Q1 2022 Boot Barn Holdings Inc Earnings Call
Okay.
Please standby.
Good day, ladies and gentlemen, and welcome to the Boot Barn Holdings incorporated first quarter 2022 earnings call.
The remainder of this call is being recorded.
I'd now like from the conference over to your host Mr. Jim Hawkins Senior Vice President of Finance and Investor Relations. Mr. Hawkins. Please go ahead.
Thank you good afternoon, everyone. Thank you for joining us today to discuss boot barn first quarter fiscal 2022 of earnings results.
With me on today's call are Jim Conroy, President and Chief Executive Officer, and Greg Hackman, Chief operating Officer, and Chief Financial Officer.
A copy of today's press release is available on the Investor Relations section of Dupont's website at boot barn Dot com.
Shortly after the end of this call a recording of the call will be available at some of your place for 30 days on the Investor Relations section of the cash.
This website.
I would like to remind you at a certain statements we will make in this presentation of forward looking statements. These forward looking statements reflect boot barns judgment and analysis only as of today and actual results may differ materially from.
Current expectations based on a number of factors affecting the price business.
Accordingly, you should not place undue reliance on these forward looking statements.
From a more thorough discussion of the risks and uncertainties associated with the forward looking statements to be made during this conference call and webcast. We refer you to the disclaimer regarding forward looking statements of it is included in our first quarter fiscal 2022 earnings release as well as our filings with the SEC referenced in that disclaimer.
We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise.
I will now turn the call over to Jim Paolo at coupons, President and Chief Executive Officer, Jim.
Thank you Jim and good afternoon. Thank you everyone for joining us.
On today's call I'll review of first quarter of fiscal 2022 results.
Hello at each of our key strategic initiatives and provide an update on current business.
Following my remarks, Greg will review, our financial performance in more detail and then we will open the call up for questions.
Given the impact of Covid had on our performance in early fiscal 2021, we believe that of comparison of our first quarter results to the same period 2 years ago provided the most helpful view into the underlying strength of the business.
During the first quarter of business performed very well across the board we generated strong total store.
We generated strong total sales growth on a 2 year basis of 65% with retail stores up 66 per cent and ecommerce up 56 per cent.
While we believe there were of macro tailwind is at play the superb execution by the entire team in securing merchandize, expanding our customer base and staffing the stores to meet the additional demand has resulted in another exceptional quarter.
Compared with 2 years ago of merchandise margin increased 220 basis points fueled primarily by better full price selling growth in exclusive brand penetration and a less promotional stance online.
I am very pleased with the continued momentum in our business.
The overall strength in our topline and margin rate drove record earnings of $1.35 per diluted share compared to 33 cents in the same period 2 years ago.
When adjusting for the tax benefit in both years, we grew earnings per diluted share of approximately 300% to $1.26 compared to 32 cents at the same period 2 years ago.
Before I provide an update on each of our 4 strategic initiatives I would like to take a minute and reflect back on the broader strategy for boot barn over the past few years.
With so much recent focus on the impact of Covid. We felt it was time to remind everyone of their broader growth strategy for boot barn, and our positioning.
Historically boot barn had focused heavily on the western customer end led with our signature category of Boots. We were then and continue to be of a leading player of serving this quite sizeable market.
Approximately 4 years ago, we embarked on a 3 pronged strategy to expand our addressable market, which included the following components.
First we sought to expand at the brand's reach.
We focused intently on growing the work segment as well as adding new segments, including the more fashion forward Wonder West category and more recently, just country, which encapsulates a much larger share of the U S population.
This expansion strategy has introduced new customers from market segments that we're not too far removed from boot barns core western customer.
We also shifted our immediate next to marketing channels intended to broadcast to a larger population such as TV radio and digital to drive awareness of boot barn.
We believe this work contributed to expanding the customer reach of boot barn, as evidenced by our continuous growth in customers non comp store basis over this period of time.
The second piece of the strategy was to contemporize. The boot barn brand, we made transformative changes to the creative aesthetic of our brand and our marketing communications, we shifted the focus away from product and price promotion and focused exclusively on building the strength of the boot barn brand so would resonate with both of its legacy western.
Customers as well as the broader cross section of the population that we're seeking to add that may have some affinity for our merchandize, but don't identify as purely of western lifestyle customer.
Broadened our merchandise assortment remodeled many stores and upgraded in store merchandising significantly.
Today, we have successfully transformed from what many thought which simply footwear retailer.
2 a true lifestyle brand.
Upgrading and modernizing the brand has played a critical role in enabling us to become more relevant to more customers that are immediately adjacent to our original core customer that may have been unlikely to shop in a pure of western retail store.
Yeah.
As for the final piece of the strategy in order to ensure that we would be relevant to all of our customers both existing and new <unk>, we created an extremely well defined customer segmentation strategy.
I'll speak to our more than 4 million active customers with email direct mail and digital communications that are tailored to them based on their demographics and purchase history.
This enables us to speak to each customer group and their language and if relevant merchandise offerings.
This was a critical piece of the puzzle as we needed to ensure we were not at risk of alienating our core western customer in our desire to expand the addressable market.
Fortunately, we have successfully achieved both objectives, adding new customers, while remaining highly relevant to our original western customer.
As we analyze and evaluate our recent business. We recognize there are some external macro factors, providing a tailwind to growth.
That said, we believe at the successful execution of this 3 pronged growth strategy has enabled us to generate outsized growth in same store sales and to enter markets with new stores that are not traditionally western.
Further as concerts radios and events begin to take hold we are confident that our strategy will position us well to capture more share from an even larger and broader addressable market.
With this recap of our growth strategy, serving as context I will now provide an update on each of our 4 strategic initiatives beginning with driving same store sales growth.
During the first quarter, we saw very healthy sales growth across our stores business.
As discussed on our last earnings call total sales in our retail stores during April and the first half of May were very strong growing 65% when compared to the same period 2 years ago.
Total sales in our stores maintained this strong growth throughout the remainder of the quarter and finished the quarter up 66% when compared to the same period of 2 years ago.
From a geographic standpoint, the growth was broad based with every store district, posting solid double digit same store sales growth as compared to the first quarter 2 years ago.
Each of our 3 regions were extremely strong the growth in our west region outpaced the growth in the north and the south.
From a merchandize perspective on a 2 year basis, we saw broad based growth across our major merchandise categories with double digit growth in work boots men's and ladies' western apparel, mens and ladies western boots hats, and non flame resistant work apparel.
F are at work apparel was the only category that declined when compared to the same period 2 years ago.
Our customers are increasingly outside working participating in recreational activities and returning to outdoor events and are looking to boot barn to get appropriately outfit.
From a marketing perspective of our creative team continues to enhance our brand aesthetic across all media and communication channels. Our marketing strategy has proven to be successful in drawing in new customers and we believe the addition of these customers will continue to help us continue to drive sales growth and increased traffic, while furthering our brand.
[noise] awareness across the country.
From an operational perspective, our store associates, along with our field leadership team leadership team, we're able to ensure that our stores were adequately staffed in order to handle the increased number of transactions during the quarter.
In fact at boot barn is relatively low turnover at the store manager level has enabled us to rise to the challenge of the surge in sales and maintain our standard for customer service I am proud of the store operations team from sort of providing the necessary training and support to our store associates to both meet the growing demand in stores and efficiently fulfill.
Omni channel orders, such as buy online pick up in store and in store fulfillment of.
Phil team has continued to provide excellent service to our customers and I'm grateful for their ongoing commitment to growing the boot barn brand.
Theres been a great deal of dialogue surrounding supply chain challenges across the retail landscape, resulting in difficulty in securing merchandize and increased freight cost.
While we have seen some of these issues as well we have managed to mitigate the impact of the on the business at significantly.
We've now improved our inventory position to flat on a comp store basis relative to last year, which was the result of a tremendous amount of hard work by the merchandising and supply chain teams, particularly in light of the extremely strong sales we've been experiencing.
And while freight costs continue to increase our ability to leverage our store base for E. Commerce orders has dampened the impact of increasing inbound freight costs.
Moving to our second initiative strengthening our omni channel leadership.
Paired with the first quarter 2 years ago total ecommerce sales grew 56% and our efforts to increase the profitability of this channel continue to be affected with EBIT showing significant growth on a 2 year basis.
To boot barn Dot com business continues to be our best performing site with total and total sales growth of more than 100 per cent compared to the same period 2 years ago.
While not as strong as the boot barn dot com business the balance of our E. Commerce sales also exhibited strong double digit growth compared to the same period 2 years ago.
Underpinning our recent performance at the Omni channel initiatives, we have implemented over the past 2 years, including buy online pick up in store.
Buy online and curbside pickup.
Same day delivery and buy online return in store.
During the first quarter, we investing further in our in store fulfillment initiative and have seen strong customer reception to this offering.
Making the stores inventory available to our E. Commerce customers has had a meaningful impact on our e-commerce growth.
This new ability to ship online orders from our stores has had an added benefit of.
Of increasing the exclusive brand penetration online, adding further to our ability to expand merchandise margin.
We believe our omni channel initiatives are driving increased traffic to our stores.
To reduce shipping costs and improving loyalty with our customers as we encourage them to shop.
Boot barn, both in store and online.
Now to our third strategic initiative exclusive brands.
Our exclusive brands performed incredibly well during the first quarter of increasing to 26, 3% of net sales of gain of approximately 650 basis points compared to the same period 2 years ago.
We were very pleased with the accelerated growth in this portion of the business and the performance of each of our exclusive product lines.
Cody James Cheyenne Hawks, and idle wind fueled by Miranda Lambert continue to be in our top 10 selling brands in the store.
We are proud of this achievement and the brand recognition, we have built over the years with our exclusive merchandise given the supply chain issues across retail today. We are also fortunate that we've been able to rely on our exclusive brand supply chain to meet the surge in demand.
Finally, our fourth initiative expanding our store base during the first quarter, we opened 3 new stores, bringing our total store count to 276 stores across 36 states, our new store openings continue to perform very well and are expected to pay back within our targeted 3 year period or better.
We expect to opened 27 stores in the current fiscal year as originally planned.
I'm really pleased with the work of our real estate team is doing and I'm very encouraged about the new store pipeline for the balance of this year as well as for the beginning of next fiscal year.
Based on our current momentum, we expect to be well positioned to grow 10% new units or more in our next fiscal year.
Okay.
And now I'd like to provide an update on current business. Our second quarter has continued the strength that we have seen during the last several months with stores and ecommerce generating strong sales.
When compared to the same period 2 years ago total sales in the first 5 weeks of our second quarter increased approximately 65 per cent.
Consolidated same store sales through the first 5 weeks of our second quarter increased 52, 4% when compared to the same period 2 years ago.
To recap the tone of the business, we have seen consistent strength in demand with nearly every week over the past 20 weeks exceeding 60% growth in sales versus 2 years ago, coupled with solid growth in merchandize margin.
I'd like to now turn the call over to Greg Hackman.
Thank you Jim good afternoon, everyone.
In the first quarter net sales increased 64, 9% to $306 million compared to the 2 year ago period.
Consolidated consolidated same store sales increased 52, 3% of retail store sales up 51, 7 per song and E. Commerce same store sales up 55, 8%.
The increase in net sales was primarily a result of the increase in same store sales and the incremental sales from new stores opened over the past 24 months.
Gross profit increased 87, 3% to $116.4 million or <unk> 38 per cent of sales compared to gross profit of $62.2 million or $33.5 per cent of sales in the 2 year ago period.
The 450 basis point increase in gross profit rate resulted from a 220 basis point increase of merchandise margin rate and 230 basis points of leverage in buying and occupancy costs.
The merchandise margin rate increase was primarily a result of better full price selling and growth in exclusive brand penetration.
Operating expenses for the quarter.
It was $62.8 million or 25 per cent of sales compared to $46.1 million or 24.8 per cent of sales in the 2 year ago period.
Operating expenses increased primarily as a result of higher store payroll and overhead in addition to an increase of incentive based compensation.
Operating expenses of percentage of sales decreased 430 basis points, primarily as a result of expense leverage on higher sales.
Income from operations was $53.6 million or $17.5 per cent of sales in the quarter compared to $16.1 million or 8.6% of sales in the 2 year ago period.
Net income was $46 million or a dollar of 35 per diluted share compared to $9.7 million or <unk> 33 per diluted share in the 2 year ago period.
Excluding the 9 cent tax benefit in the current year period, and the 1 cent tax benefit in the 2 year ago period net income per diluted share in the current year period was $1.26 compared to 32 cents in the 2 year ago period.
Turning to the balance sheet inventory was flat on a comp store basis compared to last year and down at 2% compared to the same period 2 years ago.
On a consolidated basis inventory increased 13, 5% over the prior year period to $297 million.
This increase was primarily driven by inventory held at both of our Wichita in Fontana distribution centers.
And inventory from new stores added in the past 12 months.
During the first quarter, we prepaid $61.5 million on our term loan, resulting in a total of $50 million of debt outstanding with zero drawn on our $165 million of line of credit.
We had $49.6 million of cash on hand at the end of the quarter.
Subsequent to the end of the quarter, we expanded our revolving line of credits 2 of $180 million.
Hum.
While we are pleased with the underlying strength of of the business given at given the limited visibility into the macro economic environment. We will continue to only provide select full year fiscal 'twenty 'twenty 2 guidance at this time.
We reiterate our previously provided guidance to grow units 10%.
Continue to expect capital expenditures to be in the range of $33 million to $36 million and estimate our full year effective tax rate to be 26 per cent.
Additionally, we now expect exclusive brand penetration growth of 350 basis points in fiscal 'twenty 'twenty, 2 which represents an increase from our prior outlook of 250 basis points.
Now I'd like to turn the call back to Jim for some closing remarks.
Thanks, Greg.
I am very pleased with the strong start to fiscal 'twenty 'twenty 2.
And it is exciting and few of the organization continued to deliver on our 4 strategic priorities I am.
I'm truly honored to work with such an incredible team.
Now I would like to open the call to take your questions.
Ali.
Thank you so much ladies and gentlemen, if you would like to ask a question of please signal by pressing star 1 on your telephone keypad, if you're using a speaker phone. Please next forgive me of function is turned off all of your signal to each of our equipment again at a star 1 to ask a question and our first question today will come from Matthew boss with J P. Morgan.
Great. Thanks, and congrats on a really nice quarter again guys.
Thanks, Matt.
So Jim on the consistency of the top line momentum that you walked through July holdings, 65% above fiscal 'twenty.
Are you seeing a return trips from new customers that you acquired during the pandemic and I guess I'm trying to think on the other side of this crisis, where do you see the largest sustainable market share opportunity. If we think maybe by category in terms of where you're benefiting from what's sustainable, whereas the model of substantially better.
On the other side.
I think where we have seen a step function change has been in the expansion of our addressable market and we have we.
We are taking share we believe from the industry from the mom and pop western retailers and I think.
We've also increased just the sheer number of people that now view boot barn as an alternative.
For shopping for their merchandize their apparel footwear et cetera.
And I think that is going to be with us going part of it.
We'd see at such an influx of new customers.
With no drop off in our legacy customers.
But I think we are now just operating in a in a bigger.
Customer market.
And I think that's kind of here to stay.
I think 1 of the things we'll be focusing on going forward is how do we now with even more customers. How do we also focus on improving.
Frequency. So we can have additional customers.
And all customers shopping more frequently can those 2 work together to drive even more sales growth going forward.
Yeah.
Okay.
Great and then maybe a follow up on on the margin front as we think about gross margin first quarter.
And 450 basis points above your pre pandemic base I guess, how best to think about the progression of gross margin, maybe just puts and takes as we think about the second quarter back half and just overall gross margin opportunity do you think the model is over earning today anything we have to give back or.
Sure.
So just think about long term gross margin based on what Youre seeing today.
Sure Matt its Greg.
You know from a puts and takes perspective, we've seen at nice merchandize margin improvement what I would describe as on a pure market basis right. So we've continued to be less promotional we our inventories are much cleaner.
So we have less clear on since so I expect that to continue for the foreseeable future.
We felt some freight pressure in Q1, and I expect that to continue and it might even be a bigger drag or headwind to gross profit, having said that I do have confidence that we'll be able to offset that.
Don't go backwards in terms of merchandize margin that the day I am you and the other things we're doing will continue to offset.
That freight headwind.
In terms of.
Of buying occupancy and D C cost leverage.
We're seeing some leveraging and the distribution center and in the end in the buying line and in occupancy were seeing nice leverage.
At at the growth that we're having obviously if that growth slows I think we'll get less leverage out of the occupancy line and and that's especially true as we continue to progress with adding new stores throughout the year.
Having said that we still would expect to see some nice leverage. So those are kind of of puts and takes as I think about gross profit.
Great Congrats again best of luck.
Thanks Blake.
Thank you and next we'll hear from Max.
<unk> <unk> with Cowen and company.
Great. Thanks, a lot guys and congrats on a really nice quarter. So when we think about the massive quarter to date trends. What do you attribute that to is your momentum is significantly above many industry peers. Obviously at the consumer is in a really strong shape and there's a lot of pent up demand, but it looks as though the market share that you're taking is really.
This compared to others out there.
Well, we appreciate the commentary at Max Thank you.
I think there's a few things going on and we always start with the macro there certainly is pent up demand and there is there's a lot of money flow into the economy.
That said I think we have just been able to pull a number of things together. We've we've expanded the view of boot barn to include additional customer segments. We've gone after them aggressively at.
At the same time, the consumer trend was helping US right people are getting outside more often they are looking for products that we carry too.
You'll go hiking in of go camping and or just to go to some of the contents and radios that are now just starting back up.
So I think at spin the.
Yeah, the well overused expression perhaps of.
Of the virtuous cycle of we've upgraded our branding we would stand at the merchandise assortment.
We took market share we believe all of last year, because we were able to keep all of stores opened at sort of a central retailer and we just.
I've kind of been able to hold onto those new customers of not relinquish them back.
So I think it's it's all of those things working well in concert Grademark merchandising marketing and store operations, we're sending more customers to our stores through our ecommerce channel and.
As those things work.
Together, we've seen sort of a synergistic effect.
Got it that's very helpful and your income you previously commented on improving the exclusive brand penetration of online how big of an opportunity do you think that is and is there a world where that mix gets pretty close to what you have in stores or will it always trail.
Store exclusive brand mix. Thank you.
Sure. So I think we're on record in the past of saying that historically.
Exclusive brands have penetrated roughly 30% in stores and roughly 10% of online as soon as we opened up in store fulfillment the exclusive brand penetration online nearly doubled.
So it's meaningful now if you think about.
E Commerce as a percentage of our business.
And exclusive brands growing by 8 or 10 points of penetration of online.
And then you multiply that of Margaret at when you put it all together, it's not a massive.
Our of merchandise margin per cent or dollars, but it does it does add a bit to the rate that we can achieve.
On the second part of your question of I don't think we'll get online penetration to the point, where the stores are simple because we offer a lot more product of broader assortment at in some cases more brands online than we do them of stores and nor do we have the ability to.
As easily sort of showcase the features and functions of exclusive brands of asthma.
As we do in the stores using fixed rain or special merchandising or the sort of associates of brand ambassadors etcetera, but that said, it's not it's nice that that GAAP items.
<unk> closed considerably.
On what amounted to be a relatively simple change.
Nikolay at typical some time, but you know we didn't have to move mountains or invest millions of dollars from capital to make that happen.
Great. Thanks, a lot of best regards.
Thank you.
Thank you and our next question will come from Jonathan Komp with Baird.
Yeah, great. Thank you first maybe Jim 1 clarification, if I could I think you said you have more than 4 million.
<unk> customers in your active file can you maybe just comment on what that looked like in the past and how that's grown over time.
I can admit we've seen really nice growth.
Over the last few years at the Bulks way to think about it in our view is to look at the growth in customers on a same store basis, and if you exclude the period of time that was impacted by Covid.
We've had really significant or a really nice consistent track record of adding call. It mid single digit growth in customers on comp store basis for.
Probably 4 years or so I think of you're trying to anchor include that $4 million number.
I think all of these numbers right in fiscal 'twenty I think we had about $4.2 million total customers in fiscal 'twenty, 1 we're at $4.7 million and total customers.
Bye at 8.
For for me and the way I I tried to view at I always anchor back to how many customers do we have on a same store comp store basis, and how much of our <unk>.
Increase in same store sales is due to the influx of.
New people into the building.
Okay, Great and then maybe a broader question on the demand you're seeing I think if we go back to April or May there was a view of that a lot of the strength of at the time was driven by the macro picture and I'm curious what you make now at a C. The consistency and the weekly performance here of what what Youre.
That says that's driving that are you.
Are you seeing as we move further beyond the stimulus in March are you seeing.
Fashion trends pick up stronger or how you're seeing things like the Cheyenne frontier of days or other events start to impact your business or or any more color on your thoughts there.
Sure.
Well, you're right I mean, we.
We weren't exactly sure of what to expect end there was certainly a thesis.
That was logical that the business couldn't have maintained at the same 65%.
And we've been we've been very pleasantly surprised that it's continued to grow as it has.
Underlying that there are a couple of things that make us feel pretty positive about the outlook going forward.
Number 1 at not being helped by all of oil markets right. In fact, you know.
Places like West, Texas are still a lag of a drag on our same store sales.
So we've been able to post these numbers despite.
A softness in some of those markets or at least of relative softness and despite the fact that if our work apparel was negative.
On a more positive note we started to see.
Emerging over the last few weeks and even stronger ladies apparel business.
And they over index growth in ladies.
Western boots, and if you went back through the last few years of our earnings calls we had been talking about softness in a down trending ladies cowboy boot business for quite some time.
And now.
Everything is growing essentially but ladies boots.
<unk>.
Growing at a higher rate than the rest of the company, which does lead us to believe that you know is concert from radio start to come back online.
We are extremely well positioned in those categories to maximize growth.
You mentioned that Cheyenne frontier of days.
It's at a relatively big event, it's not nearly the same.
Driver of demand as the Texas rodeos that hit our fourth quarter, but.
But if we do view the event as a bellwether for sort of of health of our customer.
In our.
Pop up store that we put up during the event we hit record sales this year.
Versus any other year up 50 plus percent versus 2 years ago.
And that.
Again, it's not.
Very meaningful in our total sales for the quarter or for the month, but if it is a view into.
The underlying consumer trends. It's it was extremely strong at read them. So that coupled with the fact that Garth Brooks and George Schrader touring again, you know theres a lot of reasons to feel bullish about the business going forward.
Yeah, Great and just lastly, if I could Greg if I look back in your model at EBIT margin percent.
Typically first and second quarter of been pretty similar and then you see a step up in the seasonally higher of third quarter any thoughts or factors, we should consider thinking about this year.
Is it from me thanks.
Yeah. Good question John.
Q2, typically does look like Q1 in terms of volume so part of what will drive operating margin in Q2 is what happens from the sales as we've just described it's been incredibly consistent.
If I think about unique things to Q2, but the things I'd call out is we're trying to add more hours back into the stores Jim touched on this in his prepared remarks that that the stores team is doing a really great job of providing great customer service end and the sales line.
It is very healthy. So I think you know we're not losing sales having said that we have a sales flex model that we use to try to add back hours and we haven't been able to use all of those hours. So we're trying very hard to continue at a higher up so that we can provide outstanding customer service to our customers. So that's.
1 thing the second thing is we've gotten really nice leverage in marketing.
Especially in Q1 is that sales continued at a high level, we're trying to.
Return to our 3 per cent.
Of sales historic spend in stores I don't think we'll get that done in Q2, but we're working toward investing some marketing dollars.
Smaller things, we've got of physical inventory and in Q2.
We have some other things going on but on balance I would say.
Given the sales line.
You can see at a somewhat similar.
Profile that said you know, we're not we're not targeting of 17 and a half per cent EBIT rate in Q2.
Okay. Thank you.
Thank you our next well hear from Stephens of Kony with Citigroup.
Great. Thank you for taking my question congrats on the momentum of the business guys.
Question about <unk>.
<unk> trends more broadly in retail you referenced higher freight costs that youre seeing in the business.
You're taking price up on products have you seen any pushback from the consumer in response to price increases and I guess more broadly what have you noticed in the competitive environment in terms of pricing.
Steve It's Greg.
We have seen a handful of our vendors raise price in the first quarter and as you. Just described we we pass that price increase along in terms of customer with our normal Mark up right. So we maintained our IMU and increase the price the retail price to the consumer end as we've.
Looked at at all.
The demand for that product you know in terms of units coming into an end coming out of the price change, we don't really see a change in the demand. So it reinforces our belief that that our consumer.
Can tolerate of price increase they typically need the product or want the product and will accept the price increase so.
As we look further out we've heard from other vendors that there might be price increases this fall or beginning of next year end and again I think that what we've seen in the first quarter gives us confidence that we can continue to.
To pass along at a price increase to the consumer of not feel of hurt on the day Bank line, if you will or in sales.
You know as it relates to exclusive brands. The teams have done a really nice job of mitigating most of those price pressures.
We do see some increased freight on our EV product.
We'll selectively increase our pricing probably on some of that product.
Again, given the backdrop of what we saw in Q1.
Great. Thanks for that and then I just wanted to follow up on could you could you speak a little bit more of the trends youre seeing in oil and gas regions. I know you cited fr comp negative in the first quarter have you seen any improvement there thus far in the second quarter, just given the price of oil I assume rate rig activity is probably up.
But we've seen a little bit of a sequential improvement in EF or in the second quarter.
But it's still.
A little bit of a drag on our top line.
<unk> sales growth.
Yeah.
Maybe this is too rosy of you, but we don't view those as future.
Future possibilities for ongoing growth because we.
<unk> that the oil patch will continue to strength into your point about rig count is growing.
Each month slightly.
Yeah that business will likely be more of a driver going forward then of drag.
But despite.
Despite the fact that we've seen a little bit of softness in those markets now for several months.
Our sales line has been extremely strong perhaps this will finally unhitch us from the reputation of our business ebbs and falls on the strength of the oil markets.
We'll see.
Yes, thanks for that Okay take care guys.
Thanks, Steve.
Thank you and next we'll take a question from Jenny said share with Jefferies.
Hey, congrats on the incredible momentum I'm wanted to ask about your store count potential I think you've spoken to the 500 plus stores in the past now that youre getting these new customers, who are kind of outside of your core western customer. How do you think about the potential for maybe greater number of stores and then maybe speak to what you're seeing from your end markets. Thank you.
Sure.
I think when we get to be end of the year and we lay out guidance of the next fiscal year, we'll we'll try to quad.
Quantify that and do some of the analysis that we have done several years ago to come up at the size of the addressable market.
And the number of stores that we think we can build what would that say qualitatively I would say, we're feeling pretty bullish on both the size of the Tam as well as of the total number of stores that we build across the country.
And now roping in the second part of your question.
We've seen we've seen very good results in our new stores opening we've seen.
Great openings for brand, new stores and brand new boot barn markets.
Even those that opened in that at the height of the pandemic.
We've also seen.
Brand new stores opening and what we would have considered pretty mature markets.
During extremely well as well so we've opened store of store in Weatherford, Texas and the salary of California. We've opened a couple of stores in Phoenix, which we probably would've thought was mature of few years ago, and we continue to develop that market with additional stores at.
And I think when you kind of cobble all of that together. It leads you to the conclusion that we will again try to defend through analytics that are 500 stores store count is going to prove to be conservative.
And I think as we've expanded our target customer outside of a pure western customer to include.
A really vibrant work business the wonder of west customer of the just country customer.
We've often talked about the market being $20 billion of.
Total addressable market.
I think that number is also understated. So we're sitting here with a very strong business from great momentum and end.
Just.
Extremely positive about the future prospects given.
Given what we've some.
Some of the changes we've made and.
How they are taking hold and the momentum that we're starting to see.
Great. Thanks for the color of that and then just a follow up on the inventory of flat versus on a per store basis understanding that theres constraints on how much you think at optimally how do you plan your inventory I know its challenging with the business tracking at 60%, but if you had at if you had your way how would you be plenty of inventory levels end and maybe speak to any of the constraints.
Taking our categories that are more challenging than others. Thank you.
So I think if we look at our current inventory levels, where were at least at a total day on a total basis, we're in pretty decent shape.
Frankly, we'd probably like to have a little bit more I mean parameter of our business has just been so strong and in certain pockets of of store youll see certain areas that are a little bit light ladies apparel is 1 of them Lady Cowboy boots is another and both of those businesses are.
Really growing quite nicely so.
Given the current trend, we'd love to have our inventory levels be up a little bit more not just flat what 1 thing that has helped us a little if I'm honest as we call out flat inventory on a comp basis year over year.
We have we have much less clearance merchandise than we did last year. So our full price inventories actually up slightly year over year on a comp basis that said, we'd still love to add some product in some key categories.
More on the Lady side than on the men's side.
And we're continuing to hustle to bring that product in.
We've had we've had mixed results from our vendors and some vendors we.
Made some some kind of bulk purchases and we talked about this on the last call and inventories at ourselves.
Others are flowing goods nicely and candidly the best supplier that we have right now is our exclusive brands. So.
While we want all of our vendor partners to participate in the growth.
When there is a void or sort of euphemistically and opened slot on a boot shelf.
We're able to get our.
Of our own product of our exclusive brands product on that.
In the stores and end Fortunately that supply chain has continued to work.
Extremely well all things considered during the pandemic and end during all of the other supply chain challenges so hats.
Hats off to the team with managing of exclusive brands for continuing the flow of goods.
We're fortunate that as a company structurally we we.
Only turn of roughly twice a year so we're not.
At a big risk of running out of product anytime soon but on balance we'd love to have some more merchandise.
Great. Thanks very much.
Thank you.
Thank you and next we'll hear from Dylan Carden with William Blair.
Okay.
Awesome. Thank you I'm just curious are just a handful of ones here I guess first maybe starting with the frequency you mentioned and that the ultimate goal here is to not only grow the customer base, putting growth frequency. I mean are you seen that already out of some of these sort of new customers new to brand customers and I guess, maybe sort of an embedded question. There is.
Of the customers you acquired in the last year, you know, how many are kind of coming back to the brand or even shopping sort of across different categories.
So there we do believe we're capturing and retaining and seeing them again I can't give you of greed statistic to defend.
Defend that we also of seeing them shop across.
The the different pieces of the business for sure so where we're seeing some of our legacy customers now looking at boot barn to buy them at maybe they only looked at us is a.
Western Cowboy boot stores.
Sure, but now they're looking to buy hiking boot and are coming into the stores theyre looking to buy.
Jeans, and a T shirt and accounts and a baseball hat and whereas we're able to meet those needs.
We're starting to bring in merchandise statements of little bit more frequently.
Tweaking some of our marketing to try to get the people that would only shop with us twice a year to come a bit more frequently.
So we will we'll be able to recap that for everybody with some more of statistics once we see from somewhat of a more normalized view of the business over.
A few quarters and not the sort of gyration of a COVID-19 time period, followed by a very very strong sales growth period.
But our belief is we've undoubtedly increased customer count and we think frequency of starting to kick up and that's sort of a new focus is too to really see if we can be.
Getting that customer in the stores more frequently and expanding share of wallet for for all of our customers.
Great and I'm curious the new store format Youre kind of trailing out in California is it too early days to kind of speak to that of what the strategy might be there. If there's maybe some market forget unlocked here that you otherwise thought were inaccessible mature you know your legacy offering and kind of as a follow on question would be you know your confidence level in hitting that kind of 10% store growth.
This year, even I think mentioned that it could be above that you know going back to 2017, that's been at Targa, but not necessarily of reality I'm just kind of curious what you're seeing in the real estate market or the acquisition market.
That might sort of drive some of that commentary.
Yeah. So on the second part I think R. R.
Level of confidence for this year is pretty strong at 95% confidence [laughter] Greg's.
Greg of say 95 per se right.
<unk>.
So we've laid out I think the cadence I think he said.
357, and then the balance in Q2 of them.
Fibonacci sequence from there somehow but.
At the B I think the level of confidence there is is pretty high on the second and the first part of your question relative to the store that we built near our office out here.
Yeah.
Were stopping short of calling that a new prototype and some end of bass departure from what we've been doing in the past at ins aesthetically more pleasing it doesn't scream western quite as much as a store that was opened in 5 or 10 years ago.
But I would tell you that if you went from some of the stores that we've been opening on the east coast and actually of any of the new stores. They are a little bit more.
Elevated in their look and feel.
And a little bit less pure of western.
And that is just part of the overall strategy of.
Of kind of opening the aperture slightly this is not a massive strategic change. This is not getting away from whats me boot barn. So successful for so many years now but can we maintain the loyalty from our core western customer, which I think we've been able to demonstrate we can.
At <unk>.
And yet still make the store inviting uncomfortable for people that may not be working on of ranch and wearing of cowboy hat every day.
And it seems that we've been able to do that in the store that you are alluding to the 1 that's out here near the corporate office at the store support center is just a little bit more elevated than some of the other new stores.
And we'll take elements of that and continue to.
Kind of migrate what a new store looks like but I wouldn't we don't want to take him. All of this is a completely different book and deal end and something that is at.
At the <unk>.
Massive change in strategy because it's not.
No that's interesting and so I guess as you're going into these new markets and Youre seeing these sort of better than historic performance in these new even during the pandemic do you kind of a sum.
Some of that related to these efforts to kind of I guess all of these new markets different in your legacy markets and at that has been a benefit as you sort of pick and choose which elements of that to put in these stores.
Well I would say so if we look at I'll just give a real examples we opened the store in Weatherford in the salary at Weatherford, Texas Italia, California, Erie, Pennsylvania, those 3 stores look roughly similar to each other.
Slightly more elevated than different than of store that was opened 10 years ago, but still not quite the stores that youre alluding to.
I'm here in Orange County, So there we haven't tried to come up with.
Something that's massively different from the East coast Bye Bye.
Downplaying a little bit the pure of western customer, we've made it a little bit more accessible to a broader group of customers now by the way that said 1 of the things we've referenced in past calls is.
Those new markets, Pennsylvania, Ohio et cetera.
Or it's still heavily skewed in their sales towards western every bit as much as Colorado or Arizona. So it's not like we're selling a whole different set of product with sales selling cowboy boots and cowboy hats that it looks like we're also getting perhaps a broader sort of swap of the of the population of.
The market in those surrounding areas.
That's great. Thanks I appreciate it.
Excellent. Thank you.
Thank you and our next question will come from Sam Poser with Williams trading.
Thank you very much for taking my questions I have a question for you guys do you want the easy 1 of the hard 1 per card was thought about inventory levels.
They are both going to be about inventories.
[laughter] of either 1 of its about inventory actually.
Well thanks.
Alright, so your comp.
What how many stores were closed.
What is your new store productivity, how many stores were closed last year and like what stores are comping against what stores.
Because I think this caught the street numbers for your car just you're we're not this isn't an apples to apples number that the street had.
Nor myself for that matter.
So what sort of new store productivity at if you just looked at if all stores were opened last year.
Just <unk>.
Including the zero stores, what would the comp be.
If that makes sense of sandwich.
Sam It's Greg we haven't quoted of 1 year number really anywhere there there will be of 1 year number that's shown in our 10-K, when we put it on file because that's how the SEC requires us to report, but everything we've described to you whether it's the plus 65 total sales or the plus 52.
Percent same store sales that's on a 2 year basis, so that's compared to 2 years ago and it excludes all of the noise around store closures during the Covid period.
And I apologize, we do say and page 2 of the press release, we do talk about a 1 year comparison, but frankly, none of our comments really talk to that 1 year comparison, because it's a bit of a food where because of COVID-19 COVID-19 closures etcetera. So we thought at all I understood of like I am.
I get it but I put the question is what's that 78% number if it was all apples to apples. That's the question, what's the real what's that number because.
The Street was at 90 whatever percent comp that you came out at a 7 day, regardless of all of this being correct. There compare I'm comparing it nobody is Matt you can't match the numbers to the 7 day. All we're trying to do is match the numbers, we completely understand how strong businesses of all of that.
Just the number of leases.
What it is.
Well I guess you'd have to look at our Q1 filing from last year and then you look at total sales and then you'd use the stores penetration to come up with a total sales number in Q1 for stores and you've got the total sales for Q1. This year, that's not necessarily on a comp basis, but we.
Opened 15 stores.
Over the past year end and you can back into a number in terms of new store productivity, we model at a million 7 of its probably.
10% higher than that or maybe 20% higher than that it's not 50% higher than that.
So at this way so of new stuff so of news.
Our store at existing stores at $100.
Q1 of new store does what 50.80.
380.
Call It 80 or 85 per se, it's probably.
Okay.
Alright, I'll drop that now see no no inventory now the other question is about the about sort of a follow up at a whole bunch of other questions you talked about.
The women's western in women's apparel being very good are you. This is are you is this more of the fashion women coming in now to buy western growth boots.
Boots and other and she.
Bringing people with her coming back to buy stuff for others in the family. What are you learning about her given that it's 1 part of your business sounds like your inventories are pretty low because of high demand.
Yeah, I think on the first part I think.
Pent up demand concerts and events of finally restarting ray of our personal.
Over the last.
20 weeks of so it's been very strong, but it really hasn't yet been driven by concerts and radios I think that's all ahead of us.
Mostly ahead of us I think when they get dressed up for concerts. They they want of new pair cowboy boots, and they want of new outfit.
I can't tell you if they're.
We've got great data on are they are they buying for other bringing more people in better at.
So at work.
I mean, we're hearing from them from fashion brands that western is having a little moment.
And there is most of these fashion brands could care less about a rodeo so the questions and it sounds like Youre seeing the same thing with without the rodeo spring at all of them so to speak.
Yeah levers that very clever upon their I think so I mean look I think at is topical I would not want to leave the impression that our business is so strong because of some.
Sort of trend that we're seeing in some of these other brands, including some couture brands I mean, all of our business is strong.
From work boots to mens western to cowboy boots men's and ladies.
Cowboy hats a day.
Just about everything.
Is very solid.
Strong double digit growth.
And what we're calling out is at particularly on the ladies boot side.
That is 1 that is over index in the last few weeks not in the quarter.
And has been 1 that for the last several quarters of few years, even ladies boots has never been that remarkable.
For us anyway from a growth perspective.
Okay, Alright, well. Thank you guys very much continued success.
Thanks Sam.
Okay.
Thank you so much of our next question will come from Peter Keith with Piper Sandler.
Hey, good afternoon.
Bobby <unk> on for Peter.
Yes.
It looks like at scale.
Pretty large infrastructure Bill then of course, we passed from Congress I'm wondering if you could discuss how prudent infrastructure programs of impact of the non trends in no way you might expect this time around.
Clearly.
Any increase in employment blue collar employment and infrastructure is.
A good or a great thing for us I can't quantify for you what that would look like.
<unk>.
But we're not banking on that as part of our future growth, but it would just be a potential another.
They're tailwind to top line growth.
It does tend to drive.
The work boot business work apparel business denim, both work and western so it would be it would just be of another great add to the business that's been experiencing from some really strong growth anyway.
Alright, great. Thanks of the color of just 1 quick out of Iran.
So.
Some of the algebra and becoming more pronounced in some parts of the country has this had any impact on store traffic in any of your markets.
I'm sorry, there was something weird with the audio when you asked that question could you repeat at first please.
Okay.
Okay.
Good day, and whatnot with the Dallas of dairy and becoming more pronounced in some parts of the country is this at any impact on store traffic in any of your markets.
It's it's of course unfortunate to see some of this recent surge of our business has just been unbelievably.
Unbelievably consistent across the country, regardless of market, regardless of Delta variant end.
Yeah, what we like everybody hope at this.
It goes away pretty fast or at least gets mitigated, but it hasn't had an impact on the business.
The business has just been phenomenal.
Alright, great. Thanks appreciate it.
Thanks, Bobby.
Thank you and next we'll hear from Mitch <unk> with pivotal research.
Hi, yes, thanks for taking my questions.
So I'm curious on the product side you guys have made a lot of comments. There I think you said 2 years everything's up but how far you've talked about ladies boots. When do you think at sort of big picture of work versus West, Germany can you say, which currently is growing faster on a 2 year basis.
Okay.
Yes, we can't run at Western now is growing a little bit faster.
As you well know you've followed us for a long time and know the company extremely well over the last few years work has been growing more so of the pendulum has swung back a little bit.
If we were to look at sort of a pie chart and it's it's the segment of the pie growing or shrinking it's going to be indistinguishable.
They are growing.
As of illustrative numbers ones growing 70 per cent ones are at 55, right, it's not going to make a meaningful difference on the percentage of the business got it.
Bringing but now western is a bit stronger than work.
And then Jim you talked about new customers in your prepared remarks, and you talked about I think 1 of the ways you are bringing in new customers with product. So I just went back from glass at the 10-K and so the split there I think of it.
2 thirds of Western and then the other third is work slash other I'm curious I've got maybe you feel a lot of questions here I'm curious how big is the other pieces of it as much as maybe 5% now is it still <unk>.
Other than that when I think about other are the main categories and other like outerwear of hiking boots ball caps or are there other pieces.
And then when you think about growing this other category in particular to attract new customers.
Are you is it really just driving more sales through those existing categories or are there. Other things that you think you can still add to the to the to the mix.
So I would say.
Quote unquote other end end the statistic that youre alluding to of course is a pretty.
Ketchup broad based you know brush stroke, if you will end.
View of the business I would say other could be 10, or maybe 12 per cent of the business that includes everything from baseball hats, the hiking boots.
Some of the a product or bring on the Lady side, you know, where we're going to categorize it as well.
Western but it might be you know almost mainstream in terms of its fashion aesthetic I think the other thing that we're doing now is we're trying to.
Refresh the sales floor more frequently in certain key categories, we're bringing in.
Of merchandize statement in ladies apparel.
To make a statement that may only lasts for 3 or 4 months and then it goes away.
We're also.
Just starting to bring in some some more.
Exciting merchandise to some stores that may otherwise have not had at in the past because of the store might be an average sort of volume.
We focus more on basics.
But when we talked about in store fulfillment, we can now bring some more sizzle of product.
Further into the store base, because even if that store can't turn at quickly enough to.
Sort of command of that product, we're able to move it ultimately with our E. Commerce channel. So all of those things. We believe will help add to the in store experience add more excitement to the store.
And perhaps not only increase customer count, but increase frequency because theres a reason to come back.
More quickly than you otherwise would have.
Okay. Thanks, I appreciate the color.
Thanks much.
Yes.
Thank you and our next question comes from Jay sole with UBS.
Great. Thanks, so much for taking my questions I just want to go back to 1 of the questions from a few moments ago.
Total revenue was up 107% at the same store sales growth was up 79 of 2800 basis point difference can you just maybe just walk us through from to get to 79 to 107, what the different components.
Of the business that drove the sales growth to 107 were obviously new stores as of piece, probably not all 2800 basis points of the difference between same store sales in total revenue. So can you just give us an idea that would be that'd be helpful.
Sure Jay its Greg from.
A definitional perspective, if of stores closed for 5 days or more at falls out of our comp calculation for the entire period.
For the entire month and so last year in the height of Covid, we had a number of stores that were closed throughout the first quarter.
And so they would be they would have had zero sales are fewer sales last year in Q1 or in that month that they fell out of of the comp base and they have 30 days of sorry, 28 days' worth of sales. This year of for example in the month of May.
So they could have been closed for 14 days last year in May and they were opened for 28 days. This year in may of those don't count as comp.
Sales in the first quarter for that month that they fell out of the of the calculation.
Got it and it sounds like that pieces of the biggest part of the difference between the total revenue in the same store sales growth. So maybe the new stores accounted for.
700 bps of the growth, but probably this pulling some stores out of the comp base because of the closures and whatnot because of Covid like really accounts for the majority of the difference.
That's correct.
Okay got it and then my other question is just on.
It's you know it sounds like obviously shipping costs are going up.
You know Jim you talked a lot about the omni channel initiatives are are you passing on some of that shipping to the consumer.
And when they order something online and is that increased driving people into the store. So in other words are you seeing a correlation between the impact of rising shipping costs across.
The landscape in the.
The traffic that comes into the store.
The honest answer is we havent passed along.
Freight costs, particularly online to the customer at you, but first of all.
A huge portion of our online purchases of ship for free.
What we have done is said.
If you buy online and you ship it to our store.
Even if that shipment.
Didn't meet the threshold for free shipping because we do still charged for shipping under certain thresholds and if it's not boots.
But if you're willing to ship it to a local store and go and pick it up and then youll get it for free so we've actually.
Sort of encouraged of customer too.
If they want to avoid the shipping cost, which hasn't changed to ship it to a local store and go in and pick up the product at.
And perhaps the objective of that is self evident but the goal of course, a matter of walking into the store to pick something up and they're surrounded by product and it's probably the least expensive.
New customer acquisition net of store could have.
Most of the free increase cost.
That we've been experiencing and I think probably most people have been experiencing is really inbound at its containers coming from China et cetera.
Your way in my remarks, a couple of them together and said yeah, we're seeing a little bit of inbound freight cost increase.
But a lot of the other things that we're doing has helped dampen that a bit.
Including some of the things we're doing from an omni channel standpoint, so it was a little bit of an apple and orange, but at its 1 of the underlying goals is to look for an offset to the inbound freight cost.
Got it understood very helpful. Thank you.
Thank you.
Thank you and our last question today of will come from Jeremy Hamblin with Craig Hallum.
Thanks, guys and congrats.
I wanted to just the because I think the response it was a bit muffled on the store cadence of openings just to see if we could clarify that again I heard the 2027, new stores planned for the year.
But you know it looks like you're at you're tracking pretty nicely.
Already on those openings and it sounds like you're very confident on the total could you just clarify.
Greg.
Most of those openings.
Some of it Jeremy we think that that at.
The store opening cadence is roughly the 3 stores happened in Q1, we think we will get 6 or 7 stores opened in Q2.7 stores opened in Q3 and the balance.
Either 10, or 11 stores will happen in Q4.
Got it.
Wanted to come back to the exclusive brands are which you guys have had so much success with.
It's been a couple of years since at the last time, you really launched.
Our new exclusive brand wanted to just get a sense.
Given the success that you're seeing.
Given potential partnership opportunities like.
You had obviously with Ida wind a success.
Is that something that's potentially of fiscal year 'twenty 2 initiative.
You know Jim are you going down that path of looking at.
You know maybe expanding the number of exclusive brands you have.
So it's a great question.
Answer is yes, and I wouldn't.
Colorado.
At current fiscal year initiative.
There will be some of the new product and new brands coming out before the end of the year.
And any meaningful impact on the business will roll into next year. It's at this is gonna be a Q3 of Q4.
Before the product starts to come in and just to give up.
Sort of some sense of.
What are.
Sure.
Sort of positioning will be at harkins directly back to our segmentation.
At where we've added.
And at an explicit segment around a more country customer that's not hardcore western so we will have a brand for that customer in both men's and ladies.
And then on the Western side, where we're looking to kind of further segment that a little bit so we'll probably add.
Alright, 2 brands actually on western.
And I think when we're when we're all done well will outline maybe on a future call sort of a portfolio of brands and how they're positioned by.
The goal here is to continue to net back the brands that we offer in the store either third party brands or our own brands, but map that back to how we're segmenting our customer base, attracting new customers.
And trying to take care of demand of current customers.
So long winded answer to yes, you should expect some new brands coming at once they're more fully developed will shine a light on them and end kind of walk you guys all 3 of them.
And it should help us continue to grow that part of our business and as we look to our fiscal 'twenty 3.
Business.
Great. Thanks for that last 1 quick hitter.
On the debt.
That's something.
That you're looking to pay off here in the next 12 months.
And then potentially do we start looking at of or other uses for capital allocation Besides store openings in M&A.
Jeremy Good question. We've what we've said is we wanted to first use our free cash flow to open stores and then to pay down our debt. So you.
Consistent with that words, opportunistically paying down some of that term loan.
<unk> added a little bit of capacity under the ABL.
And I think we'll continue to chip away at at a.
At that.
Great. Thanks, great job guys.
Thank you very much.
Thank you and that concludes today's question and answer session. Mr. Conroy at this time I'll turn the conference back over to you for any additional or closing remarks.
Great. Thank you and thank you everyone for joining the call today.
We look forward to speaking with you.
On our second quarter earnings call take care.
Thank you and that does conclude our conference for today, we thank you for your participation.
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