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Boot Barn’s ‘Essential’ Status Couldn’t Stave Off 4.7% Comp Sales Drop

Boot Barn Holdings CEO Jim Conroy said the majority of the footwear chain’s stores have remained open while the rest of retail suffered under the coronavirus lockdown, though the immediate future of the business continues to be uncertain following fiscal 2020.

In a Nutshell: Nearly every state in which Boot Barn operates recognized its role as a necessary supplier for the work boots and footwear required by essential workers while other outlets were forced to close. As a result, approximately 200 of its roughly 250 stores remained open throughout the early lockdown period, according to Conroy.

“Additionally, we augmented and launched several other services that further integrated our digital and store channels, including upgrading buy online, pickup in-store capability and adding a curbside pickup option,” Conroy said.

At the beginning of the pandemic, the company gave store associates the option to either take a voluntary furlough while maintaining health benefits or to remain in their usual store roles to take advantage of premium pay. Only a few stores were unable to put together effective teams, Conroy said, and the strategy was effective in keeping its stores open for business.

Boot Barn still saw a “significant decline” in traffic and reported a drop in comparable sales during the quarter that was partially offset by growth in e-commerce. The Houston Rodeo, an event that typically drives a western wear sales bump, was canceled in early March, leading to a 50 percent decline in same-store sales for the last two weeks of the month.

Midway through April, Conroy said sales jumped both online and in store after falling by 45 percent, shift the company attributed to consumers receiving stimulus checks.

High unemployment, depressed oil prices and a shift to digital sales will create issues for the retailer in the future, Conroy said, and Boot Barn is currently focused on minimizing its vulnerability by reducing inventory expenses and capital expenditures. Still, the company expects to open 10 stores in fiscal 2021 along with another five that were deferred from March.

Conroy believes Boot Barn’s reliance on sales of products with a functional purpose will limit the near-term inventory liabilities to women’s apparel and some footwear.

“We have also expanded our assortment of product for first responders and healthcare workers including both industry-specific footwear as well as scrubs in many of our stores,” Conroy said. “While we have been looking for sales with opportunities, at the same time we’ve also been deferring, canceling and shifting receipts of merchandise and other categories that are not in high demand and have more inherent inventory risk like ladies apparel.”

Sales: In the fourth quarter, net sales decreased by 2.1 percent to $188.6 million, below the Wall Street estimate of $198.36 million. Same-store sales decreased by 4.7 percent as a 7.1 percent setback in retail sales was slightly offset by a 7.5 percent increase in e-commerce sales.

Throughout the year, net sales improved 8.8 percent to $845.6 million, lower than Wall Street’s $855.31 million estimate. Same-store sales improved by 5 percent on a 4.5 percent retail sales increase and a 7.4 percent jump in e-commerce.

Boot Barn inventory has shifted “dramatically” to work boots, work apparel and basic denim, currently comprising half of the retailer’s business—which marks an historic increase in sales penetration for those categories, the company said. Boot Barn expects this to continue in the near term and is pivoting its assortment to take advantage of the shift.

Boot Barn handled the significant increase in e-commerce sales without changing fixed cost infrastructure and merchants have handled inventory to limit merchandise margin headwinds. A more aggressive approach to spring clearing and relaxed minimum-price guidelines in e-commerce selling may have a modest impact on margins in the short term, however.

Earnings: On net income of 5.7 million, Boot Barn Holdings generated 30 cents earnings per diluted share in the fourth quarter, above Wall Street’s 28-cent estimate.

For the full year, net income reached $47.9 million to account for earnings per diluted share of $1.64, below the full-year Wall Street estimate of $1.74.

CEO’s Take: “While the majority of our stores remain open, they are operating at reduced hours and are experiencing significant declines in traffic,” Conroy said. “This headwind has been partially offset by an acceleration in demand on our e-commerce sites.

“Despite these challenging times, I am confident that we will emerge from this crisis well positioned to resume our momentum and deliver against our long-term financial objectives,” he added.

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