Q1 2024 Boot Barn Holdings Inc Earnings Call
Good day, everybody and welcome to boot barn, Holdings' first quarter 'twenty 'twenty four earnings call. As a reminder, this call is being recorded I would now like to turn the conference over to your house.
Mr. Morris, the Dovish senior Vice President of Investor Relations and financial planning. Please go ahead Sir.
Thank you good afternoon, everyone. Thank you for joining us today to discuss Dupont's first quarter fiscal 2024 earnings results with me on today's call are Jim Conroy, President and Chief Executive Officer, and Jim Watkins Chief Financial Officer.
Today's press release supplemental financial presentation is available on the Investor Relations section of Dupont's website and through our Dot com.
We have to we had this call a recording of the call will be available as a replay for 30 days on the Investor Relations section of the company's website.
I would like to remind you that certain statements. We will make in this presentation are forward looking statements. These forward looking statements reflect barns judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting your business.
Accordingly, you should not place undue reliance on these forward looking statements.
For a more thorough discussion of the risks and uncertainties associated with forward looking statements to be made during this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our first quarter fiscal 'twenty 'twenty four earnings release.
As well as our filings with the SEC referenced in that disclaimer, we do not undertake any obligation to update them.
Forward looking statements, whether as a result of new information future events or otherwise.
Now I'll turn the call over to Jim Conroy Boot barns, President and Chief Executive Officer, Jim.
Thank you Mark and good afternoon, and thank you everyone for joining us on this call I will review, our first quarter fiscal 'twenty four results discuss the progress we've made across each of our four strategic initiatives and provide an update return business.
Following my remarks, Jim Watkins will review our financial performance in more detail and then we will open the call up for questions.
We're very pleased with our start to the fiscal 'twenty for a year in our first quarter results. During the quarter total sales increased four 9% driven primarily by sales from new stores and in the last 12 months, partially offset by a low single digit decline a negative two 9%.
Consolidated same store sales.
We feel great about this performance given that the business recycling, plus 10% and plus 79% growth in consolidated same store sales in the prior year and two year ago periods.
Additionally, we are quite pleased with the sales results both in stores and online with both businesses outperforming our guidance for the quarter.
In addition to strong sales performance during the quarter, we achieved 80 basis points of product margin expansion, driven primarily by more than 600 basis points of growth in exclusive brand penetration.
The strength in sales and margin combined with solid expense control drove earnings per diluted share of $1 13 during the quarter compared to a guidance of 85 cents and.
I am extremely pleased our start to the year with the team's execution continues to deliver both top and bottom line results.
I'll now spend some time discussing each of our four strategic initiatives.
Let's begin with expanding our store base.
New stores continue to add to our topline growth and outperformed our expectations with our acceleration of new store openings, we have been able to open 86 stores over the last two years.
With the opening of 16, new stores in the first quarter, we ended the quarter with 361 stores across 44 states.
I'd like to thank the real estate construction visual merchandising and store operations teams for their collaboration and persistence and getting these new stores up and running successfully.
Our new stores continue to pay back and fewer than 18 months with strong average unit volumes in the first year and remain confident in our ability.
Long term stated goal of 900 or more stores across the United States.
Moving to our second edition of driving same store sales group first quarter consolidated same store sales declined two 9% with retail stores same store sales declining one 8% and E Commerce same store sales declining 10, 8%.
Notably comps improved sequentially by month throughout the quarter in both channels.
And while still negative the sequential improvement in store comps was driven by sequential improvement in average transactions per store.
From a merchandise department perspective, nearly all major merchandise categories showed sequential improvement in the first quarter from our fiscal year end.
Mens western boots, and apparel achieved low single digit positive comps, ladies boots and apparel declined in the quarter, but showed sequential improvement from year end, while cycling strong double digit comps in a year ago and two year ago periods.
From a geographic standpoint stores in the north and east regions showed a slight decline in same store sales have performed better than chain average.
The south lagged the chain average with a mid single digit decline.
And the west performed in line with chain average.
Okay.
From a customer perspective, we are very pleased with the growth. We continued to see in our customer base with seven 5 million active members in our B rewarded loyalty program as of the end of our first quarter.
This represents growth of 23% from $6 1 million members hasn't it.
At the end of our first quarter of fiscal <unk>.
Over the past few years, we've used our customer segmentation as a foundation to strategically extend the reach of the brand and attract a broader range of consumers.
Historically boot barn was more narrowly focused on the western and work customers over the past few years, we added a country lifestyle segment as well as there's so much smaller segment targeting women seeking western inspired fashion.
Okay.
Our customer count is quite encouraging as we are seeing both the ongoing development of the newly added segments. While we are also expanding the size of the core western and work customer groups.
Similarly, we are seeing healthy group growth in customer count in our legacy stores, while also capturing a considerable number of new customers as the store portfolio builds across the country.
Yeah.
Understanding of the strength of the brand with our customer base I would like to spend a minute highlighting a recent customer survey we performed.
First the survey results further confirmed that the elevated average store volumes, we have seen over the last couple of years, we're not driven by transitory fashion trend as more than 75% of customers, who are purchasing with us because western and work products as part of their everyday lifestyle and wardrobe.
Second the Yellowstone television show does not seem to be a factor behind the significant acceleration we saw in sales in the last several years with only 4% of customer responses, citing Yellowstone is there a reason for wearing our product.
Lastly, our customers' propensity to shop with US continues to be very high with over 90% of customers, either very likely or extremely likely to shop at boot barn again.
Over the next 12 months.
While we acknowledge that there is a sample bias in the server responses that we receive.
We are pleased to see that the results are consistent with our CRM data regarding new customers and their shopping preferences.
For more details on the survey results. Please refer to the supplemental financial presentation that we released today.
Moving to our third initiative strengthening.
<unk> leadership.
In the first quarter our E Commerce same store sales declined 10, 8%, which was an improvement from a decline of over 18% in our fourth fiscal quarter.
Notably the boot barn brand did see positive sales growth for the quarter, but not big enough to offset the weakness in the shufflers and country Outfitter brands.
We continue to believe that our ecommerce business back to a positive growth trajectory beginning in late September early October when the last year comparisons become easier.
Despite the slowness in ecommerce sales we are quite pleased with the many achievements we are seeing from an omnichannel perspective first.
First the team has greatly expanded the digital influence in our stores, we have rolled out of band it which adds artificial intelligence to our customer facing shopping tablet, helping customer to get expert styling advice in store.
In addition, we've equipped our store associates and call center operators with the same artificial intelligence capabilities to enable all of them to provide much richer product knowledge and shopping recommendations.
We've also made great progress from an e-commerce fulfillment perspective today, we have the ability to ship most e-commerce, nearly every store where any distribution center.
This will enable us to maximize selling margin I'm moving through the limited amount of clearance that we have system wide at a less aggressive markdown.
It will also help us to minimize shipping time and cost by shipping orders geographically closer to customer demand.
Now to our fourth strategic initiative exclusive brands.
During the first quarter, our exclusive brand penetration increased over 600 basis points to 38%.
This is our third consecutive quarter of greater than 500 basis points of year over year group compared to our historical stated goal of 250 to 300 basis points of growth.
We now expect to grow exclusive brand penetration for the fiscal year by 500 basis points to 39% themselves.
With exclusive brands, providing an incremental 1000 basis points of margin compared to third party brands. This penetration growth is added meaningfully to our margin profile.
Yes.
To support the substantial growth, we have seen in store count and in our exclusive brand business over the last couple of years, we recently expanded our supply chain capability by adding an additional distribution center in Kansas City, Missouri.
As a reminder, most third party fulfilled directly by our vendors to our stores and does that pass through a blue parts distribution center. However, when it comes to our exclusive brand product, we warehouse that merchandise in our Dcs and replenish the store demand ourselves. We are pleased to report that the new DC facility opened.
On time and is operating smoothly as we begin to ramp up the throughput up goods over the next few months.
I want to thank our entire supply chain and I T teams for their world class execution, and getting the new D C up and running without any major disruptions.
Turning to current business on a consolidated basis, our July business declined, 0.5%, which was an improvement on our first quarter a slight deceleration from June .
Our retail store same store sales performance remained positive in the month of July while ecommerce sales declined 11, 24% for the month.
While it is exciting to see the tone of business begin to improve and.
It has also proven to be somewhat unpredictable with weekly comp performance ranging from negative 7% to positive 6% over the past four months.
Accordingly, we have attempted to capture this volatility in our sales guide for the balance of the second quarter, which Jim Watkins who will provide later on this call.
Looking beyond the comp sales growth, we continue to feel great about the new store performance and the pipeline of new locations for the balance of the year.
We're also quite pleased with our exclusive brands, which saw an extremely strong growth in penetration for July that has contributed to a solid product margin.
In summary, while macro uncertainty persists, we feel we are well positioned to navigate through nearly any environment that comes our way.
I'd like to now turn the call over to Jim.
Thank you Jim.
In the first quarter net sales increased four 9% to $384 million.
As Jim mentioned, our sales performance benefited from new stores opened during the past 12 months, partially offset by a consolidated same store sales decline of 2.9%.
Apprised of a decrease in retail stores same store sales of 1.8% and a decrease in e-commerce same store sales of 10.8%.
Gross profit increased 3% to $142 million or 37.0% of sales compared to gross profit of $138 million.
Or 37, 7% of sales in the prior year period.
The 70 basis point decrease in gross profit rate resulted from 160 basis points of deleverage in buying occupancy and distribution center costs.
We offset by a 90 basis point increase in merchandise margin rate there.
The increase in merchandise margin rate was driven by 80 basis points of product margin expansion, resulting primarily from a 630 basis point increase in exclusive brand penetration and a 10 basis point tailwind from lower freight expense as a percentage of sales.
Yeah.
Selling general and administrative expenses for the quarter were $96 million or 24, 9% of sales compared to $85 million or 23, 3% of sales in the prior year period.
The increase in SG&A expenses compared to the prior year period was primarily a result of higher store payroll and store related expenses associated with operating an additional 50 stores over the prior year period.
And corporate overhead costs in the current year.
Okay.
Income from operations was $46 million or 12.1% of sales in the quarter compared to $52 million or 14, 3% of sales in the prior year period.
Net income was $34 million or $1 13 per diluted share compared to a $39 million or $1 29 per diluted share in the prior year period.
Turning to the balance sheet on a consolidated basis inventory increased 6% over the prior year period to $566 million.
This increase was primarily driven by new store inventory and exclusive brand growth partially offset.
By an approximately 9% decrease in average comp store inventory.
We finished the quarter was $17 million in cash and $26 million drawn on our $250 million revolving line of credit.
Okay.
Turning to our outlook for fiscal 'twenty for us.
Outlined in our supplemental financial presentation, we are raising our guidance for both the second quarter and full year.
As the presentation lays out the low and high end of our guidance range for both periods I will only speak to that.
In my following remarks.
As we look to the second quarter, we expect total sales at the high end of our guidance range to be $379 million.
We expect the same store sales decline of 3.5% with a retail store same store sales decline of two 5% and an e-commerce same store sales decline of 9%.
We expect gross profit to be $134 million or approximately 35, 4% of sales.
Gross profit reflects an estimated 50 basis point increase in merchandise margin, including flat freight expense year over year.
We anticipate 180 80 basis points of deleverage in buying occupancy and distribution center costs.
Our income from operations is expected to be $38 million or 10% of sales.
We expect earnings per diluted share to be 90 cents.
As a result of our first quarter performance and our updated estimate for the second quarter, we are raising our full year guidance.
Our guidance for the second half of the year remains unchanged.
For the full fiscal year, we now expect total sales at the high end of our guidance range to be $1.75 billion, representing growth of five 5% over fiscal 'twenty, three which as a reminder, was a 53 week year.
This compares to previous guidance of $1.72 billion.
We expect same store sales declined 3% with a retail store same store sales decline of three 5% and flat E Commerce sales.
This compares to our previous guidance of the same store sales decline of four 5% with a retail store same store sales decline of five 2% and E Commerce same store sales growth of 1%.
We now expect gross profit to be successful.
Million dollars or approximately 36.9% of sales.
Gross profit reflects an estimated 160 basis point increase in merchandise margin, including a 100 basis point improvement from freight expense.
We anticipate a 150 basis points of deleverage in buying occupancy and distribution center costs.
Our income from operations is expected to be $223 million or 12, 7% of sales.
We expect net income for fiscal 'twenty for it to be $163 million and earnings per diluted share to be $5.35.
We also expect our interest expense.
To be $3 $2 million in capital expenditures to be $95 million.
Now I would like to turn the call back to Jim for some closing remarks.
Thank you.
We're quite pleased with our financial performance during the first quarter and are looking forward to the balance of the year.
I do want to thank the entire boot barn team for their hard work and briefly acknowledge some well deserved third party recognition.
Every year, Newsweek conduct an independent consumer survey and assembled a list of America's best retailers.
The assessment measures and our customers view on product assortment.
Our service store design and merchandising as well as a few other factors.
For 2023 boot barn tapped that list with the highest score of any company across 39 different categories of retailing.
A heartfelt thank you to the entire team nationwide for working so hard and forgetting the accolades they all deserve congratulations.
Now I would like to open the call to take your questions Cherie.
Thank you.
We'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like three move your question from the queue.
And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star. He is how our first question is from Matthew boss with J P. Morgan. Please proceed.
Great Thanks, and congrats on another nice quarter.
Thanks, Matt.
By about two <unk> full points.
Within the merchandise hierarchy mens western boots had some nice sequential improvement men's western apparel had some nice sequential improvement both of those turning positive.
And ladies western boots.
Negative.
By about 700 basis points. So there was a number of different factors, whether you're looking at it by merchandise category.
Or by channel four by geography within.
The store is business.
In terms of looking forward on the guidance piece I'll turn it over to the other gym.
<unk>.
So that the sales assumptions for the second half of the year are unchanged and we've left.
Largely left August and September unchanged as as well, we did increase the store sales a little bit and decrease e-commerce sales a little bit just based off of what we've been seeing in the business over the last four weeks.
So August and September are planned or minus 4% in stores and E. Commerce for August look similar to July with September to negative single digits.
And then just as a reminder, you know kind of recapping from the last call you were really using the sales volume from.
February March and April and projecting the sales for the balance of year using historical weekly sales curves and when we were contemplating the guide for this quarter. We took a similar approach looking at getting the most recent four weeks for the for the balance of this quarter and can also looked at it and burying time period.
<unk> and we got a similar spot regardless of which this time for us we used.
Okay. That's great color and then maybe just to follow up on new stores that you cited can you touch on recent productivity that you're seeing from some of your newer store belts, maybe a cross region and just could you elaborate on any key structural changes that you've made to the business that support now the higher mid teen store growth.
Sure the new store productivity as in line with the three and a half million dollar new store sales. So we've been calling out recently and.
Mad as you fully recognize that is.
Nearly double what we originally had five <unk> <unk>.
And a longterm algorithm.
In terms of sort of the infrastructure changes, we do tend to run pretty lean <unk>.
We have added one real estate dealmaker that sits on the east coast to help develop that part of the country.
We continue to use an extensive broker network.
We've added a couple of project managers of course.
And then within the field organization you we have some a few more people working in visual merchandising that help.
With the in store setup it cetera.
And I think maybe even more than <unk>.
Add to the organization, we've changed our process quite a bit where.
We have a really solid.
Onboarding and training program for new store managers, and new teams within a new store.
As soon as it became apparent that we weren't always going to be able to transfer.
An assistant manager to promote them to be a store manager to another part of the country, we really relied on the H R team in the store ops team.
To figure out a way.
External talent and sort of teach them the boot barn methods in the boot barn culture and that has worked extremely well, we we continue to feel.
Very optimistic about our new store openings. Their performance are pipeline are topside target of at least 900.
And we'll just continue to kind of stamp out what is proven to be a working model.
It's really helpful call our best of luck.
Thanks Man.
Our next question is from Stephen Cohn with city. Please proceed.
Great. Good afternoon, Thanks for taking my question.
I wanted to follow up about your commentary regarding some volatility and the comps bye week over the last two months how much of that is just whether we know it's been hot in this house I'm curious to your perspective on that and I guess has there been anything changing for consumer purchase activity, whether it's potential trade down or anything of that nature.
That'd be helpful.
Steve I I would submit that it's just been difficult to get it down to a particular.
External factor.
We've had extremely hot weather as you've pointed out.
Mmm that didn't necessarily always correlate to tupper business.
We've had some great concerts come into town in some in some parts of our <unk> of the country that have spike business. Conversely, we've.
Nursery big concerts, the L Y period that have brought that <unk> does this down.
So we we we felt it was important to call out because we do feel good about the president tone of the business, but it has been.
A word that's been used by other public companies reporting recently is choppy, it's been a little choppy.
When we were trying to lay out guidance for the second quarter. We wanted to just kind of take note of the fact that you know.
June and July were Green last week in July wasn't so great. So, let's just kind of build all of that or hope to build that uncertainty into the the guide for the balance of a quarter and for that matter for the year.
Okay I appreciate that hotel than that question for Jane Watkins just on the gross margin outlook. It doesn't sound like much has changed but I noticed in the second quarter I guess freight still expect it to be you know flat year over year. So it sounds like that freight benefit is largely gonna be back have waited is that fair.
That's right yeah, the the freight and again this is consistent with what we were seeing password reported the first half of this year would be kind of flat and then we'd really see that benefit pick up as we get into Q3, and Q4 and pretty significantly to get us to.
100 basis points of.
Tailwind on the full year.
Okay. Thanks, Thanks very much.
Thanks to you.
Our next question is from Max.
With television talent. Please proceed.
Hi. This is Bradley came to sit in on for Max So first sticking with gross margin Jim Watkins can you speak to wear your mark down a percentage of goods is today compared to pre pandemic and then how do you expect that the trend ahead is this sort of.
Normalized state now or could they fluctuate higher or lower Ed.
Yeah, Great Great question, the the Mark down percentage of sales is very much in line with where it was pre pandemic and again in the last couple of years. We we saw historically low mark down percentage, but it's it's back to where we we've seen it historically over the years pre pandemic and we <unk>.
Checked that to stay in a similar places as we move throughout the year and going forward.
Great and then Jim Conroy footwear.
<unk>, we're mix over the past few years has declined to 47% in the last fiscal year from 52 to 53 per cent in a few years prior to the pandemic. What do you attribute that declined to and what do you think the implications of that next shift could be and do you think footwear will continue to trend lower overtime. Thanks guys.
Sure Great question.
I guess I tend to be more glass is half full I. It's.
More as because it's a per cent to 100, we've had some businesses, most notably ladies apparel grow considerably and while ladies apparel has been under pressure recently, we had a year plus.
Screw roughly 100 per cent.
And of course, when one category grows so much you just pushes the share of the remaining businesses I need to add to 100 down a little bit.
I think we'll see ebbs and flows over the next few years I don't think this is a a ongoing training.
Way or the other that <unk>.
Five years from now footwear will be 40% five years from now will probably roughly 50 50 again on either side of 50 50.
In terms of margin profile, there's almost nothing to read into that I mean, the margins across the businesses are pretty similar between footwear and apparel.
There are some.
Mm less meaningful difference is once you get further into the merchandise hierarchy, but if you're just looking at the split between footwear and apparel. It doesn't really change the the margin profile of the business.
I I think I've already give me one or two more sentences on that more anecdotally.
<unk>, we have broadened the definition of what boot barn mean looks.
Looking a little bit outside of the core work in western customers.
And.
Reaching out to customers that might be pin generally interested in a brand like boot barn, I think it's an easier first purchase for them to enter the brand with apparel and then over time, they may invest more into the higher ticket categories like footwear.
Great. Thanks, guys best of luck.
Thanks Bye thank you.
Alright next question is from Jason has with Bank of America. Please proceed.
Good afternoon, and thanks for taking my questions. So I wanted to follow up on the E. Commerce business. I was just curious if you could provide a little bit more color on what is going on with the shepherds business. It sounds like that's been the biggest drag it makes for a couple of quarters. Now. So just curious why that business has been softer and I know the compares will start to get anything.
They'll start to laugh this but I'm just curious what what you're doing if anything to try to lessen those declines.
Sure Great question.
The shepherds business has has two dimensions that have challenged their top line both traffic.
Conversion have come down.
So we are you know we're trying to work on anything we can internally to stem the tide on conversion for sure is there something about the site the setup et cetera.
From a traffic perspective.
About half of the traffic too shufflers is traffic.
So and we have a very.
Algorithmic view of how we go out and and drive.
Top of final traffic to our site, which is we hold ourselves to a profitable return on AD spend metric.
So once we lock in that return on AD spend if traffic is down while we could.
More and improve traffic.
It would be EBIT ruining so we just don't do it I mean, we we we behave we really look at the bottom line contribution that if if the next customer is gonna be an unprofitable purchase we won't go after them.
So we are certainly looking to try to find ways to improve that business.
I think the other dimension of course is.
Has 360, plus billboards around the country, Yeah, where we think that business will grow over time.
There are other players that play in the commerce business. They are always taking share, whether they're new entrants or vendors et cetera.
But yeah, when we look at the.
The full portfolio of the company.
With.
While we're in Omnichannel business, we clearly prioritize the 90 per cent of the of the sales that come through the stores.
And that strategy has worked for us and as we start to know C e-commerce traffic more difficult to get for us and for others.
Yeah, I think when I look at the strategy over the last several years wall somewhat unconventional is starting to pay off for us that people are now coming back to stores digital native branch starting to open stores.
And we've got a five year headstart on all of them.
That's great. Thank you and then as a follow up you mentioned concerts in response to an earlier comment on some of the volatility uhm, we're considering if you've got questions about this teller stretched or I don't know if that's what you're referring to her other ones, but yeah, maybe you could help clarify that thank you.
Sure.
Wow. She is an amazing performer, we actually don't see massive swings in our business from Taylor Swift.
The the for the sake of everybody out there who will know freak out when one of these artists comes to town relieves town the names that drive our business for the most part are.
George Street, Garth Brooks, Morgan Wallen sort of the more traditional western artists.
And so Morgan while I was in Phoenix, a few weeks ago, we saw the Phoenix business Spike tremendously.
Were cycling a Garth Brooks concert and the last year period in Houston I think this upcoming week.
So what we can.
Okay.
Totally a week to week and and try to normalize it for ourselves over the period of months and certainly over the year.
And we call this out in the past that the overall concert events.
Business is a low single digit piece of our business. It just you know in a quarter or in a month or in a market. If you shrink the denominator enough it becomes impactful.
Got it that's helpful. Thank you.
Of course.
Our next question is from Jonathan calm with Bear. Please proceed.
Yeah, Hi, good afternoon, Jim.
I don't want I ask when you look back [laughter] when you look back at March and April .
Just what what do you make of the comp softness that you saw and then the recovery from those lows and could you just share a little bit more you know I believe your for your guidance was based on.
Those those volumes back then and it sounds like you haven't changed your second half guidance. So just how should we think about.
That second half and how you've contemplated it kind.
Kind of a degree of conservatism if you well.
Yeah.
The the the question around you know what we're seeing for the for the guidance for the for the balance of the year.
The those from a pure cop perspective, those months or or or soft or months of the year and we've got a slide and the deck on on page 10 that kind of goes through those the store cops by months.
And so it is we've looked at the back half of the year.
And the more recent business.
There is.
Probably a little bit of conservatism embedded in the sales trends for the the back half of the year, but again given the volunteers volatility that we've seen over the last few months and again, it's it's it's kind of depicted there on slide 10.
Yeah, leaving the back half of your where it is at least right now.
Made a lot of sense and again, we we did take different cuts as I mentioned earlier, you know looking at the most recent 13 weeks in the most recent 26 weeks and the most recent four weeks and at least getting through a Q2.
Yeah, leaving that guidance, where it was made some sense and and again the back half of the year, probably a little bit of conservatism in there.
But leave it where it was it seemed like a.
<unk> approach.
And just to follow up did you have any sort of diagnostic looking back in March and April maybe what happened and.
You know more insight on what what changed in in you know turned turned pretty quickly there.
Nope.
No I I don't know that we have any any one thing that we can we can point to I know there was a lot of noise in the in the market around yeah, whether they're a tax refunds or whether or heavy rain are coming out of heavy rain or just going up against the prior years, where we had you know a lot of noise.
Around the the onset of Covid and that omicron and tax stimulus in child tax credits and.
Uhm volatility back there so maybe there's something in the.
Two year and three or four year ago carpet was.
Creating a little bit of noise, particularly is March and April is where we we saw that in the prior years.
If that makes sense and then and then Jim if I could follow up on SG&A. It looks like this here, obviously, you've maintained a healthy pace of.
Investment and initiatives plus cost of support the the growing store base as we look for it I'm SG&A, how should we think about.
The the growth rate and take the level of comps and it really timeline to get back to showing leverage on on SG&A overall.
Yeah, I I think that's a great question, Yeah, we talked about leverage points on the last call around SG&A, you know being around a 2.5% comp and so again, what happened and get through this year and and look into physical 25, and what our sales guidance is but if we.
Return to positive.
Top growth than you know to the tune of about two 2.5% then I think that's something where we can get some leverage we have seen some pressure or the last several years just in wage rate.
And some of the inflationary costs around supplies and insurance and.
Uhm, Yeah utilities and that sort of thing and so also as an inflationary pressures. Some side you know that's something that would help around the the SG&A.
Line.
Perfect. That's really helpful best of luck and thanks. Thanks.
<unk> Thanks, John .
Alright next question is from killing <unk> with William Blair. Please proceed.
Thank you.
Just curious the new distribution capacity that you've added for private label out of Kansas City, what level of business cannot support.
Even sort of broadly and how you kind of thinking of that business, it's still growing.
Sort of higher levels, and I think we would even thought a coupla years ago.
Yeah sure it will absolutely it has been.
The way we have modeled it is it should take care of our needs. If we stay on a.
15% store growth trajectory.
And 300 basis points of exclusive brand penetration increase each year, we probably have about mm six or seven more years of capacity before we'd have to add.
An additional facility.
Likely be on the east coast.
Gotcha.
And the the online guidance.
I'm, just trying to understand it and you've kind of been asked a couple of times here, if that's where the level of conservatism, but.
I guess part of that.
Businesses also relate to what you're saying and the brand channel the own brand channel or that you're sort of partner brand channel.
Can you help us understand the inflection I get that it's easier comparisons, but not necessarily on a stack basis, just part of it has to do with the.
Behavior of some of your partners and I guess, maybe what are you seeing there as he looked at the Becker.
Sure.
I think there are a couple of extra <unk>.
Vendor partners, Yeah, I think there are vendors that in.
Certain instances are encroaching on our digital business.
Yeah. They are of course.
Seeking out the higher margins that they can get from going direct to consumer.
But that that's kind of always been in our D N a or at least for the last few years I'm not sure there's been a a step up and maybe other than.
Perhaps an increase in in their digital marketing spend.
I think.
So I think there is probably some competitive pressure there I.
I I also see I'd, just a gut feel when you think about just the channel split it does it then there's other examples of this where.
The stores business for some retailers is starting to come back where E. Commerce is under pressure and this morning, the matter and reported.
<unk> declined there directing sure when you're commerce business, which.
Yeah, they're great company and a great Brandon.
Theoretically could be getting ongoing growth I need <unk>.
So I I can't really put a finger on it specifically, but it could be.
Pressure could be against it could be the fact that we won't chase the business with more AD spend because it's it's just <unk> dilutive for us.
But while we're going to continue to try to improve the business sort of operationally.
The merchandising undecided many different ways, we can and look for other novel ways to to grow either traffic or conversion and doing just as far as the the guidance goes you know similar to what we talked about with the stores. We we did look at the.
The weekly sales volume of the e-commerce sites and in that business and how that builds throughout the the the year you know week over a week and month over month and so as we updated the guide for the rest of this quarter. Yeah. We were looking at those weekly sales volumes and the builder so.
And and his relation as a percentage of sales on the ear and how it's easily impacted and so that that gives us the confidence.
You have to put that ecommerce guide there and to leave the back half of the year, where we had it.
And that again the back half is really just lapping the the promotional activity from the brand partners as they sort of re flush their own inventory balances right.
Yeah, and there's a little bit of that and into in queue to get if you look at the chart on.
Page 14, which it sounds like you're looking at yeah, you'll see some of that as we get into September at the end of this quarter and that's where we.
You have talked about and of Q2 or early Q3 that business returning to positive.
Awesome. Thanks, a lot guys.
Thanks <unk>.
Our next question is from <unk> with B T. I T. Please proceed.
Hi, everyone I forgot some of them at him.
And what is that.
[laughter].
Business, it's it's going really nice it sounds like that and you're expected and maybe elaborate a bit more on what's working there and then it looks like we'll be at close to 40 per cent penetration by the end of the year I think 38 per cent, though but that's an updated thoughts on what the feeling is for that business and how they could it apparently become thanks.
Sure what we've seen seen I think broad based.
Success there.
Our biggest brands Cody James and Cheyenne continued to gain ground Coty James is now the biggest brand in the company.
Which is remarkable for exclusive brands.
For one of our assistant brands.
That doesn't compete in every single category. It's it's only a men's brand we've.
We've seen some really terrific grows from idle wind.
That brand only started five years ago and that partnership continues to be incredibly strong in that business is just growing.
Very very solidly.
And then our new branch, where we've had.
Yeah.
<unk> come out of the gate extremely quickly others, maybe a little slower, but we haven't had any new brand that has just been a complete dog and that's all sort of added business and and and adding to our penetration.
In terms of our top side target.
We will always be a house of brands and we know that there are there are customer is going to want to always find.
Certainly the you know the big iconic national brands in our space, they won't be able to find those in our store.
But I don't see any reason why we can't continue to grow three points a year for.
The next five years, or so and we'll get to 50 per cent or 55% over time.
Just what we've learned I think is.
The the consumer Trust us as the authoritative source in the industry. So what we.
Put it on the shelf, how we are sort the store we built the credibility that you know where the the curator of the assortment and as a customer comes in.
Yeah, what we believe in and what we've.
And put it on the shelf there they're going to gravitate towards.
It also as you well know is is provide.
Provides they're very attractive margin profile, where third party brands.
Typically can't compete.
But we have had instances, though where a third party brands.
Have stepped up and improved their I M U.
And we've.
Sort of really invested in their product and their <unk> and they've gotten some really really nice <unk>. So you know it's.
<unk> to some degree it'll depend on the reactions from the vendor partners as to how they want to partner with us.
Yeah.
Regardless for the big brands out there they'll always have a home in our store and in our hearts. Thanks, Jim.
<unk> his hand over his heart [laughter], that's helpful and I guess I'll be curious and have you had any <unk> perspective. It may be survey work you've done just on how you can see my Dear.
<unk> the same brands may view them as national brands are they aware of their <unk>.
It's <unk>, it's a mixed bag. We we track this is an <unk>.
Specifically answering your question because I don't think we've done that research head on it's a good suggestion, perhaps we should.
But we do track social media and ready to post for all of our brands.
And.
Because we're trying to get.
Unfettered customer feedback and if you were to pour through that you would see.
Sometimes they're complaining sometimes are quite happy and sometimes they know <unk>, sometimes they have no idea. So I think I do think it's a mixed bag I think the bigger more legacy brands.
Mm Corona Jameson Cheyenne.
<unk>.
More independence and their name and aren't as.
Mm anchored to the store brand I would probably probably put idle wind in that same camp Miranda Lambert is a is a great advocate for us.
And for the Idol and brand and then the other is they probably have some indication that there quote unquote store brands.
One more sentence and then I'll pause, what we do position them just as regular brands red they're priced in line with National brands. There every bit as good quality there we try not to promote them in any higher frequency than other brands.
So they they feel they kind of look and feel and act like a a national brand.
Perfect. Thanks, so much.
Our next thank you.
From Corey Tyler with cafes. Please proceed.
Great. Thanks for taking my question I'm curious, how you're thinking about pricing throughout the rest of this year, obviously inflation's receded, some and I felt like for quite some time inventory with a really significant topic of conversation, but now it seems like inventories are.
Well in control. So could you maybe also talk a little bit about your expectation for inventory throughout the rest of the year.
Sure on the pricing peace and what we did have a reset over the last 24 months where.
There was some inflationary pressure across the entire <unk> national brands are brands inbound afraid et cetera and.
While we tried to hold our pricing as much as we could inevitably we had to push some of the throat to retail pricing and if you. If you do all the arithmetic on our transactions that are comp you could you'd recognize that we could call. This out that are aur's have gone up.
I think where we stand now.
There's no.
Obvious places will will be raising retails.
We have had a couple of vendors lower there there.
Wholesale cost us and we've lowered.
The retail price in the store, maintaining that's a markup per cent.
And in case the latest strategy is working.
They've seen a higher velocity at a slightly lower price point.
So I think I think we're gonna have someone reached.
More stable equilibrium, where there's not gonna be a gyration in pricing.
Up or down in in a meaningful way yeah. We're we're back to where we were seeing just the regular price increases that would be handled as he had any any group number which is which is nice and then Corey is is.
As far as your question around inventory, where we see that going we're really pleased to see.
Yeah that number come down just a little bit you know $23 million down from where we were.
Three months ago.
Despite the the addition of the new stores during the quarter and the continued growth and exclusive Brandon So cause it seems like a really nice job of managing through the image February and making sure. We've got the right inventory to to support the sales level.
So what we're not guiding inventory through the balance of the year, we're happy with where that is and how that's being manager and I think a lot of that too is with the supply chain being.
More fixed than it was you know the last couple of years, we're able to get the product more in line with when we want it and where we want it.
Great. Thank you very much and then.
Just another question on the men's business. It sounds like you have some pretty decent momentum there are there any specific call out with them.
The men's business that you would say are really driving home after <unk>.
It's been pretty broad based and we've seen maybe outsized grows in within the boots category and exotic skin boots, which is the notable piece of that is that's our higher price points and frankly, the highest price points in the store.
So with a lot of discussion around people trading down et cetera that hasn't played out in within men's boots.
Within.
Within men's apparel.
The stronger.
And at the highest level, we split men's apparel into denim and none that I'm in the denim business has been better than the non denim business.
I think those are the <unk>.
Great.
Aw, Thank you very much and best of luck.
Thank you thanks.
Alright next question is from K Salt with T. B S. Please proceed.
Great. Thank you so much I just wanted to follow up on some of the commentary on the new stores you.
Is it possible to talk about the new <unk>, the new stores and some of the markets where people don't traditionally think of boot barn from like from the investors to have like Manchester, Connecticut is a store that opened recently can you talk about a store like that not to get too specific compared to like you know, Texas, you know southwest, California, where traditionally most people take the stores where it can you just talk about how the stores are doing some of the newer markets.
Sure.
Sure. The the quick answer is they're doing quite well when we open a new store.
In.
Texas, or California, particularly if there's not a store nearby.
<unk> <unk>.
States, notably stand out those stored in those two states are are higher our highest.
<unk> volumes for a retail store, but if you exclude those two and you say well, let's just look at the rest of the country are new store in Connecticut or in an outside of Philadelphia.
Uhm or Niagara falls or outside of all the knee looks a lot like a new store in most of the rest of the country.
They they sell western oriented product in roughly the same proportion they sell men's cowboy boots, ladies cowboy boots and men's cowboy hat, we open them with our our traditional brand footprint, we Don can toward the the look and feel of the store or the product is.
<unk>.
And strategically what that does for US is it emboldens us to just continue to roll out the concept because we haven't had to make.
Significant changes to the model.
And I don't want to minimize all the hard work that happens at the product by product level by the the merchants and their merchandise planners.
And the allocation team.
Because we can tweak a little bit, but most of the big brands are and all the stores. The major categories in terms of per cent of the total are roughly in line with the rest of the country.
And the the tweaks that we're making your sort of below the the the skin a little bit.
Got it Jim that's interesting if I can just pop on one more just because you've talked a lot about the successive frantically James and Cheyenne an auto <unk>.
The question is how much when you see the success do you think bigger in terms of like turning these brands into more than just boot barn branch like maybe creating their own websites you know, creating like physical product, maybe trying to place him in.
Super premium boutiques or things like that and really building them out in their own right to sort of enhance what they are and then buy it and turned Hanson ask what <unk> is doing.
It.
And perhaps one that we will kind of pull on that string a bit more in the future. We we have done some things that we now have a rodeo athletes that were are exclusive brands EM up and not really an upcoming pretty established saddle bronc rider.
Named Rocko Steiner, whereas rank 45, one of our newer brand. So we have the date of that.
And we do treat them as at least quasi brands, but perhaps over time, we will put them even further on a pet a stolen.
And.
Really invested in them more to to build that brand equity further than just the.
The positioning and your inventory in the stores.
Got it okay. Thank you so much.
Our next question. Thank you from.
Sam Poseur with millions trading. Please proceed.
Well. Thank you for taking my questions I have a couple here one uhm as you grow the exclusive brand business and you mentioned you were committed to the.
To having bread natural brands as well how is.
Your assortment changing I mean for what gets squeezed out you know cause you can't get everything into the store all the time, so as that penetration grows how do you manage sort of what falls to the side.
Sure great questions. They typically what happens is.
The third or fourth player in a particular product cattery get category gets either.
Minimized or eliminated and bran takes that spot.
And then maybe because you're a merchant at heart sandwich. The exclusive brands then earn their keep where we do look at sales of stock ratios for exclusive brands versus a third party brand may have the term roughly in line or in line with the rest of the store or will will make.
Some changes but.
If you think of the.
The bigger most iconic names and in <unk>.
Our arena or whether that's work brands or western brands.
We tend to nine <unk>.
Squeeze them out you know there we want people to we want our customers to come to the store because we have the brands that expect us to have but smaller brands the ones that I do less marketing the ones that are less well known 10 to see market share to the exclusive brands.
Thank you and and then secondly on the talk about E Commerce.
Rather than talking about the revenue what percent of your sales are like does the consumer touch your mobile App touch your website and then maybe comes to the store I mean is is your digital present.
A traffic driver.
Or doing more than just you know more than what the cops.
<unk> with a sales trend may actually show.
Yeah, absolutely absolutely of course in the digital team here.
Does an awful lot.
To help drive store traffic.
So which is why we built the App, which is why we continue to invest in mobile.
And you know that that.
Then omnichannel view, even if they're just buying in the stores are not online.
I certainly believe that they.
<unk> you know many shopping journeys start.
Ah digitally and particularly on a handheld.
And do you do you have a <unk> is there a measurement you have of that are.
Are you pulling customers how did you hear about us when they come in and sign up for that.
Sign up for the for your membership and so on.
I don't have a great answer for for that perhaps something led to our our next round of.
Customer research, though.
And then I mean this was asked at the beginning of the call I'm Gonna ask it one more time or try to follow up your your <unk>. Your <unk> you came in significantly better than what you anticipated in the prior guidance and so one can you is there anything you guys did that do contribute to making that happen and <unk>.
Secondly, within the <unk>.
There appears to me to be a change in the way your guiding it you know you're doing a lot more men verses, let's say a year or two ago, you regarding the upcoming quarters and and the balance of the year.
Okay. If there has been a change in the way you approach, giving guidance can you give us some color on that please.
Okay.
Yeah, I'll I'll I'll start with that second question, Sam I I I I think the.
The way, we are providing guidance I think we're explaining it.
Maybe a little bit more.
You know around the the weekly sales trend that we're seeing in and and how that plays out for the for the rest of the year.
Historically again going back to pre Covid, yeah cause we did stop guiding for a coupla years, you know during COVID-19 and after.
The the the weekly sales trend or the monthly sales trend and what percent of the year that that made up was we use that methodology and what's different. So now is it that lined up more with the prior your comp looking at you know the the one year comp and what we're up against and whether it's easier comps are harder cops.
You know or to your stack and I I think with some of the variability that we saw come.
Coming out of Covid and as the looking at a one year or to your staff.
<unk> to your comp to provide guidance fell apart a little bit and we saw that on.
On display last year with with our guidance we we've.
Leading to more into the the the more scientific approach of looking at the.
You know the bill during the year and and how that compares to historical.
And the duration each month as a per cent of the year or whatever it is.
Thank you.
Thanks him.
Our next question is from Jeremy Handlin with <unk> Capital Group. Please proceed.
Thanks, and congrats on the strong results I wanted to ask another question on the exclusive brands and just as we flashback to five years ago. Your when your penetration with a little less than 20 per cent and now it's gonna be roughly double that.
I think at the time, you know kind of two to 300 basis points of exclusive brand penetration, but you've gotten roughly double that really with the exception of the kind of Covid 2020 calendar year.
I you know I wanted to just is we've gone from like a 10000 square foot store to 12000 square foot store you know how much of the change is really to the dedicated for space two exclusive.
So is that kind of been in lockstep or are we really seeing just philosophies of exclusive.
Really outpacing a lot of these other national brands.
It's a great question and a very good hypothesis <unk> I would tell you that the.
Increase in the size of the store and the increase in the penetration of exclusive brands, while correlated I I don't think it's causal they they we got to those two decisions through completely different logic flows if you will.
On the.
On the exclusive brand penetration.
One of the things that happened coming out of Covid.
Was.
Widespread spread news around how difficult supply chains were are third party vendors honestly did everything they could to try to help get their product to us by our business was <unk>.
Taking off <unk> for Covid in a pretty meaningful way.
And even the best vendors that we have.
Despite their best efforts were shipping us sure.
And the one supply chain that we got 100 per cent of what we ordered an end could control it even better was our exclusive brands.
So it it's set up an experiment that we didn't.
I think we were doing which was sales take off and we have to put more exclusive brand product into a store.
What will happen and the answer came back a resounding well consumers will respond.
To those brands in most if not all cases and in many cases.
And I think that helped build our confidence so yeah, we came out of a very difficult time.
Terrible pandemic of challenging supply chain, but we did learn some really valuable lessons that the.
The boot barn brand maybe first.
And then our sense of brands have more strains and brand equity in consumer awareness and recognition than we had originally fine.
And you know then.
Upgraded the exclusive brand team we've added some great new designers there we have a relatively new leader there has been there for a couple of years now.
Yeah, well I think we we work really well between the buying organization design organization.
And yeah throw stores in there. So I think it's been an ongoing initiative.
To get that part of the business going in terms of the size of the store size <unk>.
Increase just because sales started to increase in.
Yeah, we we started to realize that.
Yeah. It it may have been a chicken and egg add rebuilt bigger stores. We had more sales were heavy as we had more sales we needed a bigger store. So we just.
Made a decision one day to increase the size of the store.
Also increase the opening inventory levels of a store.
And we were actually trying to track what store was the first to do it we think it was the eerie, Pennsylvania store, but.
It was around that time about two and a half years ago, where we.
Decided to play more often with a new store a larger store more inventory and we started to see the average volumes of new store.
New stores come in higher so we just continue with that strategy, but it was it was separate and distinct really from the investment and inventory and actually some brands.
[noise]. Thanks, that's a great point I guess, if <unk> been able to sustain these higher volumes as well. So I. The other question was just really quick here from kind of Mark down committed a competitor promotion standpoint, you know any noticeable changes.
That you've seen within the industry.
Not really I mean, some on the margin you know some of our competitors are running a typical promotion that they've run in the past, but they are running it.
One week longer or starting in at a different time <unk>.
As you well know, though most of the people.
That we compete against I dunno store by store basis tend to have one store.
And we.
We don't really track, what they do and and we wouldn't change anything that we're doing based on.
What the market or the industry is doing we we have our plan, we're gonna kind of stick to our plan and if if companies raise prices lower prices become more promotional it's just it's not gonna impact us.
Great. Thanks for the call our best wishes.
Thank you.
Next question <unk> Research. Please proceed [noise].
Yeah. Thanks for taking my questions drill down a little bit more on ladies boots and a pair also last quarter, you mentioned that lady's basement apparel were down 11 come down 13, respectively and that was against a D. <unk>.
More than 80 per cent to your stack I believe Jim you said that ladies apparel improve like seven points. This quarter from last so can you can you just kind of need to give us.
Those cops for the quarter and can you say what the to your <unk>.
Sure.
The seven point sequential improvement was boots and that apparel.
Apparel business between Q4, and Q1 was roughly in line.
The two one times last year for those businesses.
We're we're also quite strong.
This is one of those crazy things, where you have to start looking at year after year after year, but both boots and apparel last year to one where 20 plus per cent comes in the prior year Q1, we're both over 100 per cent comps and of course, they're recycling. The April and May of 2020, which was a COVID-19 thing. So you you can drive yourself.
Man, but they.
We always want all our businesses grow, but and I've set this I'm on prior calls.
I think all of the merchants in the business are doing a really nice job of maximizing their business. Some of them are just up against monster numbers and others were up against very strong numbers. So.
We certainly love to see the businesses get sequentially better we love to see the fact that.
You know ladies boots as an example in July was positive and that was a great thing to see.
Uhm.
But what we want more than anything what's nice to see you sort of this steady progression of a strengthening piece of that part of the business.
And and not giving it all back but that's been.
No speaking with investors, that's been sort of a potential narrative out there as well.
Store has gone up so much or the ladies businesses doubled and it's all gonna be given back and <unk> with each passing quarter.
That eventuality seems more remote.
And then I know that looking at the multi your gets tricky.
Just depending on all the the the noise over the last few years, but maybe just thinking about it in a year over year basis.
Does that when when did when did the ladies business.
Easier or is it starting in two Q or is it three Q.
Mmm three Q is where we started cycle.
<unk> the negative.
Yeah, alright, thanks Goodbye.
Okay. Thanks <unk>.
And our final question <unk> Company. Please proceed.
Hi, guys congrats.
Thank you John action.
Yeah.
Jim Connelly would you come in just a little bit when you look at the when you look at the store fleet and some of the older stores.
Obviously neighborhoods change.
Traffic patterns change a little bit are there any of those older stores that either slated for.
Productivity and for much pain expansion.
To get a little and then if you do that.
Do you get a little higher return on some of those stores, if that if that construction or expansion <unk>.
Sure absolutely what we we have an ongoing program of.
Really three different buckets. One is in some cases just pull on relocation so moving in a store across town, making a bigger putting it in.
Latest and growing part of a particular city.
Or taking a store that's doing reasonably well, we still like the location and doing a full one remodel rebrand.
And typically when we do that we see.
And sales or maybe you said differently 10 to not do a full remodel unless we expect a nice pick up in sales.
And then we have a kind of a third tranche yeah. We are.
If you look at the brand aesthetic for boot barn over the last.
Five or so years.
We've made a strategic decision to.
<unk> the brand more aspirational to elevate the creative.
To change the way we go to market from a marketing perspective, I mean, our creative director basically completely change the brand trajectory and got away from price and promotion and went to sort of Americana Western legacy and heritage view a boot barn.
And the stores need to kind of match that so the new store design certainly does but we did have some 2030 year old stores that needed to be upgraded so we will probably touch twenty-five stores this year and pull out all old carpeting and change lighting and change some fixtures.
They won't necessarily get a full on remodel, but they'll get some capital.
Capital investment, perhaps we'll see a return on that.
And in some cases, we know we're doing it just to get this sorted brand rain.
And last thing for me is when you look at that exclusive brand pipeline.
Going forward I mean, you've done so much there over the last five or six years is that pipeline for new products still adjacencies in different categories still just a strong.
Yeah, I think at some point, we'll probably see growth in exclusive brands, but maybe not five or six points or both maybe it will come back to.
250 returned it basis points of penetration growth in a year.
You called it out well typically what happened as a brand launches and then and then sort of spreads within that store to include some new categories. So.
But we found new new marketing and.
Kind of western style.
Sport jackets for men that have a quota James brand in and now and that was it wasn't business a few years ago. So they'll they'll find different subcategories, or we'll take a brand and extend it into.
Sizes, or an extended sizes or wide sizes, and boots, and they'll get a little bit more penetration. So it's not always the launch of a brand new brand, sometimes it's just expanding the working ones finding out, what's working and doubling down and and maybe cutting the losses and some stuff that isn't working as well.
Great. Thanks, Thanks for squeezing me and good luck.
No problem, thank you well.
We have reached the end of our question and answer session I would like to turn the conference back up a good Tim Cartwright that closing comments.
Oh, Thank you everyone for joining the call today, and we look forward to speaking with you on our second quarter earnings call take care.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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