Boot Barn Holdings Inc. reported net income for the fiscal second quarter ended September 29 of $4.5 million, or 16 cents per diluted share, compared to net income of $1.1 million, or 4 per diluted share, in the prior-year period. This beat Wall Street estimates by 3 cents.

Net income per diluted share in the second quarter of fiscal 2019 includes approximately 4 cents per share of tax benefit related to stock option exercises.

Net sales increased 17.5 percent to $168.1 million, beating estimates by $6.7 million. Same store sales increased 11.3 percent. Boot Barn added three stores through new openings and acquisitions.

Jim Conroy, CEO, commented, “We are very pleased with our second quarter results and the underlying strength in the business. Same store sales increased double digits both in our retail stores and online which, combined with merchandise margin expansion from increased full-price selling and exclusive brand penetration, drove 130 basis points of operating margin improvement over last year. During the quarter, we made significant progress across each of our four strategic growth initiatives. Most notably, in mid-September, we successfully launched our new exclusive brand, Idyllwind, Fueled by Miranda Lambert. We are well positioned to continue driving improved results during our upcoming holiday quarter and over the long term.” Mr. Conroy continued, “We are also pleased with sales through the first three weeks of our fiscal third quarter which continue to be very strong both in our retail stores and online.”

Operating Results for the Second Quarter Ended September 29, 2018

  • Net sales increased 17.5 percent to $168.1 million from $143.1 million in the prior-year period. The increase in net sales was driven by an 11.3 percent increase in same store sales; the sales contribution from the stores acquired from Wood’s Boots, Lone Star and Drysdales and sales from new stores added over the past twelve months.
  • Gross profit was $50.9 million, or 30.3 percent of net sales, compared to $41.7 million, or 29.1 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 30 basis point increase in merchandise margin rate and 90 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and increased exclusive brand penetration.
  • Selling, general and administrative expense was $42.2 million, or 25.1 percent of net sales, compared to $36.1 million, or 25.2 percent of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of increased sales, expenses for new and acquired stores, higher marketing costs as a result of the Idyllwind launch, and costs associated with the addition of a mid-year physical inventory.
  • Income from operations was $8.7 million, or 5.2 percent of net sales, compared to $5.6 million, or 3.9 percent of net sales, in the prior-year period.
  • Net income was $4.5 million, or $0.16 per diluted share, compared to $1.1 million, or $0.04 per diluted share, in the prior-year period. Net income per diluted share in the second quarter of fiscal 2019 includes approximately $0.04 per share of tax benefit related to stock option exercises.
  • Added 3 stores through new openings and acquisitions bringing the total count at quarter-end to 232 stores in 31 states.

Operating Results for the Six Months Ended September 29, 2018

  • Net sales increased 16.9 percent to $330.1 million from $282.5 million in the prior-year period. The increase in net sales was driven by an 11.4 percent increase in same store sales; the sales contribution from the stores acquired from Wood’s Boots, Lone Star and Drysdales and sales from new stores added over the past twelve months.
  • Gross profit was $102.4 million, or 31 percent of net sales, compared to $83.1 million, or 29.4 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 an 80 basis point increase in merchandise margin rate and 80 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and increased exclusive brand penetration.
  • Selling, general and administrative expense was $83.8 million, or 25.4 percent of net sales, compared to $72.5 million, or 25.7 percent of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of increased sales, expenses for new and acquired stores, higher marketing costs as a result of the Idyllwind launch and costs associated with the addition of a mid-year physical inventory. Selling, general and administrative expenses as a percentage of sales decreased as a result of expense leverage on higher sales.
  • Income from operations was $18.5 million, or 5.6 percent of net sales, compared to $10.6 million, or 3.7 percent of net sales, in the prior-year period.
  • Net income was $11.3 million, or $0.39 per diluted share, compared to $1.9 million, or $0.07 per diluted share, in the prior-year period. Net income per diluted share in the six months ended September 29, 2018 includes approximately $0.12 per share of tax benefit related to stock option exercises.
  • Added 9 stores through new openings and acquisitions.

Balance Sheet Highlights as of September 29, 2018

  • Cash of $9.4 million.
  • Average inventory per store was up 2.6 percent on a same-store basis compared to September 30, 2017.
  • Total net debt of $199.9 million, including $26.1 million drawn under the revolving credit facility.

Fiscal Year 2019 Outlook

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

  • To add 23 new stores including the nine stores opened and acquired during the first six months of fiscal 2019.
  • Same-store sales growth of 6.5 percent to 8 percent.
  • Income from operations between $57.5 million and $60.5 million compared to the company’s prior outlook of $54 million and $57.9 million.
  • Interest expense of $17 million to $18 million.
  • Net income of $33.6 million to $35.8 million compared to the company’s prior outlook of $29.9 million to $32.8 million.
  • Net income per diluted share of $1.16 to $1.24 based on 28.9 million weighted average diluted shares outstanding compared to the company’s prior outlook of $1.04 to $1.14.

For the fiscal third quarter ending December 29, 2018, the company expects:

  • Same-store sales growth of 5 percent to 7 percent.
  • Net income per diluted share of $0.56 to $0.60 based on 29.1 million weighted average diluted shares outstanding.