Boot Barn Holdings, Inc. slightly lowered its earnings guidance for its fiscal year ended March 31 while reporting third-quarter profits declined 23.7 percent on a 3.6 percent same-store sales decline. Third-quarter results were in line with a pre-announcement provided in early January.

For the quarter that ended December 24, 2022:

  • Net sales increased 5.9 percent over the prior-year period to $514.6 million, cycling 60.7 percent net sales growth in the prior-year period;
  • Same-store sales decreased 3.6 percent compared to the prior-year period, cycling 54.2 percent same-store sales growth in the prior-year period. The 3.6 percent decrease in consolidated same-store sales is comprised of a decrease in retail store same-store sales of 0.8 percent and a decrease in e-commerce same-store sales of 15.2 percent;
  • Net income was $52.8 million, or $1.74 per diluted share, compared to $69.2 million, or $2.27 per diluted share in the prior-year period. Excluding a $0.04 per share tax benefit related primarily to income tax accounting for share-based compensation, net income per diluted share was $2.23 in the prior-year period; and
  • The company opened 12 new stores, or 33 stores year-to-date, bringing its total store count to 333.

On January 6, Boot Barn reported preliminary results for the third quarter, showing sales arriving just ahead of guidance and EPS arriving at the lower end of guidance. Sales of $514.6 million topped guidance in the range of $502 million to $514 million. The same-store decline of 3.6 percent compared with guidance in the range of 5.0 percent to 3.0 percent. EPS of $1.74 compared to guidance in the range of $1.71 to $1.83.

Jim Conroy, president and chief executive officer, commented “I would like to thank the entire Boot Barn team for continuing to achieve solid sales and margin performance on top of a record-setting holiday season last year. Over the past few years, our annual average store volume has grown by more than 55 percent, with the elevated level proving sustainable through yet another holiday quarter. This growth, coupled with a very successful new store roll-out program has us on track to nearly double our annual sales this year as compared to pre-pandemic levels. Looking forward, our growth opportunities remain as strong as ever, with very successful recent store openings combined with a robust new store pipeline. We feel good about our level of store inventory with weeks of supply back to pre-pandemic levels and are pleased that our retail store’s same-store sales remain positive on a year-to-date basis. As we head into fiscal 2024, we have multiple levers of earnings growth from same-store sales, new store openings, and margin accretion from exclusive brands and lower freight charges.”

Operating Results for the Third Quarter Ended December 24, 2022
(compared to the Third Quarter Ended December 25, 2021)

Net sales increased 5.9 percent to $514.6 million from $485.9 million in the prior-year period. Consolidated same-store sales decreased 3.6 percent with retail store same-store sales decreasing 0.8 percent and e-commerce same-store sales decreasing 15.2 percent. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months, partially offset by the decrease in consolidated same-store sales. Higher average unit retail prices, driven in part by inflation, further contributed to the increase in net sales.

Gross profit was $187.8 million, or 36.5 percent of net sales, compared to $191.7 million, or 39.4 percent of net sales, in the prior-year period. Gross profit decreased primarily due to higher freight expenses and the cost of merchandise. The decrease in gross profit rate of 290 basis points was driven primarily by a 190 basis-point decrease in merchandise margin and 100 basis points of deleverage in buying, occupancy and distribution center costs. The decline in merchandise margin rate was driven primarily by a 180 basis-point headwind from higher freight expense.

Selling, general and administrative expenses were $115.3 million, or 22.4 percent of net sales, compared to $99.5 million, or 20.5 percent of net sales, in the prior-year period. The increase in selling, general and administrative expenses was primarily a result of higher store-related expenses, store payroll, and marketing expenses compared to the prior-year period. Selling, general and administrative expenses as a percentage of net sales increased by 190 basis points primarily as a result of higher store-related expenses and store payroll.

Income from operations decreased $19.7 million to $72.5 million, or 14.1 percent of net sales, compared to $92.2 million, or 19.0 percent of net sales, in the prior-year period, primarily due to the factors noted above.

Net income was $52.8 million, or $1.74 per diluted share, compared to net income of $69.2 million, or $2.27 per diluted share in the prior-year period. Excluding a $0.04 per share tax benefit related primarily to income tax accounting for share-based compensation, net income per diluted share was $2.23 in the prior-year period.

Operating Results for the Nine Months Ended December 24, 2022
(compared to the Nine Months ended December 25, 2021)

Net sales increased 11.5 percent to $1.232 billion from $1.105 billion in the prior-year period. Consolidated same store sales increased 1.8 percent with retail store same store sales increasing 3.6 percent and e-commerce same store sales decreasing 7.5 percent. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months and an increase of 1.8 percent in consolidated same store sales, which saw an increase in average unit retail prices, driven in part by inflation.

Gross profit was $454.7 million, or 36.9 percent of net sales, compared to $426.2 million, or 38.6 percent of net sales, in the prior-year period. Gross profit increased primarily due to increased sales. The decrease in gross profit rate of 170 basis points was driven by 120 basis points of deleverage in buying, occupancy and distribution center costs and a 50 basis-point decrease in merchandise margin. The decline in merchandise margin rate was driven primarily by a 90 basis-point headwind from higher freight expense, partially offset by growth in exclusive brand penetration.

Selling, general and administrative expenses were $285.7 million, or 23.2 percent of net sales, compared to $230.3 million, or 20.8 percent of net sales, in the prior-year period. The increase in selling, general and administrative expenses was primarily a result of higher store payroll, store-related expenses, and marketing expenses compared to the prior-year period. Selling, general and administrative expenses as a percentage of net sales increased by 230 basis points primarily as a result of an increase in store-related expenses, store payroll, and marketing expenses.

Income from operations decreased $26.9 million to $169.1 million, or 13.7 percent of net sales, compared to $195.9 million, or 17.7 percent of net sales, in the prior-year period, primarily due to the factors noted above.

Net income was $124.1 million, or $4.09 per diluted share, compared to net income of $147.7 million, or $4.86 per diluted share in the prior-year period. Net income per diluted share in the current-year and prior-year periods includes an approximately $0.03 and $0.17 per share benefit, respectively, primarily due to income tax accounting for share-based compensation. Excluding the tax benefits, net income per diluted share in the current-year period was $4.06, compared to $4.69 in the prior-year period.

Current Business
The retailer’s preliminary consolidated same-store sales in fiscal January have declined 1.5 percent compared to the prior-year period, driven by a 16.0 percent decrease in e-commerce sales, partially offset by growth in retail store same-store sales of 1.2 percent.

Balance Sheet Highlights as of December 24, 2022

  • Cash of $50.4 million; and
  • $59.1 million drawn under our $250 million revolving credit facility.

Fiscal Year 2023 Outlook
The company provided updated guidance for the fiscal year ending April 1, 2023, superseding in its entirety the previous guidance issued in its second-quarter earnings report on October 26, 2022. As a result, for the fiscal year ending April 1, 2023, the company now expects:

  • To open 43 new stores, 33 stores opened Q3 year-to-date;
  • Total sales of $1.67 billion to $1.68 billion, representing growth of 12.2 percent to 12.9 percent over the prior year;
  • Same-store sales range of approximately 0.5 percent to 1.0 percent, with retail store same-store sales of approximately 2.5 percent to 3.0 percent and e-commerce same-store sales of 10.5 percent to 9.5 percent;
  • Gross profit between $611 million and $615 million, or approximately 36.6 percent of sales. Gross profit includes an estimated 140 basis point decline from freight expense, partially offset by 40 basis points of product margin expansion.
  • Income from operations between $228 million and $232 million. This represents approximately 13.7 percent to 13.8 percent of sales;
  • Interest expense of $6.0 million;
  • Effective tax rate of 25.1 percent for the remaining three months of the year;
  • Net income of $167.2 million to $170.0 million;
  • Net income per diluted share of $5.51 to $5.60 based on 30.4 million weighted average diluted shares outstanding;
  • Capital expenditures between $90 million and $95 million; and
  • Fiscal year 2023 is a 53-week year and the company expects to generate approximately $34.0 million in sales and earn approximately $0.19 per diluted share in the 53rd week, which is included in the above guidance range.

Under its previous guidance, sales were expected in the range of $1.65 billion to $1.67 billion, same-store sales in the range of approximately 1.0 percent to 0.5 percent, and net income in the range of $5.70 to $5.90. For the fiscal fourth quarter ending April 1, 2023, the company expects:

  • Total sales of $438 million to $448 million, representing growth of 14.4 percent to 17.0 percent over the prior year;
  • Same-store sales range of approximately 3.0 percent to 0.5 percent, with retail store same-store sales of flat to 2.0 percent growth and e-commerce same-store sales of 20.0 percent to 16.0 percent;
  • Gross profit between $156 million and $160 million, or approximately 35.7 percent of sales. Gross profit includes an estimated 290 basis point decline from freight expense, partially offset by 40 basis points of product margin expansion;
  • Income from operations between $59 million and $63 million, representing approximately 13.5 percent to 14.0 percent of sales; and
  • Net income per diluted share of $1.42 to $1.51 based on 30.4 million weighted average diluted shares outstanding.