8 million in the prior year, which was a 53-week year.
  • Same store sales increased 5.2 percent.
  • Net income was $28.9 million, or $1.05 per diluted share, compared to net income of $14.2 million, or $0.53 per diluted share (and compared to adjusted net income of $14.9 million, or $0.55 per diluted share) in the prior-year, which was a 53-week year.
  • Added nine stores through new openings and acquisitions and closed two underperforming stores, bringing the total count at fiscal year-end to 226 stores.

The company announced that Anne MacDonald, an experienced branding and marketing executive, has been appointed to its board of directors. MacDonald will replace Fred Simmons, who has resigned from the Board.

Over the course of her career, MacDonald has served as chief marketing officer for several global companies including Macy’s, Citigroup, and Travelers Insurance. In addition to her executive experience, MacDonald has had extensive agency experience advising iconic brands including Procter & Gamble, AT&T and Pizza Hut. Presently she works as a strategic advisor to several clients through her own firm.

Jim Conroy, chief executive officer, commented, “We are very pleased with the top-line momentum our business experienced across most of the country both in store and online during the fourth quarter. Our investments in merchandising, marketing and omni-channel fueled double-digit gains in retail comparable sales and helped return our e-commerce business to double-digit growth as well. Importantly, we held true to our full-price selling model, which combined with a meaningful increase in our exclusive brand penetration, yielded a 90 basis point improvement in merchandise margin. Our strong sales and margin performance enabled us to exceed our earnings guidance for the quarter and further solidify our industry leading position.”

Conroy continued, “I am equally excited about the business in April and May as our double-digit same store sales growth has continued. We are looking forward to fiscal 2019 and the opportunities we have to drive profitable growth, re-accelerate store expansion, build out our multi-brand e-commerce strategy and further develop our exclusive brands.”

Regarding the change in the board of directors, Conroy commented, “I am excited to welcome Anne MacDonald to the board of directors. She brings a world-class marketing background that will enhance our ability to develop both the Boot Barn brand and each of our exclusive brands. Anne’s combination of company and agency experience will further enhance the composition of our Board as we continue to grow the Boot Barn business across the country. I also want to take this opportunity to thank Fred Simmons for his contributions since December 2011. Fred’s guidance and strategic counsel have helped lead the growth of Boot Barn into a national lifestyle brand with revenue growing 300 percent during his tenure. On a personal note, Fred has been inspiring, motivational and uplifting to me and the entire management team.”

Operating Results for the Fourth Quarter Ended March 31, 2018

  • Net sales increased to $170.8 million in the fourth quarter of fiscal year 2018 (13 weeks), from $163.0 million in the fourth quarter of fiscal year 2017 (14 weeks). Net sales increased due to a 12.1 percent increase in same store sales, the sales contribution from 9 stores added over the past twelve months and sales from the Country Outfitter site that was acquired in February 2017. Sales growth was partially offset by sales from the 14th week in the prior-year period.
  • Gross profit was $52.9 million, or 31.0 percent of net sales, in the fourth quarter of fiscal year 2018, compared to gross profit of $49.3 million, or 30.3 percent of net sales, in the prior-year period. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. Gross profit rate increased primarily as a result of a 90 basis point increase in merchandise margin rate partially offset by a 20 basis point increase in buying and occupancy costs. The higher merchandise margin rate was driven by more full-price selling, fewer promotions and increased exclusive brand penetration. The increase in buying and occupancy costs as a percentage of sales resulted from fixed costs deleveraging in a 13-week quarter in the current year compared to a 14-week quarter in the prior-year period.
  • Selling, general and administrative expense was $41.6 million, or 24.4 percent of net sales, in the fourth quarter of fiscal year 2018 compared to $41.3 million, or 25.3 percent of net sales, in the prior-year period. Excluding $1.2 million of store impairment charges in the prior-year period, adjusted selling, general and administrative expense was $40.1 million, or 24.6 percent of net sales. Selling, general and administrative expenses increased primarily as a result of increased sales, compensation expense and additional costs for both new and acquired stores. Selling, general and administrative expenses as a percentage of sales decreased as a result of expense leverage on higher sales.
  • Income from operations increased 39.9 percent, to $11.3 million, or 6.6 percent of net sales, in the fourth quarter of fiscal year 2018 (13 weeks), compared to $8.1 million, or 4.9 percent of net sales, in the prior-year period (14 weeks). Excluding the impact of the store impairment charges in the prior-year period, adjusted income from operations was $9.2 million, or 5.7 percent of net sales, in the fourth quarter of fiscal year 2017.
  • Net income was $6.9 million, or $0.24 per diluted share, in the fourth quarter of fiscal year 2018 (13 weeks), compared to $2.6 million, or $0.10 per diluted share, in the prior-year period (14 weeks). Excluding the impact of the store impairment charges, adjusted net income was $3.3 million, or $0.12 per diluted share, in the fourth quarter of fiscal year 2017, which was a 14-week quarter. Net income per diluted share in the fourth quarter of fiscal 2018 includes approximately $0.06 per share of tax benefit related to stock option exercises and $0.02 per share related to improved tax rate, partially offset by $0.01 per share of secondary offering costs.

Operating Results for the Fiscal Year Ended March 31, 2018

  • Net sales for fiscal year 2018 (52 weeks) increased to $677.9 million from $629.8 million in fiscal year 2017 (53 weeks). Net sales increased due to a 5.2 percent increase in same store sales, the sales contribution from 9 stores added over the past twelve months and sales from the Country Outfitter site that was acquired in February 2017. Sales growth was partially offset by sales from the 53rd week in the prior-year.
  • Gross profit for fiscal year 2018 was $207.9 million, or 30.7 percent of net sales, compared to gross profit of $189.9 million, or 30.1 percent of net sales, in fiscal year 2017. Gross profit increased primarily due to increased sales. Gross profit rate increased as a result of a 50 basis point increase in merchandise margin rate.
  • Selling, general and administrative expense for fiscal year 2018 was $161.7 million, or 23.8 percent of net sales, compared to $152.1 million, or 24.1 percent of net sales, in fiscal year 2017. Adjusted selling, general and administrative expense in fiscal year 2017 was $150.9 million, or 24.0 percent of net sales. Selling, general and administrative expenses increased as a result of additional costs associated with the opening of new and acquired stores over the last twelve months, compensation expense and incremental operating costs associated with the growth in the business. Selling, general and administrative expenses as a percentage of sales decreased as a result of expense leverage on higher sales.
  • Income from operations for fiscal year 2018 (52 weeks) increased 22.3 percent, to $46.3 million, or 6.8 percent of net sales, compared to $37.8 million, or 6.0 percent of net sales, in fiscal year 2017 (53 weeks). Adjusted income from operations in fiscal year 2017 was $39.0 million, or 6.2 percent of net sales.
  • Net income for fiscal year 2018 (52 weeks) was $28.9 million, or $1.05 per diluted share, compared to $14.2 million, or $0.53 per diluted share, in fiscal year 2017 (53 weeks). Adjusted net income in fiscal year 2017 was $14.9 million, or $0.55 per diluted share. Net income per diluted share in fiscal year 2018 includes approximately $0.25 per share of tax benefit from the revaluation of deferred tax liabilities, approximately $0.06 related to stock option exercises and $0.04 related to improved tax rate from tax reform.
  • The company added 9 stores through new openings and acquisitions and closed two underperforming stores, bringing the total count at year-end to 226 stores.

Balance Sheet Highlights as of March 31, 2018

  • Cash of $9.0 million
  • Average inventory per store increased 4.4 percent on a comp store basis compared to April 1, 2017
    Total net debt of $204.2 million, including $21.0 million drawn under the revolving credit facility

Fiscal Year 2019 Outlook

For the fiscal year ending March 30, 2019 the company expects:

  • To open 23 new stores
  • Same store sales growth of mid-single digits
  • Income from operations between $52.5 million and $56.5 million
  • Interest expense of $17.0 million to $18.0 million
  • Net income of $26.2 million to $29.2 million
  • Net income per diluted share of $0.92 to $1.02 based on 28.7 million weighted average diluted shares outstanding

For the fiscal first quarter ending June 30, 2018 the company expects:

  • Same store sales growth of approximately 10 percent
  • Net income per diluted share of $0.10 to $0.12 based on 28.5 million weighted average diluted shares outstanding