Boot Barn Holdings, Inc. reported earnings showed a modest decline in the second fiscal quarter ended September 24 despite a 12.4 percent revenue gain.

For the quarter:

  • Net sales increased 12.4 percent over the prior-year period to $351.5 million, cycling 69.5 percent net sales growth in the prior-year period;
  • Same-store sales increased 2.3 percent compared to the prior-year period, cycling 61.7 percent same-store sales growth in the prior-year period. The 2.3 percent increase in consolidated same-store sales is comprised of an increase in retail store same-store sales of 3.9 percent and a decrease in e-commerce same-store sales of 7.0 percent;
  • Net income was $32.1 million, or $1.06 per diluted share, compared to $37.9 million, or $1.25 per diluted share in the prior-year period. Excluding a $0.03 per share tax benefit related primarily to income tax accounting for share-based compensation, net income per diluted share was $1.22 in the prior-year period; and
  • The company opened 10 new stores bringing its total count to 321.

Results topped expectations. Boot Barn had expected total sales of $339 million to $346 million, with same-store sales of approximately flat. EPS was expected in the range of 87 cents to 93 cents.

“We are pleased to have followed up our strong start to fiscal 2023 with solid second-quarter results,” said Jim Conroy, president and chief executive officer. “Sales and earnings exceeded expectations as the market share gains we’ve made over the past two years proved sustainable despite the multiple headwinds pressuring consumer discretionary spending. Our top-line performance was driven by new store expansion and positive retail store same-store sales growth, which were up mid-single digits for the quarter. This was accompanied by further merchandise margin expansion fueled primarily by an increase in exclusive brand penetration and better full-price selling. While current macroeconomic factors are creating general marketplace uncertainty, we feel good about our prospects for the upcoming holiday season, and remain very confident in our ability to deliver profitable growth and increased shareholder value over the long term.”

Operating Results for the Second Quarter Ended September 24, 2022
Compared to the Second Quarter Ended September 25, 2021

  • Net sales increased 12.4 percent to $351.5 million from $312.7 million in the prior-year period. Consolidated same-store sales increased 2.3 percent with retail store same-store sales increasing 3.9 percent and e-commerce same-store sales decreasing 7.0 percent. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months and the increase in consolidated same-store sales, which saw an increase in average unit retail prices, driven in part by inflation.
  • Gross profit was $129.1 million, or 36.7 percent of net sales, compared to $118.2 million, or 37.8 percent of net sales, in the prior-year period. Gross profit increased primarily due to increased sales. The decrease in gross profit rate of 110 basis points was driven by 160 basis points of deleveraging in buying, occupancy and distribution center costs, partially offset by a 50 basis-point increase in merchandise margin. The merchandise margin expansion was primarily a result of growth in exclusive brand penetration and better full-price selling.
  • SG&A expenses were $84.9 million, or 24.2 percent of net sales, compared to $68.0 million, or 21.8 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, other 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 240 basis points primarily as a result of higher marketing expenses, other store-related expenses and higher store payroll.
  • Income from operations decreased $6.0 million to $44.2 million, or 12.6 percent of net sales, compared to $50.1 million, or 16.0 percent of net sales, in the prior-year period, primarily due to higher selling, general and administrative expenses.
  • Net income was $32.1 million, or $1.06 per diluted share, compared to net income of $37.9 million, or $1.25 per diluted share in the prior-year period. Excluding a $0.03 per share tax benefit related primarily to income tax accounting for share-based compensation, net income per diluted share was $1.22 in the prior-year period.

Operating Results for the Six Months Ended September 24, 2022
Compared to the Six Months Ended September 25, 2021

  • Net sales increased 15.9 percent to $717.4 million from $619.0 million in the prior-year period. Consolidated same-store sales increased 6.1 percent with retail store same-store sales increasing 7.0 percent and e-commerce same-store sales increasing 0.8 percent. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months and the increase in consolidated same-store sales, which saw an increase in average unit retail prices, driven in part by inflation.
  • Gross profit was $266.9 million, or 37.2 percent of net sales, compared to $234.6 million, or 37.9 percent of net sales, in the prior-year period. Gross profit increased primarily due to increased sales. The decrease in gross profit rate of 70 basis points was driven by 110 basis points of deleveraging in buying, occupancy and distribution center costs, partially offset by a 40 basis-point increase in merchandise margin. Merchandise margin increased 40 basis points despite a 30 basis-point headwind from increased freight expense. The merchandise margin expansion was primarily a result of growth in exclusive brand penetration and better full-price selling.
  • SG&A expenses were $170.4 million, or 23.7 percent of net sales, compared to $130.8 million, or 21.1 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, other 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 260 basis points primarily as a result of an increase in other store-related expenses, store payroll, and marketing expenses.
  • Income from operations decreased $7.2 million to $96.6 million, or 13.5 percent of net sales, compared to $103.8 million, or 16.8 percent of net sales, in the prior-year period, primarily due to higher selling, general and administrative expenses.
  • Net income was $71.4 million, or $2.35 per diluted share, compared to net income of $78.5 million, or $2.59 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 $0.12 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 $2.32, compared to $2.47 in the prior-year period.

Balance Sheet Highlights as of September 24, 2022

  • Cash of $19.7 million; and
    $146.8 million drawn under our $250 million revolving credit facility.

Fiscal Year 2023 Outlook
The company is providing updated guidance for the fiscal year ending April 1, 2023, superseding in its entirety the previous guidance issued in its first quarter earnings report on July 27, 2022. As a result, for the fiscal year ending April 1, 2023, the company now expects:

  • To open 40 new stores;
  • Total sales of $1.65 billion to $1.67 billion, representing growth of 10.9 percent to 12.2 percent over the prior year;
  • Same-store sales range of approximately (1.0) percent to 0.5 percent, with retail store same-store sales of approximately 2.0 percent to 3.0 percent and e-commerce same-store sales of (13.0) percent to (11.0) percent;
  • Gross profit between $617 million and $625 million, or approximately 37.4 percent of sales. Gross profit includes an estimated 100 basis points of pressure from freight expense;
  • Income from operations is between $235 million and $243 million. This represents approximately 14.2 percent to 14.6 percent of sales;
  • Interest expense of $4.6 million;
  • Effective tax rate of 25.2 percent for the remaining six months of the year;
  • Net income of $173.3 million to $179.3 million;
  • Net income per diluted share of $5.70 to $5.90 based on 30.4 million weighted average diluted shares outstanding;
  • Capital expenditures between $80 million and $87 million; and
  • Fiscal year 2023 is a 53-week year and the company expects to generate approximately $34.0 million in sales and earnings approximately $0.19 per diluted share in the 53rd week, which is included in the above guidance range.

Previously, guidance called for sales in the range of $1.68 billion to $1.70 billion, representing growth of 12.9 percent to 14.2 percent over the prior year. Same-store sales were expected in the range of approximately flat to 2.0 percent. EPS was expected in the range of $6.00 to $6.20. 

For the fiscal third quarter ending December 24, 2022, the company expects:

  • Total sales of $502 million to $514 million, representing growth of 3.3 percent to 5.8 percent over the prior year;
  • Same-store sales range of approximately (5.0) percent to (3.0) percent, with retail store same-store sales of (2.0) percent to flat and e-commerce same-store sales of (21.0) percent to (17.0) percent;
  • Gross profit between $184 million and $189 million, or approximately 36.8 percent of sales. Gross profit includes an estimated 200 basis points of pressure from freight expense;
  • Income from operations between $71 million and $76 million. This represents approximately 14.1 percent to 14.8 percent of sales; and
  • Net income per diluted share of $1.71 to $1.83 based on 30.3 million weighted average diluted shares outstanding.

Photo courtesy Boot Barn