Boot Barn saw total sales increase despite a low-single-digit same-store sales decline for the fiscal first quarter that ended June 30, but the company said they nonetheless felt great about their performance for the quarter given that the business was cycling plus 10 percent plus 79 percent growth and consolidated same-store sales in the prior-year and previous-year periods.
On a conference call with analysts, Company President & CEO Jim Conroy said the company was “quite pleased” with the sales results in-store and online for the quarter, with both businesses outperforming their guidance for the quarter.
“In addition to strong sales performance during the quarter, we achieved 80 basis points of product margin expansion driven primarily by more than 600 basis points of growth and exclusive brand penetration,” Conroy shared. “The strength in sales and margin combined with solid expense control drove earnings per diluted share of $1.13 during the quarter compared to our guidance of 85 cents. I’m extremely pleased with our start to the year with the team’s execution continues to deliver both top- and bottom-line results.”
Fiscal first-quarter net sales increased 4.9 percent to $384 million. The sales performance was said to benefit from new stores open during the past 12 months, partially offset by a consolidated same-store sales decline of 2.9 percent, comprised of a decrease in retail store same-store sales of 1.8 percent and a decrease in e-commerce same-store sales of 10.8 percent.
Net sales were reportedly up 2.1 percent in April, up 4.2 percent in May, and improved further in June, with sales up 7.8 percent. The fiscal second quarter started strong, posting 12.9 percent growth in July.
Retail same-store sales were down 1.8 percent for the fiscal first quarter, while e-commerce same-store sales fell 10.8 percent. E-commerce was 9.9 percent of total sales for the quarter.
Boot Barn opened 16 new stores in the quarter, bringing its total count to 361.
E-commerce continued its decline going into the second quarter, posting an 11.4 percent decline for July, to account for 9.6 percent of sales for the month. Consolidated comp sales were down 0.5 percent for July, while retail same-store sales improved 1.0 percent for the month.
“While it is exciting to see the tone of business begin to improve, it has also proven to be somewhat unpredictable with weekly comp performance ranging from negative 7 percent to positive 6 percent over the past four months,” Conroy added.
Conroy went into some detail on the retailer’s four strategic initiatives, including:
- Expanding its store base,
- Driving same-store sales growth,
- Strengthening omni-channel leadership, and
- Exclusive brands
“New stores continue to add to our top-line growth and outperform our expectations,” Conroy said when discussing the first initiative. “With our acceleration of new store openings, we have opened 86 stores over the last two years. With the opening of 16 new stores in the first quarter, we ended the quarter with 361 stores across 44 states.”
Conroy said new stores continue to pay back in fewer than 18 months with strong average unit volumes in the first year, and the company remains confident in its ability to achieve its long-term stated goal of 900 or more stores across the U.S.
On the initiative for same-store sales growth, Conroy addressed the first quarter consolidated same-store sales decline. “Notably, comps improved sequentially by month throughout the quarter in bulk channels,” he explained. “And while still negative, the sequential improvement in store comps was driven by a sequential improvement in average transactions per store.”
Conroy said nearly all major merchandise categories showed sequential improvement in the first quarter from the fiscal year-end. “Men’s western boots and apparel achieved low-single-digit positive comps. Women’s boots and apparel declined in the quarter, but showed sequential improvement from year-end while cycling strong double-digit comps in a year ago and two-year ago period,” he shared.
He detailed that stores in the North and East regions of the U.S. showed a slight decline in same-store sales, but both performed better than the chain’s average. The Southern U.S. lagged its average with a mid-single-digit decline, and the West performed in line with the retailer’s average.
“From a customer perspective, we are very pleased with the growth we continue to see in our customer base with 7.5 million active members and our B Rewarded loyalty program as of the end of our first quarter,” Conroy said. “This represents growth of 23 percent from 6.1 million members as of the end of our first quarter of fiscal 2023. Over the past few years, we have used our customer segmentation as a foundation to strategically extend the brand’s reach and attract a broader range of consumers.”
Historically, Boot Barn focuses narrowly on its western and work customers.
“Over the past few years, we added a country lifestyle segment as well as a somewhat smaller segment targeting women seeking western-inspired fashion,” Conroy continued. “The customer count is quite encouraging as we’re seeing both the ongoing development of the newly added segments while we are also expanding the size of the core western and work customer groups.”
Conroy also said that the company sees healthy growth in customer count in its legacy stores while capturing many new customers as the store portfolio builds across the U.S.
When focusing on the third initiative to strengthen the company’s omni-channel leadership, Conroy addressed the first-quarter e-commerce same-store sales decline, which he said was an improvement from a drop of over 18 percent in the company’s fiscal fourth-quarter performance.
“Notably, the Boot Barn brand did see positive sales growth for the quarter, but not big enough to offset the weakness in the Sheplers and Country Outfitter brands,” he explained.
“We continue to believe that our e-commerce business back to a positive growth trajectory beginning in late September or early October when the last year comparisons become easier,” he continued. “Despite the slowness in e-commerce sales, we are quite pleased with the many achievements we have seen from an omni-channel perspective.”
Regarding exclusive brands, the company’s fourth initiative, Conroy said exclusive brand penetration increased over 600 basis points to 38 percent of sales. “This is our third consecutive quarter of greater than 500 basis points of year-over-year growth compared to our historically stated goal of 250 basis points to 300 basis points of growth,” he detailed. “We now expect to grow exclusive brand penetration for the fiscal year by 500 basis points to 39 percent of sales. With exclusive brands providing an incremental 1,000 basis points of margin compared to third-party brands. This penetration growth has added meaningfully to our margin profile.”
Consolidated gross margin was 37.0 percent of net sales in Q1, compared to 37.7 percent of net sales, in the prior-year period. Company CFO Jim Watkins said on the call that the 70 basis-point declines in gross margins resulted from 160 basis points of deleverage in buying occupancy and distribution center costs, partially offset by a 90 basis-point increase in merchandise margins. The increase in merchandise margins was driven by 80 basis points of product margin expansion, resulting primarily from a 630 basis point increase in exclusive brand penetration and a ten basis point tailwind from lower freight expense as a percentage of sales.
The quarter’s selling, general, and administrative (SG&A) expenses were $95.7 million, or 24.9 percent of sales, compared to $85.4 million, or 23.3 percent of sales, in the prior-year period. The increase in SG&A expenses compared to the prior-year period was said to be primarily a result of higher store payroll and store-related expenses associated with operating an additional 50 stores over the prior-year period and corporate overhead costs in the current year.
In the quarter, Operating Income was $46.2 million, or 12.1 percent of sales, compared to $52.4 million, or 14.3 percent of sales, in the prior year.
Net income for the quarter was $34.3 million, or $1.13 per diluted share, compared to $39.3 million, or $1.29 per diluted share, in the prior-year period.
On a consolidated basis, inventory increased 6 percent year-over-year to $566 million. Watkins said the increase was primarily driven by new store inventory and exclusive brand growth, partially offset by an approximately 9 percent decrease in average comp store inventory.
“We finished the quarter with $17 million in cash and $26 million drawn on our $250 million revolving line of credit,” Watkins shared.
Looking ahead, Watkins reported that the retailer was raising its guidance for both the second quarter and the full year. “As we look to the second quarter, we expect total sales at the high-end of our guidance range to be $379 million,” he said. “We expect the same-store sales decline of 3.5 percent with a retail store same-store sales decline of 2.5 percent and an e-commerce same-store sales decline of 9 percent. We expect gross profit to be $134 million or approximately 35.4 percent of sales.”
Watkins said gross profit reflects an estimated 50 basis point increase in merchandise margin, including flat freight expense year-over-year. “We anticipate 180 basis points of deleverage in buying occupancy and distribution center costs. Our income from operations is expected to be $38 million or 10 percent of sales. We expect earnings per diluted share to be 90 cents,” he forecasted.
As a result of the first quarter performance and the updated estimate for the second quarter, Boot Barn also raised its full-year guidance as its guidance for the second half of the year remains unchanged.
“For the full fiscal year, we now expect total sales at the high-end of our guidance range to be $1.75 billion, representing growth of 5.5 percent over fiscal 2023, which, as a reminder, was a 53-week year,” Watkins estimated. “This compares our previous guidance of $1.72 billion.”
Watkins said that Boot Barn expects same-store sales to decline 3 percent, with a retail store same-store sales decline of 3.5 percent and flat e-commerce sales.
“This compares to our previous guidance of a same-store sales decline of 4.5 percent with a retail store same-store sales decline of 5.2 percent and e-commerce same-store sales growth of 1 percent,” Watkins said.
“We now expect gross profit to be $646 million, or approximately 36.9 percent of sales,” he continued. “Gross profit reflects an estimated 160 basis point increase in merchandise margin, including a 100 basis point improvement from freight expense. We anticipate 150 basis points of deleverage in buying occupancy and distribution center costs.”
Operating income is now expected to be $223 million, or 12.7 percent of sales, and BOOT sees net income for fiscal 2024 to be $163 million and earnings per diluted share to be $5.35 a share. The company forecasts Interest Expense at $3.2 million and CAPEX at $95 million.
Photo courtesy Boot Barn
