Q4 2023 Boot Barn Holdings Inc Earnings Call
[music].
Good day, everyone and welcome to the boot barn Holdings' fourth quarter 2023 earnings call. As a reminder, this call is being recorded.
Now I'd like to turn the conference over to your host Mr. Mark <unk> Vice President of financial planning. Please go ahead Sir.
Thank you good afternoon, everyone. Thank you for joining us today to discuss boot barns fourth quarter and fiscal 2023 earnings results with me on today's call are Jim Congress, President and Chief Executive Officer, Greg Heckman, Executive Vice President and Chief operating Officer, and Jim <unk>, Chief Financial Officer, a copy of today's press release.
Along with a supplemental financial presentation is available on the Investor Relations section of Dupont's website <unk> com.
Towards that end this call a recording will be available as a replay for 30 days on the Investor Relations section of the company's website.
I'd like to remind you that certain statements we will make in this presentation are forward looking statements. These forward looking statements.
Gentlemen, and analysis only as of today and actual results may differ materially from current expectations based on a number of factors.
Accordingly, you should not place undue reliance on these forward looking statements for a more thorough discussion.
Risks and uncertainties associated with forward looking.
Payments to be made during this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our fourth quarter and fiscal 2023 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.
Burns, President and Chief Executive Officer, Jim.
Thank you Mark and good afternoon. Thank you everyone for joining us on this call I will review, our fiscal 'twenty, three and fourth quarter results.
Discuss the progress we have made across each of our four strategic initiatives and provide an update on current business.
Following my remarks, Jim Watkins will review our financial performance in more detail and then we will open the call up for questions.
Fiscal 'twenty three was a solid year for boot barn.
Sales opened 45, new stores and continue to expand product margin.
I am proud of the entire boot barn team for driving these results and for holding on to the outsized gains from the prior year.
Fiscal 'twenty three total sales grew 11, 4% on top of 67% growth in the prior year driven primarily by strong sales from new stores opened over the past 12 months.
Consolidated same store sales were flat to the prior year, which was comprised of one 8% retail store same store sales group and a 10% decline online.
The stores comp is notable as we cycled a 57% comp growth in the stores last year.
Similarly, while our online business declines that business is cycling two very strong years from 39% and 24% comp growth in fiscal 'twenty, two and fiscal 'twenty, one respectively, given the extraordinary.
Revenue increased last year, we're quite pleased with these results.
In addition to the sales performance, we're able to grow our product margin for the year by 30 basis points, primarily to growth in our exclusive brand penetration.
This margin expansion was offset by a 100 basis points of freight headwinds, resulting in a net 70 basis point reduction in merchandise margin.
But our sales and margin results in perspective over the past five years boot barn revenue has more than doubled adding nearly $1 billion in sales and merchandise margin has it expanded approximately 500 basis points.
Okay.
Turning to our fourth quarter results total sales continued solid growth driven by sales from new stores. However, same store sales declined five 5% on a consolidated basis as we cycled same store sales growth in the prior two years of 33% and 27%.
From a margin perspective, we saw product margin expansion of 30 basis points in the quarter and is a testament to the strength of the boot barn brand, where we can continue to expand our selling margin. Despite a decline in same store sales.
While our full year results fell short of our original expectations overall I am pleased that we've been able to continue to grow the business on top of the record setting year.
I will now spend some time highlighting the recent progress we have made across each of our four strategic initiatives, let's begin with expanding our store base.
Our growth engine continues to significantly outperform our expectations, while we've historically targeted 10% new store openings, we were able to accelerate the growth of 15% for fiscal 'twenty. Three we believe the 45 stores opened in the past 12 months will continue to generate average unit volumes of <unk>.
$3 $5 million and payback in less than 18 months.
In the fourth quarter, we opened 12, new stores, which was our sixth consecutive quarter of double digit new unit openings.
These recent openings include our first stores in the states of New York, and Maryland, further expanding our presence into untapped markets.
We continue to be encouraged both by the new store performance in new markets and the lack of significant cannibalization as new stores are added to existing markets.
The new store performance with a strong new store pipeline further bolsters, our confidence in the ability to expand to 900 or more stores across the United States over the next several years.
Moving to our second initiative driving same store sales growth.
Fourth quarter consolidated same store sales declined five 5% with retail stores same store sales declining three 3% and e-commerce comp sales declining 18, 4%.
From a merchandise department perspective, the more functional product lines performed better than the more discretionary categories. These include men's western boots, and men's apparel, which performed better than the chain average and men's work boots and work apparel, which were in line with chain average.
Ladies boots in ladies apparel declined, 11% and 13% respectively as both department cycled, a two year stack of over 80%.
From a marketing perspective, the brand continues to resonate across the country. The recent customer research. We conducted was able to confirm that our outsized sales gains were due in part to the influx of many new customers, both from western and work competitors and from retailers outside of our industry.
As we look forward, we will continue to prospect for new customers through broadcast media channels, while nurturing our legacy customer base with tailored print and direct mail communication.
We are pleased with the continued expansion we have seen in our customer base with 22% year over year growth in our B rewarded loyalty members MTV.
Point 1 million active members.
Drilling down into our comp stores business from a geographic standpoint, we saw a slight decline in our east and north regions, the western and south regions, both experiencing mid single digit decline.
As we look at our store keep your eyes, a decline in transactions per store during the quarter was partially offset by growth in average transaction amount.
Our January stores business was positive on a same store sales basis, which then turned negative in February and more negative in March.
While top line performance in the stores was softer than we expected it to be at the outset of the quarter. We are relatively pleased with this result, as it were recycling a two year stack comp of approximately 60%.
From an operational perspective, the field organization continues to deliver exceptional customer experience with all the omnichannel offerings. We currently have in place our stores team has been tasked with balancing many operational responsibilities. In addition to delivering high quality customer service.
The team has not only risen to this challenge, but it has also managed to sustain our elevated sales per store.
I do want to express my appreciation to the entire field team for their execution and their ability to adapt to the changing needs of the business.
Moving to our third initiative strengthening our Omnichannel leadership.
In the fourth quarter, our E Commerce same store sales declined 18, 4% in line with the performance. We saw in this channel during the third fiscal quarter we.
We believe these declines are a result of competitors, having a stronger in fact position compared to last year.
And expect this softness will be transitory.
For the past two years, we have successfully rolled out several omnichannel capabilities, including ship to store ship from store Cross channel returns and buy online pickup in store Dude.
Doing so has enabled us to increase the customer service options online while simultaneously expanding the breadth of the in store assortment.
Today, approximately two thirds of our online sales are touched in some way by the stores, we believe that leveraging our nationwide store presence will create a seamless integration of our two selling channels and provide us with a sustainable competitive advantage in our industry.
In addition to the Omnichannel capabilities that have been created we are continuing to make progress in a number of areas.
First we continue to see strong growth in exclusive brand penetration online as we access the broader assortment that resides in all the stores across the country.
The incremental margin provided by our exclusive brands.
To further increase the profitability of our online sales in the coming years.
Oh.
Second during fiscal 'twenty, three we rolled out at boot barn mobile App. This app creates a more convenient shopping experience for our customers offers a mobile friendly option for purchasing and serves as an additional tool to drive in store traffic.
It enables online customers to shop their local store learn about events and concerts in their market and stream country music directly from the App.
Our digital team did an incredible job with the development and we are very pleased with the final product.
Okay.
Lastly, I am quite excited about a new project underway called banding that utilizes artificial intelligence and machine learning to enhance the customer shopping experience.
All the barn stores are already equipped with touch screen devices that guide customers through their purchase decisions by narrowing the assortment based on a series of filters and preferences.
First they are integrated machine learning to develop a recommendation engine based on market basket analysis.
Second they have created a fully integrated connection with chat G. P. T to provide a customer with the Congress seasonal interactive experience.
For example, if a customer shopping for a pair of women's western boots. They will now be able to ask bandied for a recommended outfit that would pair well with their selection to where do a country music concert and that recommendation will be rendered with a conversational tone, adding qualitative reasons why these items would look good together.
Additionally, we have harnessed the same capability in the handheld devices utilized by our store associates. When they are assisting customers. This new technology will empower our team greatly by providing them with a deep level of product expertise and an ability to pair items together, regardless of how much product knowledge. They have are.
They have working at boot barn.
Yeah.
While there has certainly been a tremendous amount of recent discussion around the use of AI. We are thrilled to be on the cutting edge, having already rolled out multi customer facing and an employee facing application to all of our stores.
I'm looking forward to the potential this new offering has to enhance the customer experience and drive incremental sales.
I do want to express my gratitude to the digital team specifically to Justin handling for developing this incredible tool and enabling us to be first to market within our industry and integrating AI into the customer experience.
Now to our fourth strategic initiative exclusive brands during the fourth quarter, our exclusive brand penetration increased 770 basis points to 37, 3% for.
For the full year, our exclusive brands were 34% of sales and surpassed $550 million.
For context exclusive brand sales have increased more than 10 percentage points in penetration over the last two years.
Consistent with prior quarters three of the top five selling brands were Cody, James Cheyenne and Idaho wind.
Our exclusive brands not only provide us with competitive differentiation, but they're also financially accretive to the business by approximately 1000 basis points of margin.
Turning to current business, we are halfway through our first fiscal quarter and quarter to date same store sales declined 5.8% compared to approximately 13, 4% growth in the comparable prior year period.
The consolidated five 8% decline is driven by a 15, 2% decrease in ecommerce sales and four 3% decline in retail store same store sales.
Given that we are up against the toughest compares in the year ago period. It is encouraging to see a sequential improvement from March into our first quarter signaling a healthier tone in the business.
I'd like to now turn the call over to Jim Watkins.
Thank you Jim.
In the fourth quarter net sales increased 11% to $426 million as Jim mentioned, our sales performance benefited from new stores opened over the past 12 months and the sales contribution from the 50 <unk> week, partially offset by a same store sales decline of five 5%.
Gross profit increased 5% to $156 million.
<unk>, 36.6% of sales compared to gross profit of $149 million or 38, 8% of sales in the prior year period.
The 220 basis point decrease in gross profit rate resulted from a 120 basis point decline in merchandise margin rate and a 100 basis point.
And 100 basis points of deleverage in buying occupancy and distribution center costs.
The decline in merchandise margin rate was driven by 140 basis point headwind from higher freight expense, partially offset by 30 basis points of product margin expansion, resulting from growth in exclusive brand penetration.
Lower than expected freight expense was the primary driver of the beat the guidance on the merchandise margin line as sales slowed during the quarter, we sold fewer high freight inventory items through the P&L compared to our expectations, resulting in lower freight expense.
Looking forward, we expect freight expense to be a benefit to fiscal year 'twenty 'twenty. Four is merchandise margin of approximately 100 basis points recapturing the 100 basis point headwind from fiscal 'twenty three.
Selling general and administrative expenses for the quarter were $93 million or 21, 9% of sales compared to $86 million or 22.6% of sales in the prior year period.
We leveraged SG&A expense, primarily as a result of lower incentive based compensation.
Marketing expenses and leveraged from the 14th week.
Income from operations was $63 million or 14.7% of sales in the quarter compared to $62 million or 16, 3% of sales in the prior year period.
Net income was $46 million or $1 53 per diluted share compared to $45 million or $1 47 per diluted share.
And 82 cents per diluted share two years ago.
Turning to the balance sheet on.
On a consolidated basis inventory increased 24% over the prior year period to $589 million. This increase was primarily driven by new store inventory exclusive brand growth and inflationary increases from our vendors.
Average comp store inventory increased approximately 8% over the prior year period on a three year stack basis, our retail stores same store sales growth of 56% has outpaced our three years stack average comp store inventory growth of 35%.
We continue to be pleased with the content and quantity of our current inventory levels.
We finished the quarter with $18 million in cash and $66 million drawn on our $250 million revolving line of credit.
Turning to our outlook for fiscal 'twenty for.
The supplemental financial presentation, we released today lays out the low and high end of our guidance ranges for both the full year and first quarter.
I will let be speaking to the high end of the range for both periods in my following remarks.
For the year, we expect total sales at the high end of our guidance range to be $1 $7 billion, representing growth of 4% over fiscal 'twenty, three which as a reminder, was a 53 week year we.
We expect same store sales to decline four 5% with a retail store same store sales decline of five 2% and E Commerce same store sales growth of 1%.
We expect gross profit to be $630 million or approximately 36, 5% of sales.
Gross profit reflects an estimated 150 basis point increase in merchandise margin, which includes a 100 basis point improvement from freight expense.
We expect to grow exclusive brand penetration by 400 basis points.
We also anticipate a 180 basis points of deleverage in buying occupancy and distribution center costs.
This deleverage is primarily the result of negative same store sales higher occupancy from new stores and the cost of the new Kansas City distribution Center.
I'd like to provide you with some color around leverage points.
On a go forward basis, we expect to leverage buying occupancy and distribution center costs with a 4% consolidated same store sales growth.
However, as a result of the cost of our new Kansas City distribution Center, the annual nation of the step up in new unit growth from 10% to 15%.
Store Remodels in fiscal 'twenty four.
And the benefit of the 50 <unk> week in fiscal 'twenty three the same store sales required to leverage buying occupancy and distribution center in the current fiscal year is expected to be 14%.
When adjusting for these transitory items, we expect to return to a more normalized leverage point of 4% in fiscal 'twenty five.
Our leverage point in fiscal 'twenty four on SG&A as a consolidated 2.5% cop.
Our income from operations is expected to be $209 $9 million or 12, 2% of sales.
We expect net income for fiscal 'twenty for it to be $153 million and earnings per diluted share to be $5.
We also expect our interest expense to be $4 $3 million and capital expenditures to be $95 million.
For the year, we expect our effective tax rate to be 25.6%.
Yeah.
We plan to grow new units by 15%, adding 52, new stores around here.
We anticipate opening 13, new stores during each quarter of the year.
Okay.
As we look to the first quarter, we expect total sales at the high end of our guidance range to be $364 million.
We expect the same store sales decline of 7% with retail store same store sales declining, 6% and E Commerce same store sales declining 15%.
We expect gross profit to be $131.1 million or approximately 36% of sales.
Gross profit reflects an estimated 80 basis point increase in merchandise margin, which assumes flat freight expense year over year.
We anticipate 250 basis points of deleverage in buying occupancy and distribution center costs, primarily relating from resulting from negative same store sales higher occupancy from new stores and the cost of the new Kansas City distribution Center.
Our income from operations is expected to be $36 $2 million or nine 9% of sales.
We expect earnings per diluted share to be 85 cents.
Now I'd like to turn the call back to Jim for some closing remarks.
Thank you Jim we are pleased with our fiscal 'twenty three results and believe we are well positioned to continue our growth.
During fiscal 'twenty, three we accelerated new store openings with the addition of 45 new stores across the country through product margin for the seventh consecutive year and expanded the penetration of exclusive brands by a record 570 basis points.
With new stores, continuing to well exceed our financial targets and our growing store footprint, providing even greater integration with our digital channel. We are confident business is on course to deliver profitable market share gains and increased shareholder value.
I'm very proud of the entire team across the country and want to thank you all for your continued hard work and execution.
I also would like to take a brief moment to publicly express my gratitude to Greg Hackman, who will be retiring this summer.
Greg has had a significant impact on the growth of the company and on the personal development of countless executives. Thank you Greg for all you've done for boot barn for your team and for me personally.
Now I would like to open the call to take your questions O'malley.
Thank you and at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line and in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.
Z Starkey.
And one moment, please while we poll.
Our first question comes from the line of Matthew Boss with J P. Morgan. Please proceed with your question.
Great. Thanks.
So.
Maybe Jim as we think about FY 'twenty for comps and I think guided down five 5% at the midpoint.
Two questions. So can you speak to trends that you're seeing today across your existing legacy customers versus new customers that you've acquired just the general trend across both and then as we think about the guide in terms of the first quarter of 'twenty four relative to the back half if you could just help us bottoms up build.
Our same store sales as the year progresses, <unk> relative to assumptions baked into the back half I think that would really help.
Sure I'll take the first piece of it and.
It's hard to split out the comp between new and legacy customers.
I wouldn't read much into a slightly negative comp after we cycle last year.
53, setting and even if we give a little bit of that back its not like there is massive exodus of customers from our database in fact, we called out ongoing growth in our customer count and if we look at our stores specifically right our stores were up 57%.
Last year and still positive in fiscal 'twenty three so.
I think what might be happening if you think about what many other companies are calling out with some softness in March in April .
It may just be sort of the natural downdraft that we're seeing in retail and well some some very.
Marquee companies have called out softer business in the spring companies that we have a great deal of respect for.
They weren't even cycling the numbers that we are cycling. So the fact that we're down just slightly when the rest of the world of retail seems to be down just slightly.
And our ally compares are sort of higher than everybody else.
We honestly are not worried about sort of a.
Slow decline for for the next several years I think this could just be a small bag for.
Transitory amount of time.
And Matt I'll take the second part D and guiding the year, we use the last few months of sales volume and projected that the sales for the balance of the year using the historical weekly sales penetration.
And so as that flows out through the year, the second quarter or stores are going to the comp is going to look similar to the first quarter stores comp with E comm improving to flat in that second quarter.
As we get to Q3 and Q4 the stores get better, but there is still projected to be down in that mid single digit range better than what we'll see in Q1 and Q2.
But still not positive and E com improves to a plus mid single digit.
Great and then maybe just a follow up.
Think about the profitability side could.
Could you just speak or elaborate too promotional behavior that youre seeing today within your own business or what you're seeing in the larger western wear industry, but just what gives you confidence in the 150 basis points of merchandise margin expansion in FY 'twenty four despite the AR it sounds like a little bit.
A softer demand backdrop.
Sure.
I would say that the the western industry's promotional.
Turner is similar to.
Pre pandemic times right with a relatively modest amount of sales and promotions across the industry.
Perhaps more promotional than.
You know two years ago, when when sales were strong across the industry.
But nothing really out of the question you were out of the ordinary.
And maybe the follow up point to that.
Is regardless of what the rest of the industry does when we.
Never really chase, a promotion or a sale or a reduction in prices.
Across from.
Many of our competitors we.
We think the boot barn proposition goes far beyond sort of a short term reduction in price.
And when we look at the health of our inventory, we see no reason to make any significant reductions to move through product. So we're going to continue with our full price selling philosophy, we're going to continue to drive exclusive brands, we get a nice tailwind. This year. So we're looking forward to I guess, an eighth consecutive year.
Year of margin expansion.
And Matt just to add onto that the 150 basis points of merch margin expansion doesn't include the 100 basis points of a freight tailwind for the year. So it is 50 basis points of product margin that we're guiding to and with exclusive brand penetration growth of.
400 basis points for the year, that's what's driving a lot of that product that margin expansion.
Great Best of luck.
Thanks, Dan.
Our next question comes from the line of Stephens, a cone with Citi. Please proceed with your question.
Great. Good afternoon. Thanks for taking my question I wanted to follow up on Matt's question about same store sales.
What have you seen from a category performance, thus far in the first quarter and you can you talk about your expectations from a category perspective for the year and then just also how do we think about ticket versus transaction performance within the guidance range.
Sure on the second part I guess, we don't really outlined or a guidance in traffic versus ticket, but we expect to see continued pressure.
Probably low single digit and tracked in traffic or average transactions per store.
With a higher ticket.
For most of the or at some point, we'll cycle the.
The increases that we had or the inflationary price increases we took last year.
In terms of category by category.
It's M you.
You know some of the businesses that are less.
Less discretionary more staple type products.
<unk> continue to do better what men's western apparel.
<unk> seen a slight sequential improvement from the fourth quarter into the first quarter.
Our mens western boots, as roughly flat and for the first quarter quarter to date the businesses that are down in any significant way.
We continue to be more discretionary purchases at least in general so ladies boots in ladies apparel continue to be.
Softer.
Ladies apparel is down call it.
12 points or so ladies western boots as high single digit declines.
I always feel obligated to remind the call that you know the ladies business is up against just enormous growth numbers in both boots and apparel.
If I look at Q4, ladies apparel just as an example in Q4 it was up against an 83% growth last year and 43% growth. The prior year. So if we wind up giving 10 or 15 points of that back internally within the four walls of the company, we won't get fussed over that Ray we just grew at <unk>.
40% in that 80% on top of bed, so, giving a little bit back.
It's almost expected and when we put it all together if we end up with a modest decline in same store sales.
Coming off of the years ankle. Most recent couple of years I think we should feel pretty good about that.
Just to follow up on that comment what gives you confidence that it's not fashion risk to the business right like some of those discretionary categories are selling now.
Do you think that potentially fashion, it's working against you, whereas last year maybe.
A couple of years its worked for you.
Well actually I wouldn't say it is fashion working against US I mean, we've.
We've seen some really outsized growth in the ladies business now being mindful of the fact that.
We're overly generalize and theres, a tremendous amount of or a ladies categories that are basic.
Basic product for for women that are working.
Riding horses.
Et cetera, but there is sort of a layer on top of that that we believe was helping us from a fashion sense in the last couple of years. If you go back several quarters. We said it was probably an 8% helped we haven't quantified it but that 8% helped us probably turned against us.
I would I would point you to page 12 in the supplemental deck.
That would point to how.
Small the fashion component is within our assortment.
And how it sort of diluted down are really dominated by by the more functional product.
<unk>.
The second thing I feel obligated to call out.
Is.
And historically.
There's been a lot of dialogue around our outsized growth being driven by fashion or TV shows or something.
And one of the things we tried to do this quarter is.
To validate whether that's true or not so.
There's not a tremendous amount of publicly available data, but there are four companies that sell product that we sell.
And if there was this massive fashion trend or.
Macro cycle based on a television show you'd see everybody's seeing that same growth and again. If you go back to that same document I just pointed you to.
On page 10, you'll see that the growth we experienced just far outpaces.
Anything that anybody else has seen an industry, which I think speaks mostly to the execution of the people with the boot barn, not some sort of artificial transitory piece of fashion.
Okay. Thanks for the detail I'll cede the floor.
Thanks, Nick.
Our next question.
Oh I'm sorry.
Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.
Hey, Thanks, good afternoon, everyone.
I'll have to look at the recent store growth that you have say you've accelerated up the kind of mid teens unit growth. This past year and expect that to continue the stores are coming out pretty strong out of the gate, but historically your new stores comped double digit in year Q, what are you expecting from a maturation.
<unk> angle from this most recent batch of openings the last 12 to 18 months.
Yes, you're right the stores have gotten out of the gate extremely quickly. The first year performance has been a little bit more in line with sort of a chain comp.
So when we're comping slightly positive last year. They were comping slightly positive we havent seen a a great waterfall for those recent openings I do think there's been a lot of other sort of macro things moving around so we'll see what happens as we continue to open up stores over the next couple of years.
But we we continue to be very enthusiastic about the new store opening.
Pipeline that we have we're on pace now for opening up a store a week.
So that'll be about 100 stores over the next two years and add call it $350 million worth of revenue and the flow through along with that.
So we're excited about the growth prospects going forward.
Okay, Great and then just looking back at.
The falloff in comp trend that happened in March and particularly at retail I guess, there's been a debate that I've had with.
With investors in recent weeks around the weather impact and all of the rain out west.
And do you think that actually impacted the band either positively or negatively at all in the last two months.
Over periods of time of course, it normalizes I do think if your question is specifically around California.
The challenge that we're seeing in California was we have gone from drought to torrential downpours and.
We often talk about it as the impact it will have on a particular customer but in the extremes that we have seen the impact that it's having is on the the farming industry. So during the drought we had a more difficult.
Agricultural market in the Central Valley for example, which is one of our strongholds of stores and then as the rain started to come we thought that would help that market. It's unclear what that will be going forward because they've had so much rain that we've seen farmland.
Now flooded.
So those businesses and we have two specific districts.
In California that are being impacted and they're down call it 15% or so.
Theyre very high volume districts.
But we'll we'll get through that whether that's in two months or six months won't be on the other side of the weather.
Those businesses as you know well Peter have been perennial strongholds and just.
Great growth drivers for us for.
Five or more years coming into this period and and the team will pick up from.
Once the weather passes and bulk.
Pretty certain we'll start to see growth there again.
Okay very good thank you very much.
Thanks Peter.
Yeah.
Our next question comes from the line of Max.
<unk> with TD Cowen. Please proceed with your question.
Hey, Thanks, a lot guys.
First can you speak to your new customer counts on a same store basis compared to where you were pre pandemic.
Are your new shoppers are behaving similar or showing any differences versus the legacy shoppers and then just your confidence in being able to hold onto them when the western cycle. It does slow.
Next can you repeat the first part of your first question cut out on us.
Oh, sorry about that just your customer counts on a same store basis.
Does he typically speak to overall and obviously you've grown a lot of stores. So just curious what they look like on a same store basis.
I'm not sure Andrew Us have that number specifically at hand, I guess, we could point you to is.
New stores grew 15% and of course, the customer count in new stores on average would be less than a legacy store.
And our B rewarded customer count grew 22%. So we've seen more customers just mathematically on an average store basis.
At bare minimum on the delta between those two different numbers.
On the second piece.
Yeah I think.
There's been a lot of conversation around all the help that fashion trends have given us.
The businesses that we would consider fab.
Fashionable right now or are undoubtedly headwinds to our comp.
And were in the fourth quarter for sure so.
I'm not sure there is a a big shift that will be seen.
And candidly I can come back to the comments you made earlier a lot of the other companies in our space didn't see the growth that we saw that you would've expected.
If it was a.
Western wear trend across retail.
Again, I would point you to point to page 10.
Where our growth.
Sort of considerably outpaced.
The only four companies, we can get data on from a public company standpoint, and these are great companies extremely well run great partners to us.
But we certainly were able to outpace whatever underlying fashion cycle. There was but then whatever fashion cycle. There. There may have been is is no longer here, we're certainly up against these outsized growth rates, particularly in ladies' apparel, which.
Has a portion of that that is fashion.
Got it Okay, and then what do you attribute the acceleration in exclusive brand mix for <unk> and then it looks like that you raise your exclusive brand penetration growth for <unk> 24 for the first time in a while so just is there anything that youre seeing differently are the shoppers may be behaving a little.
It differently.
Thanks, a lot.
I think our new stores, just continue to build I'm, sorry, our new brands continue to build momentum historically, we had six brands then we launched four brands in the last 18 months or so and when we launch a new brand. It starts off you know small to medium sized and.
Then continues to get more.
More traction in is added into more categories.
So that part of the business will continue to grow we expect it to grow again this year.
It has exceeded all of our expectations that we had five years ago, and two years ago and last year.
Our customers are really responding to them.
And they've they're just great complements to the third party brands that we have out there.
So.
Most of our big brands and the names that you would know that our third party brands continue to see growth with ice and the exclusive brands are in general.
Taking share from secondary or tertiary or certainly non strategic brands out there.
So we were excited to see that part of the business continue to grow you can only buy that product at boot barn, it's financially accretive of course as you well know.
So we'll continue to build that business and work it into the assortment to a point, where we can ultimately say hey, we have to hit a ceiling in a particular category and will slow down, but I don't see that happening for a few years.
Sorry, just on that last point does the ceiling change at all or is it sort of similar as what you saw here.
Between the three years ago.
I think the ceiling has continued to be increased if you will.
10 years ago, and I know that wasn't your question, but 10 years ago.
We saw it will mean someday, we could get to 20% in.
Could we do that and still maintain a compelling assortment and our house of brands commitment to our customers.
And then we kind of marched right through the 20% and then candidly what happened was Covid hit.
And that challenged supply chains and gave us a.
A unplanned experiment, where we had access to exclusive brands.
And less access to third party brands.
And that really resulted in a very nice increase in our exclusive brand penetration at the same time sales were growing 50% 55%.
So when when we put those two facts together, we said we'll look yeah, we can.
Double the business in <unk>.
Three years and grosses breakthroughs, we certainly don't see them as a detriment to topline growth.
If you if I really had to answer that question and.
And I went to this on a public call I promised I'd have to go category by category, because there are certain departments or certain parts of our business that are dominated by a brand or two and others that have much less national brand strained where the ceiling would be higher so.
As a company are ceiling would be.
Composite number of rolling up all of those departments.
Got it very helpful. Thanks, a lot guys and best regards.
Thank you.
Our next question comes from the line of Jonathan Komp with Baird. Please proceed with your question.
Yes, hi, good afternoon, I wanted to just ask a broader question you know the whole increase in unit volumes that you've seen in the past few years. It looks like hearing about in about 4.4 million mature store unit volumes for the year ahead, just any change in your confidence in holding that level.
And then as you think about the build for this year based on the weekly sales trend.
Perspective, you can provide us that give enough room, if unemployment starts to tick up or how have you factored in any sort of macro sensitivity.
So the.
For the folks on the call John is alluding to a slide in the supplemental presentation page 11.
Which isn't similar slightly different but similar to a slide that we've used in the past that says look we've had a step up in the average sales per store and it's now been 24 months and well.
We're down slightly from a comp basis that four six has gone to port for that Triangulates to roughly a negative five comp.
We expect that business to stay in the 4.4 ish range going forward, which as you know.
Kind of this this bar chart in the end the same store sales.
Guide that's out there.
Could it be better than that it probably good I think we are.
Trying to keep an eye on what's happening from a macro standpoint.
Some of the softness in the discretionary categories. Some of the things that you that the.
Sort of Mega cap retailers are calling out.
Who have insight into a much broader portion of the population so.
Trying to keep a little bit.
If you look at our guide our guide is more conservative than our current quarter.
And I think thats the gap.
Yeah. Thank you that's helpful and then maybe.
A question just on me.
Margin profile it looks like a re basing this year around 12% operating margin give or take up any perspective, you can share just quantify how much.
Additional expense that includes from the step up in unit growth in the distribution Center and then as we think out.
To 2025 and beyond is it realistic to think you get back to your long term earnings algorithm. After the reset this year.
Yeah, Tom to just walking you through some of the Oh God is the occupancy deleverage and.
The negative same store sales guide for the year is worth around 60 basis points. If you look at the acceleration of getting us from.
Ramping up the new store growth from 10% to 15%.
Is the step up that that cost us about 50 basis points on that occupancy deleverage.
City distribution center.
It's about 35 basis points of that deleverage and that's one where once we get that up to full run rate.
Expecting to see some relief from freight expenses were shipping from the center of the country now.
So again as we get to fiscal 'twenty five that that will be full run rate in helping us.
We've got some remodels that were doing to get some of our stores approximately 35 stores brand right and so that's in there. That's that's a step up from last year, that's costing us about 20 basis points.
And then there's the lapping of the 50 <unk> week is about 15 basis points. So I think just from a margin perspective. Those are some of the things that are dragging this year and that's outlined in that leverage point slide that we put together.
We turn to the following year.
Whether we get back to the.
Kind of the algorithm.
Yes.
The topline recovers and gets back to the growth that we've we've outlined of the low to mid single digit same store sales growth.
Yeah, the expectation would be to continue at 15% new unit growth into the future and so that's.
A little bit more of a drag on occupancy at least initially until you hit that full run rate.
But there's no reason to think that we won't get back to that algorithm.
If I could just add to the commentary around the algorithm.
I think we often use the algorithm term as an abbreviation for our same store sales growth.
If we went through the original algorithm it assumed.
10%, new unit growth with new stores doing $1.7 million.
And were 15% new unit growth with new stores doing double that.
It assumed exclusive brands would grow 250 basis points of year over the last two years have grown five basis points a year.
500.
500 basis points, a year, thank you or 10 points of penetration so.
We really wildly exceeded the outbreak and then if you look at E. P. S. Three years ago, we were at $2. This year, we're guiding to $5.
The algorithm would get you to 20% EPS growth.
Wildly over 20% EPS growth so.
Getting back to the algorithm would be a slowdown if you look at multiple year period.
We are accelerating other than the most recent year's comp so I do want to make sure that everybody on the call. It doesn't lose sight of the multiple levers we have to grow this business.
And how were over achieving on all of them other than comps for the last few quarters.
That's really helpful and I guess, what I'm asking.
Do you see a multiyear earnings reset after the strength you've delivered.
Or is there any reason that you can't get back to nice growth with 2020 for being the new base here.
I'll take that so Jim Watkins doesn't feel obligated to give out a 2025 guide as we've just had everybody digesting their 'twenty 'twenty four guide I think if we look to next year.
The two things we have a pretty high degree of competency.
<unk> will open 52 stores or maybe slightly more so we'll try to keep the 15% growth.
And we expect to continue to see exclusive brands continue to build whether that's two and a half or three points or four points.
The same store sales piece is a little bit.
More or perhaps more murky right. We've had incredible growth over the last couple of years, we've given a little bit of it back now.
You know my intuition tells me that will be back to low single digits mid single digits for fiscal 'twenty five.
You don't want a whole lot better in 12 months, when we're putting out that guide.
But if you're thinking about where the risk is where the beta phase.
We do have 100 stores upcoming in the next 24 months that will generate $350 million of sales and a $100 million worth of EBIT.
Regardless of what the comp is.
And maybe will be slightly lower than that or slightly higher than that but the new store engine is really building momentum.
And if you look at our total sales growth.
What we're continuing to see total sales growth for this upcoming year, because despite the fact that we're comping down 5% or slightly better than that or guiding to that for this year, we're still seeing.
Total sales growing.
And despite a minus 5% comp we're still assuming we're going to get to a $5 EPS number so.
Again, we feel pretty good about how we're positioned right now.
Yeah, that's really helpful. Thanks for walking through all of that best of luck.
Thanks, Ken.
Okay.
Our next question comes from the line of Janine Stichter with BTG. Please proceed with your question.
Hi, everyone I wanted to ask about the ecommerce business. It seems like it's a bit weaker for longer than we would've expected. So just wanted to understand if there's anything you might change there in terms of the strategy is it still a case of kind of prioritizing the stores business and and prioritizing profitability of E Commerce.
Could anything potentially change there and the strategy with maybe the advertising dollars and then along those lines just wanted to get your confidence and attorneys and keep him.
Yeah.
So the second part is also on E com.
Yeah.
Yes.
No change I mean, similar to how we don't chase promotions in our retail stores.
We don't think spending more marketing online is going to be EBIT accretive, we certainly could spend more and grow top line and.
Have it be EBIT eroding.
Yeah.
But that's just.
But where we tend to focus as you well know.
The profitability of the business and on growing earnings and not sort of.
A short term boost to the E Commerce channel in terms of the cycling of negative numbers I think we've been pretty consistent that it would be in the second quarter of fiscal 'twenty four we would see that business turn positive. So we havent been surprised.
If we'd been surprised at all the one thing we don't split out often is the difference between boot barn, dot com and <unk> dot com and the boot barn dotcom business is already back to flat, it's just being dragged down by shufflers dot com, which while that might be disappointing when people look at when investors look at it.
A negative ecommerce.
Sure.
That business isn't sort of our marquee brand, it's not strategic to us other than it's a it gives us the ability to be price competitive if we ever had to be.
So I think I think we're going to continue to operate that business.
As we have been I think our degree of confidence that it'll turn positive by mid to late second quarter is still pretty good.
And you know we are we continue to focus that part of the organization.
Lynn.
Building out capabilities for customers across channels and it's.
They've done some just incredible work.
The amount of shipments that are now shipped from our stores.
Versus a couple of years ago is just incredible and so about a third of our ecommerce business now being shipped from stores, which gives us the ability to put the best product that you could possibly imagine in all of our stores build the in store shopping experience and if it doesn't sell we can move the markdowns through the ecommerce channel. So.
I can't say enough about how well the digital team has been doing and I I certainly don't want to.
Spend unprofitable advertising dollars to to boost the sales line.
Okay, perfect and then a follow up on the free I know you said 100 basis points of benefit this year I think over the last few years, you've lost over 200 basis points from freight headwinds.
Should we expect that you get some of that back in fiscal 'twenty five or is there just kind of it sounds like you're not getting it all back.
I think about it thank you.
It's a great question Jeanine I think it's really going to come down to what where freight rates stabilize are that we're seeing container costs that are back to pre COVID-19 levels.
Again, I think <unk>.
Nine to 12 months from now or even six months from now we will probably have a better idea of.
We get some of that back in the following year in fiscal 'twenty, five, but we feel comfortable guiding 100 basis points of recovery for what we gave back last year and then we'll just have to see how the macro settles in.
Great. Thanks, very much and best of luck.
Thank you.
Our next question comes from the line of Jason Haas with Bank of America. Please proceed with your question.
Hey, good afternoon, and thanks for taking my questions.
Curious if you could talk about how new stores are performing in your newer markets, particularly the northeast I know that there's maybe some concern that the concept wasn't resonate.
Resonate with customers in the northeast So maybe you could tell us how those stores have been performing lately.
Sure sure there they are outperforming our new store model for sure you know historically we.
But our new store could do 1.7 or $2 million and we've updated that to three and a half and that $3 $5 million has proven to be true in.
Legacy markets, like Texas, and California, as well as markets like Pennsylvania, Ohio, Virginia, Maryland.
New York, New Jersey and.
Wow.
While it may seem too.
But conventional wisdom.
We are seeing new stores in that part of the country selling western product in equal proportion to.
The rest of the country. So it's not like we opened up a store on long island, and it's selling all genes in work boots, it sell in cowboy boots, and cowboy hats and.
We will be on par with the new store model.
On page eight of the AR.
Right.
Sorry on page <unk>.
It's in the deck someplace, but.
Page seven sorry.
So in summary, we.
We're quite pleased with new store openings in new Ingmar and our new markets.
And then while while Theres some concern often about well, what's the downside risk of opening up new stores, but we have 352 stores today and either zero or one or two lose money. So the downside risk is pretty low for us.
So what we're going to continue to expand the footprint across the country that will continue to give us more economies of scale continuing to build the brand.
And has a high degree of certainty that we'll get.
Between three and $4 million of additional revenue for every new unit that we open.
That's great. Thank you and then as a follow up I was looking at the two 5% leverage point for SG&A in fiscal 2024 is that a good leverage point to think about for like fiscal 2025 and beyond or.
Is it less than that because there's more investments.
In 2024 and in fiscal 'twenty 'twenty four.
I think that is a good number to use going forward.
If that changes.
We will update you on that but that's what we've been at historically, maybe it's a little bit higher.
But it's in line with where we've been and in expenses is something that were.
Constantly taking a look at and trying to improve on and maintain our cost conscious culture here.
The boot barn, and so we'll continue to chip away at it waves.
Ways that we can.
Save some of those costs.
Same time, we're going to continue to invest in the business and things that will provide us growth in.
You know into the future. So we'll keep you updated on that Jason.
Great. Thank you.
Thank you.
Okay.
Our next question comes from the line of Dylan Carden with William Blair. Please proceed with your question.
Thank you.
Just kind of getting back to the long term margin conversation.
Other way of asking that question, maybe you just numbers you've given.
The business over.
Yes, it's been for several years.
At which point you bet is 500 basis points of merchandise margin I think largely to private label penetration at that point in your history. You are kind of a 33 ish percent gross margin business.
I know theres, a lot of puts and takes between freight deleverage on occupancy but just.
Simple math gets you to 38, 39% gross margin is that kind of a structural level.
Of that line item at this point all else being equal.
Yes, I know youre guiding to 36 and a half.
I guess the guidance, but yes behind the Hood I guess yeah.
And in fiscal 'twenty, two where we did get that 38 full spectrum.
For the year.
I think it's.
Returning to same store sales growth and leveraging some more of those buying occupancy and distribution center costs and marching back towards that 38 and towards 39 is what we have in our sights and how were planning the business internally.
Excellent.
Sorry that offhand comment on Remodels I think you said 35 remodels in the current year or maybe you did last year is that something is that a number that's bigger than what it's been historically.
Yes, I know youre kind of putting more into the boxes to warrant maybe some retrofitting, but is that something go forward. So it's yeah, secondly increased accelerate price comp, let me comment on that.
Yeah. So so that we won't do a certain number of relocations and two of them.
Within our market and that will drive some some comp sales and typically drives a pretty nice comp tailwind for us when we do remodels will often.
Expand the size and if we can get a bigger heartburn than out of it then you will see some growth a lot of the Remodels. We're looking at now are the stores that have been in the chain for.
10 years, or so and nida or longer.
Our refreshed and so theres not necessarily a comp lift that we planned on those stores, but it's something we're going to do to get them brand right and.
Looking nice and into the future and functioning the way that we need them to as far as whether that's a new number. It is something that we started last year and in a smaller degree.
I would expect we'll continue to look at 35 ish stores.
As we go into the next couple of years as we.
Try to get all of those stores.
Right.
Yeah, if you think about.
Over 150 stores over the last several years those are all in great shape.
The other stores prior to that.
Yeah.
A lot of those needs that need some work and so we're going to take.
Kick those off.
Can you kind of answered my next question so as far as magnitude round numbers 150 stores 75, a year kind of takes you.
Four years, or so that kind of work through those.
More or less what you are saying that.
Yeah, Yeah, maybe a little longer in the number this year is around $15 million between those those remodels and I think we have five relocations in the budget for the year.
Awesome. Thanks, a lot guys.
Thanks, Tom Thanks, Don.
Our next question comes from the line of Corey Carlo with Jefferies. Please proceed with your question.
Hi, good afternoon, and thanks for taking my questions and I don't know if Greg is around there, but congrats to Greg if he's there.
His retirement announcement.
Thank you Corey.
Okay.
So.
I wanted to ask on the distribution center that you built in Kansas City could you, maybe just remind us number one about what your current distribution fleet looks like and Jim you mentioned that you are adding around 100 stores or so over the next two years. He added 45 in the last fiscal.
So.
Clearly there is theres a lot of new stores that are ramping up do you feel like you now have the capacity built out to be able to support the new store growth ahead, and just remind us of some of the benefits of this new DC that you built.
Sure. So on the first piece that the current distribution center footprint.
I'm going to oversimplify slightly in Wichita, and we have a fulfillment center that takes care of ecommerce predominantly.
And historically, we've had a distribution center.
In California relatively close to the office that takes care of stores almost exclusively so little bit of a blurred line. We're shipping some e-commerce, there, but let's assume that the Fontana, California distribution center in stores only.
That D C sort of was hitting capacity when we knew this was coming so we had a we had a multi year plan to build the Kansas City distribution Center.
And what actually happened was our sales grew so fast that we pushed Fontana two it's almost it's breaking feet last year.
And so Kansas City is coming online.
As originally scheduled but our sales line is sort of way ahead of plan.
That with those two distribution centers, Montana, Kansas City that will service our store base.
Again for simplicity sake split the country in Hampton Fontana will take care of the Western States in Kansas City will take care of the Eastern States, we should be good from a distribution center capacity standpoint for four or five years.
If we use assumptions of 15% new unit growth and a low to mid single digit comp and exclusive brand penetration continuing to build that that's the way we've modeled it the next one would come on in.
Call It 2000.
28, or 29 or something like that.
And there it would be it would be even further east to take care of the stores that have been built on the east coast.
And the benefits are well, one we just needed capacity too.
And in this particular case, the Kansas City distribution center will be able to do some value added services that are presently done in the stores now there'd be diamond the D C, which is a bit more efficient use of labor.
And has the store associates, our store partners as we call them.
Focus primarily on customer service and sales driving and that sort of product floor ready.
Of course, because we'll have two distribution centers and will be closer to each of the stores that the freight expense outbound to our stores will be lower.
Probably we'll get there in a more timely fashion.
And.
And some of the other sort of familiar or typical benefits you'd get from having a network that's out closer to <unk>.
Endpoints are your stores in this case.
Got it and then just what's the financial impact associated with opening that distribution center.
Is most of that.
In the rearview at this point I think that there is some impact I believe thats embedded on the slides you talked about in your prepared remarks as well in the guidance can you just remind us what that is.
Yeah. So we spent about $20 million on the distribution center throughout last year, getting it up and up and ready and we'll spend another eight in this coming year and so we will have.
This is Paul.
<unk> expense of that capital is starting to depreciate threw in in this fiscal year and into next year.
And we will see that and that buying occupancy and distribution center line labor is going to be coming online here shortly and so that'll be in that.
And the gross margin number also and then there are some in SG&A, a little bit related to the I T and supplies related to that facility.
Okay, Great and then just lastly from me on inventory.
Sales are.
Obviously projected to be up comps are projected to be down.
But it looks like inventories also.
So could you just maybe talk about how you feel about the.
The relative positioning of your inventory at present, maybe how you expect that to.
Trend throughout the rest of the year.
Sure Cory it's Greg.
Take that because.
That's part of my line of sight in my last month or so.
So the 24% increase in inventory a little more than half of that is related to the new units that we've added over the last year, so that 15% unit growth as well as the new stores that we've got planned and kind of the first half of the year.
And then about 30% of the growth is related to inventory in our distribution centers that supports our exclusive brand.
So again as we grow brand penetration, we need to house more of that inventory in those two distribution centers.
And then the balance of the growth is related to a comp stores right and.
Our comp store cost inventory dollars are up 8% year over year.
And our units are up about 3% right. So that that delta, 5% is the inflationary impact.
Years price increases.
If we look at our inventory at the end of the.
Of the year and we look at forward weeks of supply based on our guide we've got about 30 weeks of supply and that compares favorably to the pre COVID-19 years of fiscal 'twenty, one 'twenty and 19 windows weeks of supply were $36 34, and 32 and I'm looking at slide 13.
The supplemental deck so we.
We feel very good about the inventory levels and we feel very good about the quality of that inventory.
As we look at again on that on that same slide on the right hand side, we've grown merchandize margin for.
Many many years and we've always kind of curious this level of inventory. So I don't think anybody should be concerned about that 24% inventory growth.
Great. Thank you so much and best of luck.
Thanks.
Our next question comes from the line of Sam Poser with Williams trading. Please proceed with your question.
Good afternoon, and thanks for taking my question.
So the freight.
On the freight impact on gross margin how much of the inventory that you currently have.
As it has that higher freight cost attached to it right now how long is it going to take for that.
Great to roll through the inventory. So then you can take full benefit of the lower rates.
So we turn our inventory twice a year. So it takes about six months to get that through.
Through the peak freight costs.
We're coming in last summer and then they've been coming down since then so.
We're mostly through that Sam we thought we'd get through more of it in Q4, but we'll have a little bit coming into Q1, but we've guided Q1, yeah flat.
So from from a freight expense. So I think we're mostly through that we just thought we'd get through you get some of that capitalized great additional capitalized freight through the P&L in Q4 and with the sales volume it just didn't happen.
And then you mentioned that in the fourth quarter you reduced your.
Marketing spend and my question is when you look about the pieces of like what is your ROI on marketing when you look at the discretionary, especially the womens part of the business is at that.
Could you be doing a you know could you be doing more marketing and theoretically you're getting a disproportionate return on investment in the parts of the businesses that aren't working as well.
As others are even in parts of the businesses that are working well couldn't you get them working better.
As you know by <unk>.
Evolving marketing rather than cutting it when business gets tough.
You see the color good luck.
Yes.
I think that the age old question around marketing Sam I mean, it's it's if it were.
EBIT accretive and we could prove that out.
We would.
Certainly just spend more marketing get more sales as long as the flow through in the sales exceeded the marketing expense that we invest it.
Yeah, our marketing budget, it hovers around 3% of sales a year.
We've grown from roughly $200 million to $1 $8 billion in 10 years. So I think the marketing is helping us grow at this current budget I'm not sure of doing more.
Would be EBIT enhancing or just yeah.
Spending money to to get an artificial lift someplace, particularly online we do know the ROI on our online marketing and essentially what we do there is we spend to the point, where the last dollar just about break even at least.
Theoretically that's how we think about it.
I know a lot of companies spend way past that under the notion that the lifetime value is going to be higher et cetera.
I don't personally subscribe to that theory.
So we from a from a direct marketing if you think about our digital marketing.
We were pretty aggressive there and if we get a higher return on ad spend.
We'll spend a bit more than it is the return it's been comes down we'll ratchet back always trying to again at least kind of theoretical.
It says.
That last dollar be just above breakeven.
Just one last thing.
Is like what percent of that 3% what what portion of that is directed to the to the to the ecommerce business versus club brand marketing sort of longer term efforts.
Roughly 10% is probably.
Earmarked for digital.
Marketing specifically.
We're also hopeful that all of our marketing drives customers to bolt channels of course, but in.
In terms of the split between digital spend in traditional spend we tend to believe pretty strongly in some of our traditional media channels and continue to invest there.
I didn't mean that I bet against your E Commerce business, let's say against that that marketing against the e-commerce versus.
Versus your brand overall brand marketing I mean cause.
You can do overall overall brand marketing digitally too so I'm really saying like of that sort of that great part that you want to break even on which is against your ecommerce business.
How much what percent of the total spend is that.
I'd have to get back to you on a specific number I mean, it's it's north of 10%.
Alright, thanks very much appreciate it.
Thanks Sam.
Our next question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Hi, guys. This is Jack on for Jeremy Thanks for taking our questions.
So the guidance implies about 15% unit growth in 2020 for FY 'twenty for can we assume that given your comments about of about one opening per week, you'll follow that run rate of about 10 to 12 openings per quarter, and then any color on average construction lead times that.
Would be great.
Sure.
Yeah.
They're roughly phased at 13 a quarter.
And the lead times look where we're experiencing the same thing that other retailers that are adding a lot of stores are experiencing I guess there aren't many other retailers doing this but.
We kind of just manage it into the pipeline and.
We see stores that get delayed from time to time, we try to have some conservatism in the lead times that store will get developed.
But sort of hats off to our real estate and construction department.
Because we've been hitting our numbers pretty closely for.
A few years now.
In fact, I think there's a page in the deck on that as well you are right to call out there it's been consistently double digits for several quarters now.
Feel very strongly that we'll hit at least 13 stores in the first quarter of this year.
We opened two stores today actually.
<unk>.
So.
Again, if you're trying to phase it or build a model I would I would put them in roughly evenly throughout the year.
Yeah.
Great. That's great color and then just kind of switching back to the inventory discussion you guys noted you feel pretty comfortable with the inventory levels, just drilling down a little deeper or are there any specific categories, where inventory is a little a little out of balance or.
Just any color you could give a category wise.
Sure Jack it's Greg.
The two categories, we've talked about and we're getting those into line, but there are still probably a bit heavier than we'd like.
Is in the work boot business, that's a very functional area the boots and work boots don't tend to come in and out of cycles or anything like that they tend to be.
Evergreen if you will so we don't have any concern about that and we're getting that in line. The other category was mens western performance foodservice, our rubber soled boots that we were a bit heavy and we've continued to make really good progress on it.
In both of those merchandise categories, we expect to be on kind of our merchandise plan based on our expected sales volumes by middle of this year.
Great. That's all for me thanks for the color guys.
Thank you.
Our next question comes from the line of Jay sole with UBS. Please proceed with your question.
Great. Thank you so much just curious about band it.
Jim can you talk about what's consumer experiences when they use band it and then do you have other ideas in mind for how to use AI to enhance the business. Thank you.
And so it just rolled out this week. So we don't have a lot of.
Use cases, yet, but it is [laughter].
Pretty amazing probably ever been in its call us experiment experimented with chat GPT at some point.
And did you crazy silly things, but when you ask it for.
Sort of styling advice or why is the composite toe different than a steel toe and it gives you sort of it.
If explanation in well written prose, it's just it's remarkable.
So that's the consumer facing piece it's also.
You're going to be used to help sales associates or our sales partners drive more sales and then if you'd think about.
Yeah. The next several levels of what we can do with it.
First what will the notion of it being available in the store drive store traffic I don't know maybe.
Will it help drive conversion, where otherwise somebody would walk out empty handed because now they can get sort of real time counsel and perhaps even build their basket because theyre getting increased.
You know advice, saying, Hey, this belt would go great with that jeans kind of thing.
If you continue to extend it if it is helpful for.
New store associates.
It helps us grow stores may be even more quickly because now we can hire sales associates that are have this great Crouch.
They can use their handheld device to at least appear like they have more knowledge more experience.
I can keep going right then if we look at the logs of what they are typing into their handheld.
We can understand where their knowledge shortfalls are.
And Theres, probably 10 other use cases that it can go through but we're so far over time, then I'll stop but needless to say we're excited about this we do feel like we're first to market certainly within the western industry, if not the retail market.
In general.
And we're not even a digital native company, we're an analog native company, but first in market with AI I get that.
But we are pretty excited about it.
Well it sounds great. Thank you so much.
Thank you.
Our next question comes from the line of Mitch comments with Seaport Research. Please proceed with your question.
Yeah, Thanks for taking my questions.
Chairman, ladies boots, and apparel, you referenced the tough multiyear comparisons.
When do those get easier is that what youre looking for in terms of that business turning in.
Starting to perform more in line with the chain as a whole and I have a hopefully a quick follow up.
I think we have another.
Two quarters before we start to cycle negative business.
The ladies side.
And.
Look we're always looking for growth and we have a rock solid team of merchants on the ladies boots and apparel business. So they are bringing in new vendors, they're expanding their assortment. There also manage their inventory quite closely so we don't get overextended didn't.
And our sales environment, that's out there in that particular category.
But we just had we had so much growth and and perhaps even drove.
Industry wide retail trend towards western based on the combination of our marketing and our product assortment that we're now we're up against that and you know there was a time that you have to play a little defense and.
Just be.
A little bit more prudent, but I think within the next six months or so we'll see those businesses start to come.
Come back around.
Okay, and then on California, and the weather I think he's I think he mentioned that there were two districts in particular that were.
Most severely impacted including the central Valley, where they top down I think you said mid teens or down 15% in the quarter I don't know, how many stores, but that would be but could you say what the impact that was on four key accomplish that as much as 100 basis points.
And then also can you say, what's factored into the outlook going forward I know, there's been some talk about Sierra Nevada, snowbelt that might make the central valley challenging through the summer and all of that so.
And we called out two districts of 30, it's probably roughly 10% of store sales because they're they're bigger.
Yes.
Yeah.
Yeah, it's 8% of our total business are in those two districts, where 10% of our store sales.
And if they're down 15% rates, it's one of F 150 basis points of comp erosion. If you take a negative 15 on 10% of the business.
Those districts had been down for 12 months now just the AG pressure that Jim was talking about related to the drought and so as we begin to cycle that in the next quarter, we're modeling them to be.
Less negative than what we've seen in the last 12 months.
Okay. Thanks, guys. Good luck.
Thank you.
Yeah.
And our next question comes from the line of John Lawrence with Benchmark Company. Please proceed with your great. Thanks, guys I know, it's running late be quick here.
Jim would you comment a little bit about the loyalty member.
How big is that business now what's the attributes of that Guy that has a loyalty card how long how much more is the shopping with you.
Then on average.
So it's a great question, there's over 7 million $7 $1 million I think last year was $5 8 million.
Board members.
It's.
A little bit more than two thirds of our sales dollars go through that.
Graham So we then get.
Who's buying how often how much they're spending they are all of the metrics you perhaps might expect their average basket is higher their frequency is is more frequent.
Presumably they're more loyal to us and shopping competitor is less frequently.
And the stores just do.
A really great job of introducing customers to that program.
And.
It's been it's been a critical asset for boot barn, now for a dozen years or even longer.
Here.
Great.
Good luck, thanks, and Greg Thanks for all the help.
Youre welcome. Thank you.
And we have reached the end of the question and answer session I'll now turn the call back over to Jim Conroy for closing remarks.
Well. Thank you everyone for joining the call today I'm sorry went so long we look forward to speak with you all on our first quarter call.
Take care.
Yeah.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
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