Speaking at William Blair’s 43rd Annual Growth Stock Conference, Jim Conroy, Boot Barn’s president and CEO, said that while Boot Barn may have been founded as a western boot retailer in 1978, its growth trajectory has resized multiple times as it has expanded across work, fashion and country lifestyle categories.
“We started as a Western-only retailer, and then in an effort to continue to get more growth, we added work customers – more traditional Carhart jackets, Timberland boots, etc.,” said Conroy, who joined Boot Barn as CEO in 2012.
About five years ago, Boot Barn began addressing the fashion category with stylish women’s boots and just prior to the pandemic entered the “country lifestyle,” category, which has been “sort of the underpinnings of how we continue to get growth within the company.”
Overall, he said Boot Barn now sees itself as having a totally addressable market (TAM) of $40 billion. The core western and work category is seen having a TAM of $25 billion and the new country lifestyle categories gave Boot Barn another $15 billion TAM opportunity.
Boot Barn had sales of $1.66 billion in its year ended April 1, giving the retailer less than five percent of its reachable market. Said Conroy, “Plenty of room for us to continue to grow.”
Boot Barn has been aggressively expanding since Conroy took over as CEO, expanding from 86 locations in eight states in 2012 to 356 stores in 44 states currently.
Boot Barn is by far the dominant player in its categories with its second largest competitor, Cavender’s in Texas, with 95 stores.
“The number three competitor probably has three stores,” said Conroy. “So, when people ask us who we compete against, mostly for every single store in our chain their number one competitor tends to be a one-store mom & pop. So, while we aspire to be as good a retailer as Lululemon or Tractor Supply, in order for us to win, we just need to be a one-store operator.”
Murdoch’s or Tractor Supply in a farm and ranch channel are also seen as competitors but only a small part of their mix is boots and other gear that Boot Barn sells. Conroy said, “We’re the category killer. We actually like to be in centers that have a Tractor Supply so we can kind of siphon off their traffic.”
Online, Amazon sells all the products that Boot Barn sells that are not exclusive, but Conroy said Boot Barn’s categories tend to be in-store purchases. Said Conroy, “That’s been true for the last 10 years that I’ve been CEO. Still, only 10 percent of our business is done through our digital channel.”
Boot Barn’s sales are expected to reach $1.72 billion this year, up from $233 million in 2012 when Conroy joined Boot Barn.
“We’ve got a really nice growth rate of about 20 percent annually in revenue, almost DTC-type growth,” said Conroy. “However, paradoxically, we also have been growing our operating income over the same period of time, and we’re quite pleased with the fact that we’ve been able to grow profitability at an even higher rate than we’re growing ourselves.”
EBIT has expanded at about 33 percent average annual clip over the same ten-year period and is expected to reach about $210 million in the current fiscal year.
Boot Barn continues to have four strategic initiatives to drive success:
- Expand its store base,
- Drive same-store growth,
- Continue omnichannel leadership, and
- Build out its exclusive brand portfolio.
On expansion, Conroy said Boot Barn sees the potential to open 900 stores with the growth supported by the broadening appeal of the concept as it has expanded categories.
Conroy said that while some may envision Boot Barn to be a “cowboy costume store,” it doesn’t overly skew Western with customers often coming in for “a pair of jeans or a plaid shirt or button-down shirt.” He also said while Boot Barn is a “category killer” with boots representing 50 percent of sales, only one-third of transactions include a boot.
Boot Barn will open 52 stores this year on top of 45 last year and is seeing significantly improved new store economics versus its 2014 initial public offering.
Square footage on average for new stores is now 12,000, up from 10,000 square feet at the time of the IPO. First-year sales average $3.5 million currently, up from $1.7 million in 2014. Investments in the average new store have grown to $1.4 million from $700,000 at the time of the IPO, but new stores are now offering a payback in a little over a year with about a 75 percent cash-on-cash return in the first year. Previously, the payback was two and a half to three years.
New store growth is expected to be split between new and existing markets. Conroy said Boot Barn has increased its store target to 900 from 500 previously in part due to the success of opening stores in the Northeast and Mid-Atlantic states. Conroy said, “Those stores are not only achieving the $3.5 million revenue mark, but they’re also selling Western products. We don’t have to change the model to build out stores in the Northeast.”
A second reason for the expanded store target is that Boot Barn is finding success with multiple doors in the same market. Conroy said, “We used to think our density could be less than what it’s turning out to be. So, we used to have four stores in Phoenix. They were doing $2.5 million each. Now, we have eight stores in Phoenix and they’re doing $5 million each. So, as we put more stores in legacy markets, we haven’t seen any material cannibalization.”
Regarding driving same-store growth, Conroy said underlying same-store growth has continued to benefit as the company has expanded its active customers not only due to new store growth, but the expanded appeal tied to the new fashion and country lifestyle categories.
Boot Barn’s active customer base has nearly doubled from 3.1 million in FY16 to 5.8 billion in FY23 and is projected to reach 7.1 million in FY24.
“The ramp up in customers is two-fold,” said Conroy. “One, we continue to take share from within the industry. So, we continue to take customers away from the number one competitor in each market, being a mom & pop. And secondly, as we’ve expanded the aperture for what the Boot Barn brand means, we’re starting to get a little bit more – not totally mainstream, but a little bit more mainstream customers as we’ve expanded into this country customer.”
Also helping support same-store growth has been Boot Barn’s ability to expand its average unit volume (AUV) per store that’s expected to reach $4.4 million in FY24, up from $2.6 million in FY21.
The AUV growth over that period reflects an increase in average customer per store by 20 percent to 20,600 in FY23 from 17,200 in FY21, as well as the addition of 44 percent in dollar inventory from FY21 to FY23 with new styles added to support the new categories.
Ultimately, Conroy said the gains reflects Boot Barn’s expanded customer reach.
“We’ve been running at these levels now for 27 months consecutively so it feels to us like we’re here to stay,” said Conroy. “People sometimes try to ascribe it to a ‘COVID winner.’ I think that’s been 12 or 18 months ago. We would have seen our business come back down if it was just purely being a Covid winner.”
Conroy also noted that the expected healthy same-store growth trends is due to most sales being driven by function that tend to be more of a recurring purchase than a fashion-driven purchase.
He said most customers are buying boots for functional needs, including some looking for work boots as they work on roads or construction or the oil fields, as well as some seeking western as they work on the ranch or with horses. Many also prefer western-styled boots for everyday wear. He further noted a cowboy hat is often likewise a functional purchase for someone “picking vegetables for 12 hours a day in sunlight.”
He also said most women’s purchases also tend to be a functional purpose, and he said it’s a “misconception” that most are driven by fashion. He said of Boot Barn’s women customer, “Most of our lady’s boots are distressed-leather brown boots with rubber soles for women that are working with horses or shoveling manure out of a stable. They sometimes also go to Nashville and put on a fashion boot but this is what sort of pays the bills. Similarly for ladies’ apparel, if you go to our website, you’ll see the sizzle of much of our ladies’ fashion, but what really drives our business is riding jeans, button-down shirts, hats – very functional items for women that are working outside.”
Conroy said fashion only represents about 11 percent of Boot Barn’s mix. It provided about an 8-point comp benefit in recent years due to favorable trends with the popularity of TV series such as Yellowstone but is now a “headwind” with ladies’ apparel and boots both recently comping down in the range of 12 percent to 15 percent.
From an omnichannel standpoint, Conroy said Boot Barn believes its stores are a competitive advantage supporting its online positioning as the vast majority of online sales in some way involve a store associate.
“We’ve also recently launched AI within our stores to enable customers to get true expert advice, almost styling advice from a tablet that sits in the store that uses machine learning to couple market basket analysis,” said Conroy. “It pings chatGPT and returns in a very conversational tone, ‘If you’re buying those white cowboy boots and you’re going to a country music festival, here are other items that are in that store that you might want to wear with that.’”
E-commerce penetration is expected to return to historical levels and will need to expand by 20 percent to keep pace with store growth. Said Conroy, “I wouldn’t expect the split of our business between stores and online to change meaningfully. If it does change. I think it’s going to move towards stores, which is good for us because it’s more profitable.”
Finally, a differential for Boot Barn is its exclusive brand portfolio, where it now has ten brands, adding four about two years ago. Three of the top five selling brands at Boot Barn are owned brands.
“When you think about ‘good, better and best,’ these are real brands. They are better price points. They’re not this value-oriented, promotional-driving brand trying to be a cheap knockoff of a national brand at all. In fact, they are every bit as good if not better than a national branded product,” said Conroy. “And if you look at that same time period, so the roughly 10 years that I’ve been here, our exclusive brand business has grown from $5 million to over $600 million and [they’re] unbelievably compelling brands. They give us some competitive differentiation. They’re 10 points margin accretive and now they’re on their way to 34-to-38 percent of total sales this year.”
Photo courtesy Boot Barn
