Boot Barn Holdings Inc. on Tuesday reported that net sales for the third quarter ended December 29 increased 13 percent to $254 million, narrowly missing analysts’ expectations by $0.54 million.

Net income was $19 million, or 66 cents per diluted share, compared to net income of $20.1 million, or 73 cents per diluted share in the prior-year period, in line with estimates. Net income per diluted share in the prior-year period was $0.46 when excluding $0.27 related to tax reform.

The company raised fiscal year EPS guidance to $1.31 to $1.33—based on 28.8 million weighted average diluted shares outstanding—compared to the company’s prior outlook of $1.16 to $1.24.

Highlights from the quarter include:

  • Net sales increased 13 percent to $254 million.
  • Same store sales increased 9.2 percent, with double-digit growth in e-commerce and high single-digit growth in retail stores.
  • Net income was $19 million, or $0.66 per diluted share, compared to net income of $20.1 million, or $0.73 per diluted share in the prior-year period. Net income per diluted share in the prior-year period was $0.46 when excluding $0.27 related to tax reform.
  • The company opened two new stores during the quarter.

Jim Conroy, CEO, said, “Our strong results in the third quarter reflect the continued strength across the country and in nearly all major product categories. Our strong merchandising initiatives, segmented marketing, and solid store operations drove double-digit growth in e-commerce and high single-digit growth in retail stores while expanding our consolidated merchandise margin 120 basis points. Our same store sales trend through the first five weeks of the fourth quarter is in line with our third quarter performance and we continue to hold true to our full-price selling model. Notably, our Texas stores also continue to perform better than company average. We are confident that the strategies we have in place have us well positioned to conclude a very successful fiscal 2019 with a strong fourth quarter performance.”

Operating Results for the Third Quarter Ended December 29, 2018

  • Net sales increased 13 percent to $254 million from $224.7 million in the prior-year period. The increase in net sales was driven by a 9.2 percent increase in same store sales, the sales contribution from acquired stores and sales from new stores added over the past twelve months.
  • Gross profit was $85.7 million, or 33.7 percent of net sales, compared to $71.9 million, or 32 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 from a 120 basis point increase in merchandise margin rate and a 50 basis point decrease in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and growth in exclusive brand penetration.
  • Selling, general and administrative expense was $56.4 million, or 22.2 percent of net sales, compared to $47.5 million, or 21.2 percent of net sales, in the prior-year period. The increase in SG&A expenses was primarily a result of additional costs to support higher sales and expenses for both new and acquired stores. As a percentage of net sales, SG&A increased primarily as a result of higher incentive compensation in the thirteen weeks ended December 29, 2018 and a gain from insurance claims in the thirteen weeks ended December 30, 2017 that did not occur in the current year period.
  • Income from operations grew 20.1 percent to $29.3 million, or 11.5 percent of net sales, compared to $24.4 million, or 10.9 percent of net sales, in the prior-year period. This increase represents more than 60 basis points of improvement in operating profit margin.
  • Net income was $19 million, or $0.66 per diluted share, compared to $20.1 million, or $0.73 per diluted share, in the prior-year period, which included $0.27 related to tax reform.
  • Opened 2 new stores, bringing the total count at quarter-end to 234 stores in 31 states.

Operating Results for the Nine Months Ended December 29, 2018

  • Net sales increased 15.2 percent to $584.1 million from $507.2 million in the prior-year period. The increase in net sales was driven by a 10.4 percent increase in same store sales, the sales contribution from acquired stores and sales from new stores added over the past twelve months.
  • Gross profit was $188 million, or 32.2 percent of net sales, compared to $155 million, or 30.6 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 from a 100 basis point increase in merchandise margin rate and 60 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and growth in exclusive brand penetration.
  • Selling, general and administrative expense was $140.2 million, or 24 percent of net sales, compared to $120 million, or 23.7 percent of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of additional costs to support higher sales and expenses for both new and acquired stores. As a percentage of net sales, SG&A increased primarily as a result of higher incentive compensation in the thirty-nine weeks ended December 29, 2018 and a gain from insurance claims in the thirty-nine weeks ended December 30, 2017 that did not occur in the current year period.
  • Income from operations grew 36.7 percent to $47.8 million, or 8.2 percent of net sales, compared to $35 million, or 6.9 percent of net sales, in the prior-year period. This increase represents 130 basis points of improvement in operating profit margin.
  • Net income was $30.3 million, or $1.05 per diluted share, compared to $22 million, or $0.81 per diluted share, in the prior-year period, which included $0.27 related to tax reform. Net income per diluted share in the thirty-nine weeks ended December 29, 2018 includes approximately $0.12 per share of tax benefit related to stock option exercises.
  • Added 11 stores through new openings and acquisitions and closed three stores.

Balance Sheet Highlights as of December 29, 2018

  • Cash of $50.6 million.
  • Average inventory per store was up 3.8 percent on a same store basis compared to December 30, 2017.
  • Total net debt of $174 million, including a zero balance under the revolving credit facility.

Fiscal Year 2019 Outlook

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

  • To add 18 new stores, including the 11 stores opened and acquired during the first 9 months of fiscal 2019.
  • Same store sales growth of approximately 10 percent.
  • Total sales of $770 million to $773 million.
  • Income from operations between $62 million and $62.7 million compared to the company’s prior outlook of between $57.5 million and $60.5 million.
  • Interest expense of approximately $16.5 million.
  • Net income of $37.7 million to $38.2 million, compared to the company’s prior outlook of $33.6 million to $35.8 million.
  • Net income per diluted share of $1.31 to $1.33 based on 28.8 million weighted average diluted shares outstanding, compared to the company’s prior outlook of $1.16 to $1.24.

For the fiscal fourth quarter ending March 30, 2019, the company expects:

  • Same store sales growth of 5 percent to 7 percent.
  • Total sales of $186 million to $189 million.
  • Net income per diluted share of $0.25 to $0.27 based on 28.9 million weighted average diluted shares outstanding.