Q4 2025 Boot Barn Holdings Inc Earnings Call
Good day, everyone and welcome to the Boot Barn Holdings, Inc. Fourth quarter 2025 earnings Conference call. As a reminder, this call is being recorded now I would like to turn the conference over to your host Mr. Mark The Dovish Senior Vice President of Investor Relations and Finance. Please go ahead Sir.
Thank you good afternoon, everyone. Thank you for joining us today to discuss boot barns fourth quarter and fiscal 2025 earnings results with me on today's call are John Haines, Chief Executive Officer, and Jim Watkins Chief Financial Officer, a copy of today's press release, along with a supplemental financial presentation is available on the Investor Relations section.
Boot barns website at boot barn Dot com. Shortly after we end 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 during this call are forward looking statements. These forward looking statements reflect coupons judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting boot barns business. Accordingly, you should not place undue reliance on these forward looking statements for a more thorough discussion of the risks in them.
Certainties associated with the forward looking statements to be made during this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our fourth quarter and fiscal 2025 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.
<unk> or otherwise I will now turn the call over to John Hayes.
John Hayes: <unk> Chief Executive Officer John.
John Hayes: Thank you Mark and good afternoon. Thank you everyone for joining us on this call I will review, our fourth quarter and fiscal 2025 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 for questions.
John Hayes: Okay.
John Hayes: We are very pleased with fiscal 'twenty fives results across all metrics, our full year fiscal 'twenty five revenue increased to a record level of $1 9 billion.
John Hayes: Which equates to $1 billion of sales growth over the last four fiscal years driven by the 186 stores open during that period and our strong same store sales growth.
John Hayes: During fiscal 'twenty five we opened 16, new stores across all geographies and we expanded our footprint into four new states during.
John Hayes: During the year merchandise margin expanded 130 basis points, representing 500 basis points of growth compared to four years ago for the year. We grew earnings per diluted share by 23% to $5 88, an increase of $1.08 over the prior year I'm very proud of the team's accomplishments over the past year and their ability to execute at a high.
High level.
John Hayes: Turning to our fourth quarter results total revenue increased 17% and we opened a record 21, new stores consolidated same store sales increased 6% same store sales in both the stores and E. Commerce channel were strong the stores, increasing five 5% and ecommerce increasing nine 8%.
John Hayes: From a margin perspective fourth quarter fourth quarter merchandise margin expanded 210 basis points.
John Hayes: The strength in sales and marketing combined with solid expense control resulted in earnings per diluted share of $1 22 during the quarter, which was within our guidance range in comparison to 96 cents of earnings per diluted share in the prior year period.
John Hayes: Turning to current business. We are now six weeks into the first quarter of fiscal 'twenty six and we have continued to see broad based growth as consolidated same store sales have increased 9%.
John Hayes: And by increased transactions and full price selling well.
John Hayes: While we are pleased to see the strong trend of the business continue into fiscal 'twenty six we recognize the ongoing uncertainty with respect to tariffs I am confident that our team is well prepared to navigate this uncertainty I believe the team's strong background in institutional knowledge will be a distinct advantage within our industry.
John Hayes: Yeah.
John Hayes: Slide 16 of the supplemental investor presentation that we released today explains our tariff mitigation strategy in detail.
John Hayes: In terms of our third party vendor strategy, we are approaching this with a mix of discipline and agility. While we are prepared to work through the uncertainty with our third party vendors. We also see a chance to be opportunistic both in terms of market share gains and deeper penetration of our exclusive brands.
John Hayes: Many of our third party vendors have notified us of price increases, which will go into effect. This summer.
John Hayes: We currently expect to raise retail prices at the same level.
John Hayes: This margin rate.
John Hayes: Or exclusive brands, we have been partnering with our factories to manage pricing by reducing costs and resourcing production to countries with lower tariffs. We have been reviewing each individual style by cost making decisions line by line to determine whether or not we should cancel an order order more hold pricing a raise pricing.
John Hayes: All in an effort to maintain the momentum of our exclusive brands.
John Hayes: While our goal is to maintain merchandize margin rate on exclusive brand products, we do expect to hold price on certain items, giving up some margin rate in order to maintain or gain market share.
John Hayes: Our inventory turns less than two times per year, and we had accelerated some receipts ahead of tariffs, we expect the incremental cost of the tariffs to be approximately $8 million and the impact to the second half of fiscal 'twenty six.
John Hayes: As explained on slide 17 of our supplemental presentation.
John Hayes: Okay.
John Hayes: Looking at our exclusive brand sourcing over the last several years. The team has been focused on reducing risk across our supply chain by diversifying our countries of production over.
John Hayes: Over five years ago, Chinese factories produce more than half of our exclusive brand products.
John Hayes: Thanks to our team's ongoing diversification efforts as a fiscal 'twenty five this number was reduced to 24%.
John Hayes: We've accelerated these efforts even further in fiscal 'twenty six resulting in an estimated 12% penetration of goods produced in China for the year.
John Hayes: And we are estimating that China will only produce approximately 5% of exclusive brand. Good in the second half of fiscal 'twenty six and in fiscal 2007 I am.
John Hayes: I'm confident that our team is equipped to navigate the current challenges facing the retail industry and I believe the company's foundation is solid and we are structured for future growth.
John Hayes: Yeah.
John Hayes: I will now spend some time discussing each of our four strategic initiatives.
John Hayes: Let's begin with new store growth.
John Hayes: Fiscal 'twenty five mark the third consecutive year that we've opened up 15% new units and our new store engine continues to meet our sales earnings and payback expectations across all geographies.
We opened 60, new stores in fiscal 'twenty, five and ended the year with 459 stores.
John Hayes: The new stores opened in fiscal 'twenty, five are projected to generate $3 $2 million of revenue and payback in less than two years.
John Hayes: We expanded our national footprint into four new states in fiscal 'twenty, five ending the fiscal year with a physical presence in 49 states.
John Hayes: We believe our new stores not only generate tremendous returns, but also increase brand awareness as we expand our footprint across the country and elevate boot barn to a household name.
John Hayes: Looking forward to fiscal 'twenty six we are planning to open 15% new units, which equates to 65 to 70 new stores.
John Hayes: We expect to open these stores in both legacy and new markets.
John Hayes: Given the consistent performance of our new store openings across all geographies. We believe that we have the market potential to double our store count in the U S alone over the next several years.
Moving to our second initiative same store sales.
John Hayes: Fourth quarter consolidated same store sales grew 6% with brick and mortar same store sales, increasing five 5% store comp growth was driven by a 6% increase in transactions and an approximately flat basket.
John Hayes: From a merchandising perspective, we saw broad based growth across most merchandise categories in the fourth quarter led by the combined ladies western boots, and apparel businesses comp positive mid teens.
John Hayes: This was followed by the combined mens western boots, and apparel businesses, which comped positive high single digits, our denim business, which is included in the figures just mentioned comp positive mid teens.
John Hayes: Our work boots business comp low single digit negative and our work apparel business comp high single digit positive. We are extremely pleased to see the widespread growth across categories continue into the fourth quarter.
John Hayes: Our customer loyalty database grew 14% year over year, reaching $9 6 million total active customers as of the end of fiscal 'twenty. Five this growth represents more than 1 million customers being added to the program each year for the past four fiscal years, we continued to harness the power of this information to assist with planning our media spending.
John Hayes: Tailoring, our customer communications and modifying our merchandize assortment by store base by store based on local demographics.
John Hayes: From a store operations perspective, I am very proud of our field organization's performance throughout the fourth quarter visiting more than 40 stores over the last six months I have seen the team's dedication firsthand.
John Hayes: <unk> been consistently impressed by their enthusiasm and dedication to our customers and to boot barn.
John Hayes: Witnessing their hard work in connection to the customer.
John Hayes: It is truly an inspiration to me and I am confident we will continue to grow the brand by following their scaffold.
John Hayes: We will continue to be a store's first organization and we will invest in the store experience for our customers. This includes investments in Remodels design and technology. One one of the initiatives that I'm, especially excited about is the introduction of traffic counters to our stores. We believe the addition of traffic counters will allow us to focus more on converting traffic into sales.
John Hayes: And providing the best customer service in the industry.
John Hayes: Moving to our third initiative Omnichannel.
John Hayes: E Commerce comp sales grew nine 8% in the fourth quarter and the online business had positive comps in all fourth four quarters of fiscal 'twenty five.
John Hayes: Our digital flagship boot barn dot com makes up approximately 75% of our online sales and comp low double digit positive for the fiscal year.
John Hayes: We believe this is a reflection of the strength of our brand as we continue to increase our national awareness through marketing and new store openings.
John Hayes: We also believe the online business benefits from our store growth as we see online demand increase almost immediately when a new store opens tomorrow.
John Hayes: Now to our fourth strategic initiative merchandise margin expansion and exclusive brands.
John Hayes: During the fourth quarter merchandise margin increased 210 basis points compared to the prior year period and for the full year fiscal 'twenty five merchandise margin increased 130 basis points compared to the prior year period.
John Hayes: Over the last four fiscal years merchandize margin has increased 500 basis points with approximately one third of that growth driven by exclusive brands and the remaining two thirds due to increased full price selling buying economies of scale and supply chain efficiencies.
John Hayes: Exclusive brand penetration increased to 190 points in the fourth quarter and 90 basis points for the full year fiscal 'twenty five exclusive brand penetration of $38 six equates to 500 basis points of exclusive brand growth over the last four fiscal years I am pleased with the team's ability to balance expanding exclusive brands, while driving growth within.
John Hayes: <unk>, our third party partners.
John Hayes: For fiscal 'twenty, six we expect to grow exclusive brand penetration 100 basis points, and we expect merchandise margin rate to be flat given the uncertain tariff environment. We have attempted to reflect the appropriate impact on the first and second half of fiscal 2006, we expect merchandise margin growth in the first half of the year as we sell through on tariffs.
John Hayes: In stores and online.
John Hayes: As we move to the second half of fiscal 'twenty six we expect to see merchandise margin pressure as we begin to sell tariffs goods or.
John Hayes: Our strategy is to maintain merchandise margin rate, but we may not raise prices on certain items give up some margin rate in order to maintain or gain market share. We are confident in the team's ability to design and develop compelling product assortments to drive the business forward and we believe we can expand merchandise margin in the future through multiple growth levers.
Jay: I would like to now turn the call over to Jay.
Jay: Thank you John.
Jay: In the fourth quarter net sales increased 16, 8% to $454 million the.
Jay: The increase in net sales was the result of the incremental sales from new stores and the increase in consolidated same store sales.
Jay: The 6% increase in same store sales is comprised of a five 5% increase in retail store same store sales and a nine 8% increase in E Commerce same store sales.
Jay: Gross profit increased 21% to $169 million compared to gross profit of $139 million in the prior year period.
Jay: Gross profit rate increased 130 basis points to 37, 1% when compared to the prior year period. As a result of a 210 basis point increase in merchandise margin rate, partially offset by 80 basis points of deleverage in buying occupancy and distribution center costs.
Jay: The increase in merchandise margin rate was primarily the result of supply chain efficiencies lower shrink expense better buying economies of scale and growth in exclusive brand penetration, while the deleverage in buying occupancy and distribution center costs was driven by the occupancy cost of new stores.
Jay: Selling general and administrative expenses for the quarter were $119 million or 26, 2% of sales compared to $101 million or 26, 1% of sales in the prior year period.
Jay: SG&A expense as a percentage of net sales deleverage by 10 basis points.
Jay: As a result of higher legal expenses and store payroll.
Jay: So the offset by lower marketing expenses.
Jay: Income from operations was $50 million or 11% of sales in the quarter compared to $38 million or nine 8% of sales in the prior year period.
Jay: Net income per diluted share was $1 22, compared to 96 cents per diluted share in the prior year period.
Jay: Turning to the balance sheet on the.
Jay: Consolidated basis inventory increased 25% over the prior year period to $747 million, an increase of approximately five 7% on a same store basis.
Jay: Total inventory increased as a result of adding 15% new stores.
Jay: Growth in exclusive brands and the proactive pull forward of shipments in anticipation of tariffs.
Jay: We feel good about the health of our inventory and our markdowns as a percentage of inventory are below last year and below historical levels.
Jay: We finished the quarter was $70 million in cash and zero drawn on our $250 million revolving line of credit.
Jay: Turning to our outlook for fiscal 2026.
Jay: Due to the continued uncertainty around tariffs and the resulting impact on consumer spend we're providing guidance with wider ranges than we have historically.
Jay: 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.
Jay: Both the low and high end scenarios of our fiscal 'twenty six guidance contemplate increased tariffs, resulting in price increases this summer, which we believe could lead to softer consumer demand.
Jay: Also included is a merchandise margin decline in the second half of the fiscal year due to unmitigated tariff costs.
Jay: The difference between the low and high end scenarios reflect the varying degrees of both softer consumer demand in merchandize margin decline in the second half of the fiscal year.
Jay: Both scenarios also contemplate a 30% tariff on China.
Jay: 10% global tariff rate and zero percent tariff on goods from Mexico for the balance of this fiscal year.
Jay: Yeah.
Jay: For the full year at the high end of our guidance range. We expect total sales to be $2, one 5 billion.
Jay: Representing growth of 13% over fiscal 'twenty five we.
Jay: We expect same store sales increased 2% with a retail store same store sales increase of one 5% and E Commerce same store sales growth of seven 5%.
Jay: We expect merchandise margin to be $1.08 billion or approximately 51% of sales, which would be flat to the prior year period and includes exclusive brand penetration growth of 100 basis points.
Jay: We expect gross profit to be $793 million or approximately 36, 9% of sales.
Jay: We anticipate 60 basis points of deleverage in buying occupancy and distribution center costs due to the occupancy of news new stores and 50 basis points of leverage in SG&A.
Jay: Our income from operations is expected to be $266 million or 12, 4% of sales.
Jay: We expect net income for fiscal 'twenty, six to be $197 million and earnings per diluted share to be $6 45.
Jay: I would now like to provide some guidance around estimated leverage points with flat merchandise margin rate at the high end of our guidance range, we expect to leverage EBIT at 3% consolidated same store sales growth, we expect to leverage buying occupancy and distribution center costs in fiscal 'twenty six 7% comp increase.
Jay: And we expect to leverage SG&A with a flat comp.
Jay: Turning to the low end of our guidance range for the full year. The low end of our guidance range assumes softer consumer demand than the high end, resulting in total sales volume of $2.07 billion.
Jay: Representing growth of 8% over fiscal 'twenty, five and our full year same store sales decline of 2%.
Jay: The low end also assumes 30 basis points of merchandise margin decline of 140 basis points of gross profit deleverage and 10 basis points of SG&A deleverage compared to the prior year period.
Jay: These assumptions result in income from operations of $228 million or.
Jay: Or 11% of sales and earnings per diluted share of $5.50.
Jay: In both the low and high end scenarios, we plan to grow new units by 15%, adding between 65 and 70 new stores during fiscal 'twenty six.
Jay: We expect our capital expenditures to be between $115 million to $120 million, which is net of estimated tenant allowances of $35 million and for the year, we expect our effective tax rate to be 26%.
Jay: As we look to the first quarter of fiscal 'twenty. We expect total sales at the high end of our guidance range to be $491 million and a consolidated same store sales increase of 6%.
Jay: We expect merchandise margin to be $254 million or approximately 51, 7% of sales a 140 basis point increase over the prior year period, which includes a 190 basis point increase in exclusive brand penetration.
Jay: We expect gross profit to be $188 million or approximately 38, 2% of sales, which includes 20 basis points of deleverage in buying occupancy and distribution center costs are.
Jay: Our income from operations is expected to be $64 million or 13% of sales.
Jay: We expect earnings per diluted share to be $1 52.
Jay: Turning to our share repurchase program.
Jay: As announced in our earnings release, the board of Directors has authorized a share repurchase program to buy up to $200 million.
Jay: Of our common stock we plan to execute a quarter of the total authorization. This fiscal year with the spend roughly consistent by quarter, which has been factored into our guidance.
Jay: With our fiscal 'twenty outlook, we expect to generate cash from operations that is more than sufficient to fund new store growth other capital expenditures and buy back shares.
Jay: Today's announcement reflects confidence in our strong cash flow generation and allows us the opportunity to deliver additional value to our shareholders.
Jay: Now I would like to turn the call back to John for closing remarks.
Jay: Thank you Jim we are very pleased with fiscal 'twenty fives results and the entire team's effort resulted in strong results across the board and further strengthened the brand and customer loyalty.
Jay: I am grateful to the entire organization for their commitment and I look forward to the opportunity to grow the business in fiscal 'twenty six and beyond.
Jay: Now I would like to open the call for questions operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question.
Jay: Please press Star then two as this call is scheduled for one hour. Please limit yourself to one question and one follow up.
Jay: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Matthew Boss with JP Morgan. Please go ahead.
Amanda Douglas: Great. Thanks, It's Amanda Douglas on for Matt and congrats on the role John.
John Hayes: Thank you.
Speaker Change: So maybe to start John can you elaborate on April and May same store sales and what do you think is driving the acceleration despite tougher comparisons and given the no slowing to date what are you embedding to change in your initial comp guidance for this year.
Speaker Change: Thanks, Amanda for the question, Yes, if we look at so.
Speaker Change: So if we look at all of Q1 at the high end of the guidance, we're guiding a plus six which is in line with Q4, which was also of course, the plus six so we're not contemplating our guidance for the entire quarter or an acceleration for the entire quarter, but youre absolutely right in the first six weeks, we have seen our songs.
Speaker Change: Strong sales trend as we moved into that first quarter and that momentum has been consistent across all major merchandise categories across geographies, both mens and womens footwear, both men's and women's apparel. So it really I think shows the health of our customer and business overall.
We feel good about sustaining positive comp growth, especially in the first half of the year as we've contemplated in the guide.
Speaker Change: Six plus three for that first half.
Speaker Change: And we do expect given what we know today and we know the situation with tariffs is very fluid that we expect comps to flat flattened in the second half as price increases start to weigh on consumer demand.
Speaker Change: That's helpful and Jim can you elaborate on pricing power you see for the boot barn brand today, maybe looking back relative to 2018 or 19, and then can you quantify the tariff headwind to margins or earnings any outlook and any mitigation efforts that you've already included.
Speaker Change: Yeah, I'll start with the the second part of the question or the second question. If you turn to slide 16 and then.
Further on 17, we've quantified the tariff impact.
Speaker Change: On the year to be around $8 million and I would remind you that tariffs are fluid and our goal is to give a give you our best thinking today on how we're mitigating those but we've really separated us into an exclusive brand strategy, which which we've quantified to here at $8 million and then the third.
Speaker Change: Party product that we're purchasing is not included in the $8 million, but it is embedded in the price increases that were anticipating to come in the summer.
Speaker Change: Or that we've been notified will come in the summer and those price increases are around that mid single digit increase in so it's back to now your first question on pricing power of boot barn, what we've seen over the years.
Speaker Change: We've seen pretty good pricing power.
Speaker Change: Normally we'll have price increases that are two or 3% company wide and in our customers have been able to absorb those okay. The price increases that are in that 5% range, we expect to see some.
Speaker Change: Elasticity of demand and some softening of demand and that's what we've embedded in with a flat comp and.
Speaker Change: The third quarter and the fourth quarter. The one other thing I would add and just just.
Speaker Change: So everyone's clear the way we've guided this year has been very consistent with what we've done in the past we use the last four months of sales volume and projected sales using this historical seasonality of the business what we did.
Speaker Change: After that as we adjusted the sales down in the second half of the year to factor in some of that that pricing power or not being there to the full extent. So that's really a reflection in the second half of the year.
Speaker Change: Great. Thank you.
Speaker Change: Thanks Amanda.
Speaker Change: The next question comes from Peter Keith with Piper Sandler. Please go ahead.
Speaker Change: Excuse me Mr. Keith Your line is open. Please go ahead with your question.
Peter Keith: Sorry about that guys. Good afternoon, everyone and John Congrats on the CEO role well deserved.
Speaker Change: Thanks, you heard about product coming out coming out of China that there could be some product shortages and I'm wondering if that is a possibility that maybe certain suppliers choose not to pull in product is that.
Speaker Change: Is that a scenario and maybe even that's something you can capitalize on with some of your buying power.
Peter Keith: There might be an opportunity there Peter it's a great question as we look at what we've already bought from an <unk> standpoint for fiscal 'twenty six the the second half as you see on slide 16 in the in the Investor presentation is we're only going to have 5% on order from China, and we will move.
Peter Keith: Much of that product to other countries, such as Cambodia, India Vietnam.
Peter Keith: So if something really opportunistic comes up in China, not to say that we wouldn't look at it but we're comfortable that our you know our China excuse some exclusive brand product is roughly $2 $3 million of terrible product for the remainder of fiscal 'twenty six it's 5%.
Peter Keith: On order.
Peter Keith: And we think we can take that number down that is the fully loaded number and we haven't.
Peter Keith: Finished negotiating with our factories, so it's going to be some number less than that so there may be additional opportunities, but where we sit today, 5% of remaining fiscal 'twenty six for exclusive brands coming out of China.
Peter Keith: Tariffs at 30% and negotiation is still ongoing we feel like we're already in a pretty good spot and I would just add to that Peter and the team has done a nice job anticipating tariffs and so.
Peter Keith: They were purchasing product even before we got to the end of the fiscal year pre tariffs.
Peter Keith: And we have about $20 million or more or less. It was was brought in in advance of the end of last fiscal year. So end of March to try to beat the tariffs are included in there is some products from China.
Peter Keith: Even over the last couple of weeks the team.
Peter Keith: I think has done a nice job of getting ahead of the curve and keeping orders fluid and coming so I think we'll have a little bit of an advantage Justin.
Peter Keith: First mover advantage in some of the things we've done already.
Speaker Change: Okay, very good and I just wanted to clarify some of the price increases is that just on kind of the tariff impact items, where youre going to see a mid single digit.
Speaker Change: Price increase and then I guess the guidance imply that demand goes down by more than mid single digit on those items.
Speaker Change: Yes, so as you know Peter we don't pay tariffs on our products, we buy from third party vendors. There that there are just price increases that we started to receive probably two three weeks ago at this point.
Speaker Change: Those price increases were when the China tariffs were at 145%.
Speaker Change: And I have to say I'd be disappointed if some of those price increases don't come down a little bit. They were mid single digits that being said we are very we have a great partner and has very very good partners. We've worked with for many years every year. They have price increases have you know low single digits and we our strategy always has been.
Speaker Change: And to preserve margin these mid five 6% price increases.
Speaker Change: From those vendors that didn't happen to carry through to preserve rate at retail along with larger price increases outside of our strategy outside of boot barn in more at a macro level. We think is going to soften consumer demand overall in that second half. So it's really a combination of those mid <unk>.
Speaker Change: Did your price increases from third party vendors and what's happening externally.
Speaker Change: And just to help quantify the haircut that we took on the second half of the year had we not been experiencing.
Speaker Change: The tariff and the expected softening of demand in the second half as price increases come into effect.
Speaker Change: We would've been at a consolidated plus 3% in Q3, and Q4 more or less and so it really was shaping up to be kind of that algorithm year with a low to mid single digit same store sales growth merchandise margin in the.
Speaker Change: A 40 basis point range and more not for the price increases that were foreseeing because of tariffs.
Speaker Change: Kind of brought that guidance down.
Speaker Change: Very helpful. I appreciate the detail. Thank you.
Speaker Change: Thanks, Peter for the next leader.
Speaker Change: The next question comes from Stephens, a cone with Citi. Please go ahead.
Great. Good afternoon, thanks, very much for taking my question I'll add my congrats as well John on the on the CEO role.
Speaker Change: I'm going to stick on the second half guidance because it seems like its conservative in the sense of if these.
Speaker Change: These price increases in the past you've been able to kind of pass that onto the consumer and then from a standpoint of the momentum in the business that with transactions I think up 6% in the in the fourth quarter I guess.
When you think about the ability to pass on price can you just talk a bit more about the strategy because it seems like there is some opportunity here, where you can take a little bit of this price up and if it's if it's passed out of the consumer and you hold margin rate that would be potential upside versus how you're thinking about the second half is that a correct assumption.
Speaker Change: Yeah, I think that's a fair assumption I would just reiterate this is a very fluid situation and so as we receive the price increases or the cost increases wholesale.
Speaker Change: Looking product by product style by style, and we will test and learn and do different things.
Speaker Change: To see kind of where the consumer is the goal would be to keep our pricing.
Speaker Change: Increases as low as we can but if we are receiving those.
Speaker Change: Price increases from our vendors, we will raise the pricing so it's fluid Steve I wish we had all the answers, but it's going to be.
Speaker Change: Something that does have some potential upside to the guide in the second half to back to your question.
Speaker Change: But we will have to wait and see so I think what we've put out there is a guidance that is.
Speaker Change: <unk> tariffs and the price increases related to those.
Speaker Change: And elasticity of demand then and.
Speaker Change: It would be seem conservative.
Speaker Change: Yeah, Okay. Thank you, yes, I'm sorry.
Speaker Change: Nowhere is the one or two pieces that I think I would add to it as Jim said it correctly. We've spent I've been spending a lot of time with the omni channel team exploring ways, we can test that price elasticity.
Speaker Change: And optimize pricing on our exclusive brands, but when it comes to third party products.
Speaker Change: There is a complicating factor would there would their map pricing their minimized advertised pricing one of the things we're I'm quite proud of that we've done here at boot barn is.
Speaker Change: Boot barn, dotcom as our digital flagship always matches the price in boot barn stores and that becomes difficult.
Speaker Change: If we try to be opportunistic in pricing and then not preserve margin, which has always been our strategy on those third party brands. So I think our strategy our strategy does differ quite a bit between how we're approaching the third party brands versus being more opportunistic with exclusive brands.
Speaker Change: Okay understood and then my second question was just merchandise margin was very strong in the fourth quarter and outpaced expectations can you just talk a little bit more about that in detail and maybe how you feel about the run rate of the business from a full price selling perspective.
Speaker Change: Yes, youre talking about the in the fourth quarter, our merch margin being higher than than expectations correct. Yes.
Speaker Change: Yeah. It was primarily due to the supply chain efficiencies that we've been seeing all of last year. We did see some there's some good news on shrink when we did our annual physical inventory that was better than what we had.
Speaker Change: Anticipated.
Speaker Change: <unk>.
Speaker Change: Continue to see these better buying economies of scale of volume discounts and that sort of thing and a little bit of exclusive brand penetration growth and so.
Speaker Change: What I would say as we look to fiscal 'twenty six the margin does continue to be to be strong its going to be what we saw this last year.
Speaker Change: Yes.
Speaker Change: Just to give you some color on the on the halves of the year the merchandise margin rate in the first half of the year, we expect to be very strong.
Speaker Change: Nearly 100 basis points of expansion in the first half of the year driven by a continued buying economies of scale a little bit of rate improvement in the first quarter and some exclusive brand penetration growth.
Speaker Change: We're selling and tariffs product through the system as we enter the second half that's when we expect the tariff expenses will put some pressure on the margin as we don't raise prices on all of our product to to maintain the margin rate. So I think the underlying.
Speaker Change: Environment around margins continues to be very strong.
Speaker Change: At the company.
Speaker Change: Okay I appreciate all the detail thanks.
Steve: Thanks, Steve.
Jay Sole: The next question comes from Jay sole with UBS. Please go ahead.
Jay Sole: Great. Thank you so much two questions from me number one can you talk a little bit more about SG&A I think within the fiscal 'twenty six guidance that you gave it looks like youre going to be able to leverage SG&A on a flat comp maybe just tell us a little bit around the mechanics about that how you can achieve that because that's a nice target and then secondly.
Jay Sole: You're talking about the $8 million and expense.
Jay Sole: Because of the tariff impact and that sounds like for the second half of fiscal 'twenty six but.
Jay Sole: Just a peak into fiscal 'twenty seven for a second would you expect you know essentially another 8 million cost for the first half of fiscal 2007, and does that $8 million in the second half of 'twenty six continue in the second half of 'twenty seven or do you think there is some progress. So eventually you sort of can either find a way to minimize those costs or at least raise price. So you get back to the regular.
Jay Sole: Merchandize margins that you're used to over time, thanks, so much.
Jay Sole: Yeah, great great questions, Jay I'll start with the $8 million expense. One is it's a little early to guide fiscal 'twenty seven and I know, we're the ones who put a fiscal 'twenty seven country of origin.
Jay Sole: Slide in there so.
Jay Sole: But youre right, we will have some of that expense carry with us into the next year, we would expect that if the $8 million of tariff expense that we're seeing in fiscal 'twenty six is really.
Jay Sole: Flowing through the P&L, primarily from the second half of the year and the continued tariff environment to the tariff expense that will pay will likely be more than the $8 million because we'll have a full year of tariffs enter next fiscal year.
Jay Sole: It's week to week, it's a little tricky to tell what the what the tariff rates are going to be.
Jay Sole: I think it's probably really early to tell for fiscal 'twenty seven, but I think that is a correct assumption that those will continue with US. We'll can we'll look at tariff mitigation strategies are over the next year as we plan fiscal 'twenty seven and start buying inventory in placing orders for fiscal <unk>.
Jay Sole: 'twenty seven but.
Jay Sole: I don't think that that goes away and then there is a question of pricing around that.
Jay Sole: And that will have to work through as far as SG&A for fiscal 'twenty six we expect to see some nice leverage on store payroll.
Jay Sole: And really as we look at the last year SG&A expense, we're planning on a more normalized incentive based compensation more normalized legal expenses, we had a handful of things that pushed our legal expenses up in this last year. So we don't expect those to continue so that that'll be some.
Jay Sole: Nice driver there.
Jay Sole: And the team is continuing to.
Jay Sole: Work really hard to keep expenses low and run lean as we add new stores that generate positive EBITDA that helps cover some of the fixed costs that we have in SG&A and so we're really starting to see the benefit of having more stores come in into the chain and just a reminder, that this also.
Jay Sole: Assumed.
Jay Sole: Assumes us absorbing some of the incentive based comp reversal that we had last year.
Jay Sole: And so despite that we're still planning on some nice SG&A leverage.
Speaker Change: Got it okay. Thank you so much.
Jay Sole: Thanks Jay.
Speaker Change: The next question comes from Max <unk> with TD Cowen. Please go ahead.
Speaker Change: Hey, Thanks, a lot guys and congrats on the nice start to the quarter.
Max: So first how are you thinking about what products or categories on the EV side, where you either increase decrease or maintain prices is it sounds like you're leaving the old three options on cable for now.
Max: Yes. This is John I'll take that one.
Max: We're looking at from a psychological price barrier standpoint, so we're looking at it product by product, it's not at the category level.
Max: I'll give you one specific example, we've got a one of our top selling women's western boots as a Cheyenne boot it sells for $199 99 wed likely leave a boot such as that at its current price given it would obviously go into the two hundreds.
Max: So it's going to be based on styles that we're deep in styles that are hitting psychological breakpoints from a pricing standpoint.
Categories, where we think we can grow exclusive brand penetration and.
Max: And be opportunistic so I think it.
Max: The consumer is going to vote on what they are willing to digest from a price increase standpoint, but at the same time, we if those price increases.
Max: You need to be mid single digits or a bit higher we've seen opportunities to increase our exclusive brand penetration and and allow more consumers to find our exclusive brands.
Max: As they're shopping for their next western or work boots.
Speaker Change: Got it so it's not necessarily purely just on elasticity.
Speaker Change: Alex or categories, there's more that goes into <unk>.
Speaker Change: Absolutely.
Speaker Change: Got it Okay, and then just a follow up can you speak to what Youre seeing in the competitive set is there.
Speaker Change: It behaving rationally.
Speaker Change: Their health is deteriorating as you do mostly compete against the mom and Pops that are probably starting to feel more distress and then ultimately as.
Speaker Change: As we think about the other side of this whenever that may be.
Speaker Change: Are you thinking in positioning the business to come out with potentially a step change in your market share.
Speaker Change: We haven't seen anything as of late again, the price increases have just started to come across our perennial basket in the last couple of weeks I'm sure. Most other retailers in the space are seeing the same thing.
Speaker Change: Their ability to preserve rate versus.
Speaker Change: Yes.
Speaker Change: Deal with a slowdown in consumer demand at the moment top level may be very different.
Speaker Change: The promotional cadence among our larger competitors, who are all very rational and always have been very rational in this space, we haven't seen anything.
Speaker Change: That would suggest that as shifting today.
Speaker Change: But if these if these price increases.
Speaker Change: Nick.
Speaker Change: Regardless of of tariffs coming down from $1 45 to 30 in China.
Speaker Change: I could see some challenges for the mom and Pops, but again the situation is very fluid, we have not seen anything to that effect as of yet.
Speaker Change: The larger competitors all seems still very rational.
Speaker Change: Great. Thanks, a lot guys. Thanks regards.
Speaker Change: Okay.
Speaker Change: Thanks Max.
Speaker Change: The next question comes from Janine Stichter with DTI G. Please go ahead.
Janine Stichter: Hi, Thanks for taking my question I was hoping you could talk a bit about the new markets versus legacy markets. How they are performing and any differences split this year with the 65 to 70, new stores and then I think this is the first time I've heard you speak to increasing online demand with a new starts with a new store opening on kind of a halo effect that we sometimes see e-commerce business.
Janine Stichter: Can you elaborate a little bit on that how much that is and how you typically see it at all thank you.
Janine Stichter: Yes, absolutely we as we look at the new store openings for this year, it's going to be across legacy markets and new markets. We've opened stores in Rhode Island, We've opened stores in Alaska, We have a store in Alaska, We've opened a store in Vermont.
Janine Stichter: This past year, and again, Alaska, and Vermont are very small markets, but we would see that e-commerce business jumped quite a bit I think the most notable example of e-commerce, increasing nicely as we open stores as the state of New York I think we're up to 12 stores in the state of New York now and we have a report.
Janine Stichter: And the E Commerce group that looks at sales by Phase III Commerce, and I've been watching for a year in New York is declining that list and I don't think that would be bought me. We were not opening stores in New York I don't have the numbers in front of me of exactly I mean use Alaska, Vermont.
Janine Stichter: My business Quintupled right. The second we opened those stores, but again very very small markets. The New York, New Jersey numbers that have to take a closer look at but we've been watching them continue to move up our list of top states year. After year as we've increased the number of stores in Pennsylvania, and New York New Jersey.
Janine Stichter: Great. Thanks, so much of the color.
Janine Stichter: Thank you.
Speaker Change: The next question comes from Jonathan Komp with Baird. Please go ahead.
Jonathan Komp: Yeah, Hi, good afternoon, I wanted to ask first.
Speaker Change: Same store sales when you look at a two year basis really have accelerated here at the last few months just as you step back and look at the trend.
Speaker Change: Standout in terms of what what's driving the recent performance here.
Speaker Change: Yeah.
Speaker Change: I think.
Speaker Change: One category that I have to call out as denim we saw a.
Speaker Change: A real shift in our mens.
Speaker Change: Mens and womens denim performance as we got into <unk>.
Speaker Change: Holiday last year, and we were in stock much more than we had been so if I had and we've seen nice increases in womens western boots men's western boots.
Speaker Change: Work apparel is doing nicely cowboy hats, but if I looked at one place where we have seen a real shift more so than the others. It is that denim business.
Speaker Change: And John I would just I would just add on that the.
Speaker Change: As you look at our at our deck on slide eight.
Speaker Change: The annual same store sales chart that we've got there.
Speaker Change: And just the consistent growth that we've seen over the years on a low to mid single digit.
Speaker Change: It does feel like we're back to that underlying strength in the business back to that algorithm, maybe even exceeding it a little bit and then business has been very strong on a one year basis looking back since August.
Speaker Change: With the exception of February where a lot of other retailers had some softness in their business. We had that nice strong mid to high single digit growth on a monthly basis and so that we.
Speaker Change: We have done the work we've looked at the current volumes and we've rolled that forward and so not to get everyone over their skis.
Speaker Change: We do feel like the guidance is laid out and the best way possible.
Speaker Change: Given what we're facing and around price increases and tariffs and that sort of thing, but the underlying strength is strong.
Speaker Change: Okay, Great that's really encouraging.
Speaker Change: Picture question on margin at the high end of the guidance this year.
Speaker Change: Almost assuming holding operating margin.
Speaker Change: As you step back and think about.
Speaker Change: So the headwinds and uncertainties this year.
Speaker Change: The time, you'll have to try and mitigation strategies.
Speaker Change: After this year.
Speaker Change: You think about sort of the broader context of getting back to rod.
Speaker Change: Mid teens operating margin over time.
Yes.
Speaker Change: We feel great about it.
Speaker Change: Back to that 15% I think is still well within our site and within our reach this year Youre right. We are holding that margin roughly roughly flat and <unk> seen some nice SG&A leverage that's helped helping offset some of that new store occupancy rate.
That puts some pressure on the buying and occupancy, but assuming this were a normal year, John and we didn't have the back half.
Speaker Change: Pressured at the top line and maybe a little bit in the merchandise margin line it would be.
Speaker Change: Nice year to build back some of that EBIT rate.
Speaker Change: Tens of basis points, not about a 100 basis points and so if you look at the next five or six years. After this if we get through this year I think we're right back in.
Speaker Change: And progressing towards that.
Speaker Change: Okay.
Speaker Change: That's great very helpful. Thanks again.
Speaker Change: Thanks, Sean.
Speaker Change: The next question comes from Chris <unk> with Bank of America. Please go ahead.
Chris: Thanks, guys. Good afternoon, so Jon now that you're settling into the role on a permanent basis, what changes if any can we expect in terms of how you're planning to run the business relative to the prior regime than outside of Paris, what portion of the company's strategy are you most focused on today.
Chris: Yeah, Great question, So as I've said on the last call and I'll continue to say the four strategic initiatives remain unchanged.
Chris: We've had them for close to 12 years and any adjustments I will be making will be under those the current and future for strategic initiatives.
Chris: Could just call out a couple of them that have been my focus and now that I have the role permanently continues to be my focus. The first one is sourcing our exclusive brand team as we've just talked about talked about with the tariff situation has done an incredible job lowering our exposure to China, and diversifying which countries. We're in from a supply chain standard.
Chris: <unk>.
Chris: And I think the next opportunity within that is to use the size and scale of our exclusive brand business to drive better costing so focusing on the margin structure of EV and to that effect. We've recently hired a new vice president of sourcing who just started on Monday and that that will be her.
Chris: Area of focus so margin structure on exclusive brands is absolutely one of my focuses.
Chris: A couple of other ones, our exclusive brands and focusing on the big brands the ones that really resonates deeply with our customer base, our Cody James Cheyenne, Idaho wind.
Chris: Having some separate marketing campaigns around those brands themselves not only around boot barns, so putting more muscle behind our best exclusive brands and then the last one is reinvigorating work. So we know we've been challenged in the work boot business work apparel doing a little bit better but work boots have.
Chris: Been flattish for the past several quarters, and we're going to put a spotlight and some marketing dollars behind the work boot business with some major marketing campaigns that cover a search social video call or Influencers really driving home. The message that you should be proud of working in the trades.
Chris: And that will be both Tony and Hawks base. So we're going to push hard on the work boot business, both talking to the customer and then talking to our store partners using some of our AI tools Cassidy, namely to Hell.
Chris: Our store partners better understand how to sell a functional work.
Speaker Change: Great that was very helpful. Thanks, Thanks, John and then just a quick modeling follow up just on SG&A do you think we can see greater library, if sales do come in better than your base case or do you foresee other factors that could temper that potential upside to that line item.
Speaker Change: No I think if sales do.
John Hayes: Exceed the high end of the range that we expect to see some leverage on the SG&A rate.
John Hayes: SG&A rate above and beyond what we guided there at 50 basis points.
Speaker Change: Okay very clear thank you.
John Hayes: Thanks, Chris.
Speaker Change: The next question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please go ahead.
Jeremy Hamblin: Thanks, and congrats John and the team on the on the momentum.
Jeremy Hamblin: I wanted to first ask about the ecommerce business.
Jeremy Hamblin: Which has been a little bit more volatile.
Jeremy Hamblin: For a variety of reasons.
Jeremy Hamblin: And if you look at February softer retail store performance, but you know solid E comm performance.
More recently some weakness in April followed by it's only a couple of weeks, but a pretty big bounce back here in May just wanted to get a sense for why you think you might be seeing a bit more volatility in that business is that.
Jeremy Hamblin: You know kind of promotional driven you know competitive promotion driven or you know I'm a little bit more color just on of that than kind of your.
Jeremy Hamblin: Your outlook there on.
Jeremy Hamblin: Building that business back up in terms of a percent of sales.
Jeremy Hamblin: Absolutely, yes, if we again I always focus of course on coupon Dot com. It makes up north of 75% of our business and that business has been double digit comp positive a little bit of a drag from some of the other businesses shufflers country, outfitter, and our and our Amazon business.
Jeremy Hamblin: But.
Jeremy Hamblin: February of course, there was softness across all of retail that from what I've been able to tell and what we've heard from others no one ever really teased out what happened in February it was a little puzzling and we saw some of that but that's not really what carry through as you look at April we we had two things going on in April one we at the end.
Jeremy Hamblin: Our last fiscal year or two years ago, we had a promotion that carried over into last fiscal year into April that we did not repeat this year. So we have more full price selling a healthier e-commerce business from a gross margin dollar EBIT contribution standpoint in April so that April number as a result of an aggressive.
Jeremy Hamblin: Promotion that we had the.
Jeremy Hamblin: The year prior the second piece that deserves a callout is we've got a major third party vendor that is in the middle of some systems upgrades and we do some drop ship with them and that makes up.
Jeremy Hamblin: More than a couple of points of the e-commerce comp given that drop ship inventory was not available to us during that time.
Speaker Change: Great color and then just one other one here on the cadence of store openings on 65 to 70 stores that are that you're expecting and I wasn't sure. If you actually gave a percentage of of openings in legacy markets versus new markets.
Jeremy Hamblin: Yeah.
Jeremy Hamblin: Yes, the first quarter.
Jeremy Hamblin: It will be.
Jeremy Hamblin: Yeah.
Jeremy Hamblin: And that 10 to 12 store range and then the balance of the year should be spread out pretty well.
Jeremy Hamblin: Between the three the three quarters as far as.
Jeremy Hamblin: Legacy markets new markets.
We're going to be opening all across the country filling in existing markets.
Jeremy Hamblin: And opening in some some brand new market. So it can be pretty broad based across the country.
Speaker Change: Great. Thanks, Good luck guys.
Jeremy Hamblin: Thank you.
The next question comes from Sam Poser with Williams trading. Please go ahead.
Sam Poser: Thank you for thank you for taking my questions I.
Sam Poser: I guess my first question is do you think within this the recent strength that there has been that your consumers aware of the potential tariffs and the potential price increases in some of the what's going on right now maybe just some pull forward.
Sam Poser: Especially for Europe, or the work folks that will buy.
Sam Poser: No that they'll need and when they will need it.
Sam Poser: Hey, Sam how are you.
John Hayes: John Yes, we do not see that so we had the it's a great question. We had a similar hypothesis and we thought that could have been happening we had our data science team and CRM team go back and look at our customers and look at frequency and see if there was any change in.
John Hayes: Basket size and number of transactions over the last six months over the last nine months, especially as we got into the noise. The more recent noise of tariffs and we just can't find any data that would suggest that we are seeing any pull forward of demand or people buying product ahead of when they need it.
John Hayes: Thank you and then and then to follow up on one of the earlier questions regarding how long you know assuming assuming your assumptions are correct.
John Hayes: Along the headwind last and.
John Hayes: By the time, we get to the beginning of the next year, you'll still have.
John Hayes: I mean, you'll you'll actually have more goods with the tariff impact. So theoretically you will clear these headwinds.
John Hayes: I just want to confirm you won't clearly some headwinds just because of your product mix.
John Hayes: Until we get to the.
John Hayes: At the end of Q2, 2007, I mean does that.
John Hayes: Is that just the way to think about it because you have so much inventory at the old prices now that'll start to flow through.
John Hayes: Slowly flow through by the end of the calendar year.
John Hayes: Late Q3.
John Hayes: At the end of Q3, you'll have mostly all the higher tariff good it'll just keep on going until you lap it completely.
John Hayes: Yes.
John Hayes: Whatever.
Sam Poser: Yes, I mean, we turned our inventory around two times, a year, a little bit less than that and so you are right. Sam is we buy the tariffs inventory and the tariff goods and we work that into the system it will be.
Sam Poser: Into next year at the beginning part of next year before we see everything that's in the system.
Sam Poser: Bing.
Sam Poser: Having been purchased with the tariff.
So, yes, youre thinking about that the right way.
Sam Poser: And then and then lastly, you talked about that.
Sam Poser: You talk about the breakdown of where you're buying your.
Sam Poser:
Sam Poser: Your products from and how that is going to evolve, especially out of China.
Sam Poser: I'm sort of I mean, western boots make up what percentage of your total business of your total.
Brad: This is Brad.
Sam Poser: Okay.
Sam Poser: The western boots for exclusive brands is similar to what it is for the overall company.
Sam Poser: And so it's roughly a 38%.
Sam Poser: Yes.
Sam Poser: Penetration.
Speaker Change: Of your exclusive within your exclusive brands I'm, just surprised that Mexico sourcing doesn't go up more within.
Sam Poser: Within the mix.
Sam Poser: Yes, so if you think about the Mexico sourcing exclusive exclusive brand.
Sam Poser: Leather soled cowboy boots.
Sam Poser: The majority almost all of them are made in Mexico today.
Speaker Change: You are right there is opportunity to further increase the Mexico production and what we've sourced there in the past have also been some rubber soled western boots, and so theres opportunity immediately to bring some of that back and the team's done a nice job of starting to look for.
Speaker Change: As to bring more of that production back into Mexico and so.
Speaker Change: You are right. If you look at the numbers on this on this piece of paper.
Speaker Change: The slide there isn't much of an increase to Mexico, we have increased already in late in our fiscal 'twenty five number in fiscal 'twenty six from what we talked about before being in the upper Twenty's.
Speaker Change: But there is opportunity for us to do more in Mexico, and maybe that number goes up.
Speaker Change: Great well. Thank you continued success.
Sam Poser: Thanks Sam.
Speaker Change: The next question comes from Ashley Owens with Keybanc capital markets. Please go ahead.
Ashley Owens: Thanks, so much so maybe just to start off can keep discussing exclusive brands pretty in detail there Scott.
Ashley Owens: You mentioned, you're aiming a whole pace in certain items within the portfolio.
Ashley Owens: Yeah, he's talking about the current assortment that would be curious does that dynamic create an opportunity to extend exclusive offerings into new styles with what you're seeing with a third party.
Ashley Owens: Any color you can provide on maybe your style categories and price points to potentially capture more share from some of those more elastic consumers, who maybe aren't willing to pay up to that expected price increases and just how opportunistic do you want to be there.
Ashley Owens: Yes, it's a great question.
Ashley Owens: We haven't really explored that as of yet one of the things. We've always been very cautious of is we want to make sure that our exclusive brands have the same quality and build as the third party brands.
Ashley Owens: And we don't want.
Ashley Owens: Too much of an entry level Buda I suppose is one way I could put it but we will there are boots that are as im looking down a list of our best sellers there, they're our exclusive brand boots that as these price increases go into effect with third parties and that kind of disseminated across all western and work.
Ashley Owens: Taylor's.
Ashley Owens: <unk>.
Ashley Owens: They will look very attractive from a price point standpoint, so maybe not an entry level point.
Ashley Owens: But.
More attractive most certainly than everybody else and we've always assorted.
Ashley Owens: Our exclusive brands.
Ashley Owens: Especially from a boot standpoint with good better best So we you know and maybe it's an entry level.
Our price point, but a good better best so there there are boots. Currently today that are competitive from a price standpoint, and they will be even more competitive price wise as third party brands raise retails across the rest of the western space.
Ashley Owens: Okay got it that's helpful color. Thank you.
Ashley Owens: Youre welcome.
Speaker Change: The next question comes from Mitch <unk> with Seaport Research. Please go ahead.
Mitch <unk>: Yes, thanks for taking my questions.
Speaker Change: I guess that kind of a two parter on exclusive.
Mitch <unk>: So.
Mitch <unk>: So I guess my first question is you've talked about maybe taking surprised if you're not taking some price, but I'm curious what's embedded.
Mitch <unk>: In the Merch margin guide you you've given us the 8 million on Cogs Youre also giving us a merch margin range or is any taking a price embedded in that or does that merchandise margin all mitigated on the tariff costs.
Mitch <unk>: Yes, so the.
Mitch <unk>: That make sure I'm understanding your question correctly, Mitch I'll restate it a little bit in my answers so that the merchandise margin rate being flat for the full year Embeds us absorbing some of the of the tariff expense ourselves and not passing.
Speaker Change: Along completely to our customers.
Speaker Change: And where we wouldn't be passing on the price increases would be in <unk>.
Speaker Change: Primarily in the exclusive brand area.
No.
Speaker Change: Of the product Assortments.
Speaker Change: Did I understand the question correctly.
Speaker Change: That's my kind of my question is whats actually embedded in that merch margin rate some mitigation no mitigation.
Speaker Change:
Yes, we will we will have.
Speaker Change: Some mitigation I think if we had full mitigation our merchandize margin rate for the year would probably be closer to the 40 basis points.
Speaker Change: Yes, that's absorbing the entire $8 million.
Speaker Change: And we feel really good about the numbers, we put out there Mitch but I just would remind you. This is a very fluid situation and we've got 10 months ahead of us to really work through this but I feel like the team's done a really nice job of capturing this at the product level.
Speaker Change: And but there will be decisions that.
Speaker Change: Have not yet been made product by product.
Speaker Change: To get there.
And then the EV penetration at the 100 basis points for the year.
Speaker Change: Does that breakout first half second half if I heard correctly I think you said that the penetration would be up like 180 bps in <unk>. It would stand to reason that maybe the penetration could be even higher in the back half you know just given that.
Speaker Change: The ECB might look more compelling to the consumer if you don't take price can you kind of break that out a little bit.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: It's a great question and a fair assumption.
Speaker Change: The first quarter, we have 190 basis points of E B exclusive brand penetration growth.
Speaker Change: The second quarter is also above the 100 basis points and then the second half it gets.
Speaker Change: A little bit a little bit lower so.
Speaker Change: There is opportunity to the extent that customers gravitate towards our exclusive brands, whether that's via price or style or.
Speaker Change: High quality, there is opportunity for that to grow further.
Speaker Change: Okay, and then I guess lastly on the SG&A leverage Jim I think you said the leverage point is flat I wanted to say previously that was at 2% or maybe I'm wrong about that but if that has changed what has sort of changed in the in the maybe the overhead structure to kind of bring it down a couple hundred basis.
Speaker Change: Points.
Yeah.
Speaker Change: I would remind you that the fiscal 'twenty six number I would anticipate as we get into the next year, maybe that goes up probably not back up to a 2% and really that for the current year is some of the high cost that we had last year that we're not expecting to repeat so maybe some more one off type items and then.
Speaker Change: The second piece of that as we opened the number of stores 60 stores this year and they are generating.
Speaker Change: Knight.
Speaker Change: Cash flow and EBITDA were able to cover more of the fixed costs companywide by by more sales volume and then that helps.
Speaker Change: Bring that leverage point down just a little bit.
Speaker Change: Okay. That's helpful. Thanks.
Speaker Change: Thanks, Matt.
Thanks Mitch.
Speaker Change: The next question comes from Jeff <unk> with Stephens, Inc. Please go ahead.
Speaker Change: Good evening, Thanks for running the call a little later and taking my question and congrats John.
Speaker Change: No problem, Jim I was just wondering you did a good job of educating everybody.
Speaker Change: The ICR conference about the just the kind of shifted.
Speaker Change: Year, two and year, three vintage stores and how that influences the comp I Wonder if you could just maybe comment on how thats progressing because it does look like you'll.
Speaker Change: You'll have a greater.
Speaker Change: Position of year, two and year three stores in the comp base.
Yes, Thank you Jeff the.
Speaker Change: Youre right.
Speaker Change: New store waterfall continues to look nicely just a reminder, that the first year of store goes comp it comps roughly in line with the chain average in that second year comp is where we're really seeing some nice outperformance in the chain average.
Speaker Change: Third year, it's still a little too early to tell it depends a little bit by class of stores you know, sometimes it's a nice tailwind sometimes it's less so.
I would say is that we did do some some work and we looked at the average annual sales volume for the most recent year fiscal 'twenty five that we just finished up in stores that opened in fiscal 'twenty, one averaged higher volumes in those open in 'twenty, two and those in fiscal 'twenty to perform better than those in 'twenty, three and then 23 better than.
Speaker Change: 24, so we are seeing a nice result, with how those stores are continuing to add volume.
Speaker Change: As the years progressed.
Speaker Change: Just a quick follow up as you guys look at the summer calendar this year any callouts in terms of.
Speaker Change: Headwind or tailwind in that maybe even if you could comment.
Speaker Change: Any new acts.
Speaker Change: Kind of getting some great traction with Green Leone.
Speaker Change: Anyone need to call out there.
Speaker Change: The concert.
Speaker Change: Lineup the summer looks decent it doesn't look spectacular it doesn't look it doesn't look bad in any way it looks like a summer of probably less stadium tours than last year, but more festivals.
Speaker Change: We actually have a festival this weekend in Gulf shores, Alabama with Morgan wall in the sand in my Boots Festival, we're going to have a stage, we're going to be the main pages to boot barn stage.
Speaker Change: The secondary stage is going to be the Cody James stage, which is something new that we haven't done before.
Speaker Change: We're going to continue to sponsor or close to 1000 rodeos. This year. So the rodeo sponsorship market still looks great and the celebrity tie ins there rightly green who has been the big one.
Speaker Change: Right now and we spent some time with Riley at the Atms just the other day and we're continue to you kind of not by the Upfronts as I call them. When it comes to these music sponsorships and wait for some of the remnant opportunities, which has worked well for us in the past.
Speaker Change: Awesome well congrats on the next quarter and look forward to catching up soon.
Speaker Change: Thank you.
Cory <unk>: The next question comes from Cory <unk> with Jefferies. Please go ahead.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: Jim I was just wondering if you could talk a little bit about the comp guide and maybe just unpack for US how you think about the drivers of that.
Speaker Change: Its traffic what's ticket how much promotions embedded how much tariff is embedded in there in terms of price.
Speaker Change: Then what does that shape look like throughout the year.
Speaker Change: Yeah. So so great great question, we expect the let me just backup the nice comp growth that we've seen over the last few quarters has been driven by an increase in transactions with with the basket being roughly flat.
Speaker Change: As we are looking at Q1 and Q2, we expect to continue to see that driven by increase in transactions.
Speaker Change: As we get into the second half of the year, we would expect to see the price increases impacting the transactions and as transactions come down.
Speaker Change: We are coming up.
Speaker Change: And so that being those two kind of offsetting a little bit in the second half of the year.
Speaker Change: Okay got it that's really helpful. And then just on your overall capital allocation strategy.
Speaker Change: The repurchase announcement of $200 million would just be curious in terms of kind of what you view as the best approach for capital allocation.
Speaker Change: Returning excess cash to shareholders and how you prioritize and rank the different levers that you have to pull for that.
Speaker Change: Sure. So so I think the.
Speaker Change: Our number one focus is to generate cash.
Speaker Change: Funds, new stores that have a tremendous payback and then this new piece of it is we've continued to generate more cash than necessary to to operate those stores and we've paid off our debt we have.
Speaker Change: Nice capacity on our line of credit.
Speaker Change: To give some back to the share the shareholders and really our thought around this is for it to be a very methodical.
Speaker Change: Repurchase program.
Speaker Change: Yes.
Speaker Change: And maybe there'd be an occasional opportunistic buybacks, but really just every quarter buyback a certain level of shares in itself, it's not a huge amount.
Speaker Change: If we did roughly $50 million a year, we're not committing to that on this call we've authorized $200 million, but to have something where its really methodical every quarter and we have the flexibility to increase or decrease that depending on whats.
Speaker Change: What's going on with the business.
Speaker Change: Okay, great. Thank you so much.
Corey: Thanks Corey.
Corey: This concludes our question and answer session I would like to turn the conference back over to John Hazen for any closing remarks.
Corey: Thank you everyone for joining the call today, we look forward to speaking with you all on our first quarter earnings call take care.
Corey: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Corey: Yeah.
[music].
Corey: Yeah.
Corey: [noise].