Boot Barn Holdings Inc. reported pro forma net income more than doubled in the fiscal first quarter ended June 27 due to contributions from seven new stores and comparable store sales growth.

Net sales increased 16.4 percent to $96.0 million from $82.5 million in the first quarter of fiscal 2015. Same-store sales including e-commerce sales increased 5.6 percent from the same period of 2014.

Net income was $2.3 million, or $0.08 per diluted share; and more than doubled on a pro forma adjusted basis.

“We achieved a great start to the fiscal year with strong first quarter results as a result of solid execution across our growth initiatives,” said CEO Jim Conroy. Double digit net sales growth was driven by the contribution from new stores as well as our 23rd consecutive quarterly increase in same store sales. We also saw a healthy improvement in merchandise margins year-over-year, achieved growth in adjusted operating income of 23.6 percent and more than doubled our net income on a pro forma adjusted basis. Finally, we were able to achieve expense leverage with adjusted income from operations improving 35 basis points versus last year.”

Conroy said integration with Scheplers, a chain Boot Barn acquired June 29, is progressing as expected and that the acquisition is expected to be accretive in the current fiscal year, excluding one-time acquisition and integration costs.
Operating Results for the First Quarter Ended June 27, 2015

Income statement
Net sales increased 16.4 percent to $96.0 million from $82.5 million in the first quarter of fiscal 2015. Net sales increased due to contributions from 7 new stores opened during the quarter and a 5.6 percent increase in same store sales, which include e-commerce.

Gross profit was $30.8 million or 32.1 percent of net sales, compared to gross profit of $26.9 million or 32.6 percent of net sales in the prior year period. Merchandise margin grew in the quarter, primarily driven by increased penetration of private brands, improved mark-up across the chain, and an improvement in e-commerce margin. This increase was offset by increases in store occupancy costs and depreciation expense associated with the increase in new store openings compared to the prior year period.

Excluding the acquisition-related costs and adjusting income from operations in the first quarter of fiscal year 2015 to reflect $0.8 million of public company costs we estimate would have been incurred had the company been a public company during that quarter, adjusted income from operations was $5.7 million in the first quarter of fiscal year 2016, an increase of 23.6 percent, compared to $4.6 million in the prior-year period. This improvement demonstrates expense leverage of 35 basis points versus last year on a pro forma adjusted basis.

The company opened 7 new stores and ended the quarter with 176 stores in 28 states.

Net income for the first quarter of fiscal 2016 was $2.3 million, or $0.08 per diluted share, which includes $0.03 per diluted share of acquisition-related costs. This compares to $1.4 million or $0.00 per diluted share in the prior year period. Pro forma adjusted net income was $3.0 million, or $0.11 per diluted share compared to $1.4 million or $0.06 per diluted share in the prior year period.

A reconciliation of adjusted income from operations, pro forma adjusted net income and pro forma adjusted net income per diluted share, each a non-GAAP financial measure, to their most directly comparable GAAP financial measures is included in the accompanying financial data. See also “Non-GAAP Financial Measures.”

Balance sheet

  • Cash: $12.9 million
  • Total debt: $100.9 million
  • Total liquidity (cash plus availability on $75 million revolving credit facility): $60.8 million

Scheplers integration
On June 29, 2015, the company completed the purchase of Sheplers, a 116-year old western lifestyle company with 25 retail locations across the United States and an industry-leading e-commerce business.

The company financed the acquisition and refinanced approximately $172 million of its and Sheplers’ existing indebtedness with an initial borrowing of $57 million under a new $125 million syndicated senior secured asset-based revolving credit facility for which Wells Fargo Bank, National Association, acted as agent, and a $200 million syndicated senior secured term loan for which GCI Capital Markets LLC acted as agent.

The company expects the acquisition to be accretive to fiscal 2016 earnings (ending March 26, 2016), excluding estimated one-time transaction and integration costs. The acquisition is also expected to generate $6 million to $8 million of ongoing annual synergies and to be approximately 10 percent accretive to Boot Barn’s net income in fiscal year 2017.

Fiscal Year 2016 outlook
For the fiscal year ending March 26, 2016, the company is now including Sheplers in its consolidated outlook. Therefore, the company now expects:

  • To open 22 new stores, with 14 expected to open in the first half of the fiscal year and 8 in the second half of the fiscal year.
  • Same store sales growth, including e-commerce sales of low to mid-single digits.
  • Pro forma adjusted income from operations between $49.3 million and $51.5 million, compared to the company’s prior outlook of $39.1 million and $41.1 million.
  • Pro forma adjusted net income of $23.2 million to $24.5 million, compared to the company’s prior outlook of $21.9 million to $23.1 million.
  • Pro forma adjusted net income per diluted share of $0.85 to $0.90 based on 27.3 million weighted average diluted shares outstanding, compared to the company’s prior outlook of $0.81 to $0.86 per diluted share.
  • Capital expenditures of approximately $31.0 million, which includes $13.0 million related to Sheplers.
  • For the fiscal second quarter ending September 26, 2015, the company expects:
  • Same-store-sales growth for the Boot Barn business, including e-commerce and excluding Sheplers, to be in the low to mid-single digits.
  • The Sheplers business, including e-commerce, to experience a single-digit decline in same store sales. The stores will experience a mid-single digit decline in sales as the company prepares the stores for rebranding. The e-commerce business will experience a high single-digit decline in sales as the company wraps up against outsized sales performance in the second quarter of fiscal 2015.
  • Total same store sales growth for Boot Barn, including e-commerce and Sheplers, to be in the low-single digits.
  • Pro forma adjusted net income per diluted share of $0.02 to $0.05 based on 27.2 million weighted average diluted shares outstanding.

The Fiscal 2016 outlook for pro forma adjusted income from operations and net income will exclude merger and integration costs and other non-recurring expenses, including losses on the disposal of assets, acquisition-related expenses, acquisition-related integration and reorganization costs, amortization of inventory fair value adjustment, markdown of discontinued Sheplers’ inventory, and the write off of debt issuance costs as part of the June 29, 2015 refinancing. See the table at the end of this press release that reconciles forecasted GAAP net income to forecasted pro forma adjusted net income.