Boot Barn’s Comps Climb 10 Percent In Q4

Boot Barn Holdings Inc. reported earnings in the fourth quarter ended March 30 rose 26.1 percent on a 10 percent comp gain.

Highlights for the quarter ended March 30, 2019, were as follows:

• Net sales increased 12.9 percent to $192.8 million.
• Same store sales increased 8.7 percent, including an increase in retail store same store sales of 9.8 percent and an increase in e-commerce sales of 3.3 percent.
• Net income was $8.7 million, or $0.30 per diluted share, compared to $6.9 million, or $0.24 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes $0.02 per share of tax expense related to a return to provision adjustment. Net income per diluted share in the prior-year period includes $0.06 per share of tax benefit from the exercise of stock options.
• The company opened six new stores during the quarter.

Highlights for the fiscal year ended March 30, 2019, were as follows:

• Net sales increased 14.6 percent to $776.9 million.
• Same store sales increased 10.0 percent, including an increase in retail store same store sales of 9.5 percent and an increase in e-commerce sales of 12.2 percent.
• Net income was $39.0 million, or $1.35 per diluted share, compared to $28.9 million, or $1.05 per diluted share in the prior-year period. Net income per diluted share in fiscal year 2019 includes $0.13 per share of tax benefit from the exercise of stock options and $0.02 per share of tax expense related to a return to provision adjustment. Net income per diluted share in fiscal year 2018 includes $0.25 per share of tax benefit from the revaluation of deferred tax liabilities and $0.06 per share of tax benefit from the exercise of stock options.
• The company added 17 stores during the year, including 12 new stores and 5 acquired stores.

Jim Conroy, chief executive officer, commented, “We delivered outstanding financial results in fiscal 2019 with same store sales growth of 10 percent, including strong gains in both our retail stores and e-commerce channel. The combination of double digit top-line growth and meaningful merchandise margin expansion helped raise our operating margin 150 basis points to 8.3 percent of sales and drove a significant increase in profitability. We believe our enhanced merchandise assortments featuring a broader offering of exclusive brands, multiple omni-channel initiatives aimed at improving the shopping experience, and new marketing programs have combined to drive our strong performance.”

“We continued to experience strength across the business in the fourth quarter, highlighted by our eighth consecutive quarter of positive same store sales growth in our retail stores and further improvements in e-commerce profitability,” continued Conroy. “We completed another successful rodeo season in Texas, which along with solid results in each of our other geographies, allowed us to exceed expectations. Our recent performance reflects the progress we are making executing our strategic initiatives and underscores our ability to drive sustained growth even in the face of more challenging comparisons. We are now at the halfway point of the first fiscal quarter and our business continues to be very strong with consolidated same store sales growth of 7.5 percent along with solid merchandise margin performance. Overall, we have strong momentum as we head into fiscal 2020 and we remain very excited about our growth prospects for the current year and beyond.”

Operating Results for the Fourth Quarter Ended March 30, 2019

• Net sales increased 12.9 percent to $192.8 million from $170.8 million in the prior-year period. Consolidated same store sales increased 8.7 percent. Excluding the impact of the 3.3 percent increase in e-commerce same store sales, same store sales increased by 9.8 percent. The increase in net sales was driven by the 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 $63.4 million, or 32.9 percent of net sales, compared to $52.9 million, or 31.0 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 due to a 150 basis point increase in merchandise margin rate and 40 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by better full-price selling, growth in exclusive brand penetration, and a benefit from lower shrink.
• Selling, general and administrative expense was $46.9 million, or 24.3 percent of net sales, compared to $41.6 million, or 24.4 percent of net sales, in the prior-year period. The increase in selling, general and administrative expenses was primarily a result of additional costs to support higher sales and expenses for both new and acquired stores.
• Income from operations grew 46.2 percent to $16.5 million, or 8.6 percent of net sales, compared to $11.3 million, or 6.6 percent of net sales, in the prior-year period. This increase represents approximately 200 basis points of improvement in operating profit margin.
• Net income was $8.7 million, or $0.30 per diluted share, compared to $6.9 million, or $0.24 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes $0.02 per share of tax expense related to a return to provision adjustment. Net income per diluted share in the prior-year period includes $0.06 per share of tax benefit from the exercise of stock options.
• Opened 6 new stores, bringing the total count at quarter-end to 240 stores in 33 states.

Earnings, sales and comps all topped guidance. When it released third-quarter results on February 5, Boot Barn said it expected fourth-quarter same-store sales to expand 5.0 percent to 7.0 percent; total sales in the range of $186 million to $189 million, and net income per share in the range of 25 cents to 27 cents.

Operating Results for the Fiscal Year Ended March 30, 2019

• Net sales increased 14.6 percent to $776.9 million from $677.9 million in the prior-year period. Consolidated same store sales increased 10.0 percent. Excluding the impact of the 12.2 percent increase in e-commerce same store sales, same store sales increased by 9.5 percent. The increase in net sales was driven by the 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 $251.4 million, or 32.4 percent of net sales, compared to $207.9 million, or 30.7 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 due to a 110 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 better full-price selling and growth in exclusive brand penetration.
• Selling, general and administrative expense was $187.1 million, or 24.1 percent of net sales, compared to $161.7 million, or 23.8 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, selling, general and administrative expenses increased as a result of higher incentive compensation, the marketing launch of the Miranda Lambert product line, and an insurance gain in the prior-year period that did not occur in the current-year period.
• Income from operations grew 39.1 percent to $64.3 million, or 8.3 percent of net sales, compared to $46.3 million, or 6.8 percent of net sales, in the prior-year period. This increase represents approximately 150 basis points of improvement in operating profit margin.
• Net income was $39.0 million, or $1.35 per diluted share, compared to $28.9 million, or $1.05 per diluted share in the prior-year period. Net income per diluted share in fiscal year 2019 includes $0.13 per share of tax benefit from the exercise of stock options and $0.02 per share of tax expense related to a return to provision adjustment. Net income per diluted share in fiscal year 2018 includes $0.25 per share of tax benefit from the revaluation of deferred tax liabilities and $0.06 per share of tax benefit from the exercise of stock options.
• Added 17 stores through new openings and acquisitions and closed three stores.

Balance Sheet Highlights as of March 30, 2019

• Cash of $16.6 million.
• Average inventory per store was up 3.0 percent on a same store basis compared to March 31, 2018.
• Total net debt of $174.3 million, including a zero balance under the revolving credit facility.

Fiscal Year 2020 Outlook

For the fiscal year ending March 28, 2020 the company expects:

• To open or acquire 25 stores.
• Same store sales growth of approximately 5.0 percent.
• Income from operations between $71.5 million and $74.4 million.
• Interest expense of approximately $15.5 million.
• Net income of $41.7 million to $44.0 million.
• Net income per diluted share of $1.42 to $1.50 based on 29.4 million weighted average diluted shares outstanding.

For the fiscal first quarter ending June 29, 2019, the company expects:

• Same store sales growth of approximately 6.0 percent.
• Total sales of $178 million to $180 million.
• Net income per diluted share of $0.20 to $0.22 based on 29.1 million weighted average diluted shares outstanding.