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Boot Barn’s Average Store Sells 55% More than 2021

Boot Barn’s net sales grew 5.9 percent in its third quarter to $514.6 million on net income of $52.8 million, or $1.74 per diluted share.

The Western-themed lifestyle retailer raised top-line estimates for the remainder of its fiscal year, while lowering its bottom-line projections when releasing fourth-quarter guidance update.

In a Nutshell: Boot Barn released the bare bones of its third-quarter results earlier this month at the ICR Conference, but the company this week gave a more in-depth look at its expectations for the remainder of the fiscal year.

For the fourth quarter, Boot Barn now expects total sales of $438 million to $448 million, representing growth of 14.4 percent to 17 percent over the prior year. The projections pushed the company’s full-year outlook to a sales range of $1.67 billion to $1.68 billion, which would mark growth of 12.2 percent to 12.9 percent over the prior year. Previous expectations were between $1.65 billion and $1.67 billion.

The Irvine, Calif.-based retailer now forecasts net income of $167.2 million to $170 million for the full year, down from prior prognoses of $173.3 million to $179.3 million.

Thus far, the retailer says preliminary consolidated same-store sales in January have declined 1.5 percent compared to January 2022, driven by a 16 percent decrease in e-commerce sales, partially offset by 1.2 percent growth in retail store same-store sales.

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During the third quarter, Boot Barn’s strongest growth categories were work apparel and men’s Western apparel, said Jim Conroy, president and CEO of Boot Barn, during an earnings call.

“While sales of men’s and ladies’ Western boots and ladies’ apparel has declined, it is important to note that each of these businesses was up against incredibly strong double-digit or triple-digit growth in the prior year period,” said Conroy. “From a geographic standpoint, we saw growth in our East and North regions, a slight decline in our South region and a mid-single-digit decline in our West region, which is perennially our strongest region. Given the outsized growth we saw in all regions of more than 50 percent in our prior-year period, we are again pleased with the performance across the country.”

In the call, Conroy once again called out the retailer’s 900-store target, which would nearly triple Boot Barn’s fleet of 333 locations at quarter’s end. The company opened 12 stores in the third quarter, and increased its expected full-year store expansion from 40 to 43 stores. The 10 stores the retailer plans to open in the fourth quarter will mark Boot Barn’s sixth quarter in a row of opening at least 10 new stores.

“When looking at our January business on an annualized basis, we continued to maintain an average unit sales volume of approximately $4.2 million per store,” said Conroy. “This elevated store sales volume began in April 2021 and now sustained itself for 22 consecutive months. For reference, our average store sales volume historically had been $2.7 million annually and is now more than 55 percent higher than that.”

Boot Barn isn’t guiding for its store count for next year yet, but Conroy said “it would be surprising if we didn’t guide 40 or 45 or 50 stores for fiscal 2024.”

Total inventory at Boot Barn as of Dec. 24 was $592.2 million, up 53.6 percent from the $385.6 million in merchandise it carried the year prior. The increase was primarily driven by added inventory in the company’s distribution centers in order to support new store openings and growth of its exclusive brands.

Average comp store inventory increased approximately 20 percent over the prior year period in order to support the elevated level of average unit sales volume per store.

Gross margin dipped to 36.5 percent of net sales, 2.9 percent from the 39.4 percent of net sales in the prior-year period. Gross profit decreased primarily due to higher freight expense and cost of merchandise, including a 1.9-percent decrease in merchandise margin and 1 percent of deleverage in buying, occupancy and distribution center costs. The decline in merchandise margin rate was driven primarily by a 1.8-percent headwind from higher freight expense.

The retailer finished the third quarter with $50.4 million in cash on hand and $59.1 million drawn under its $250 million revolving credit facility.

Net Sales: Net sales at Boot Barn increased 5.9 percent to $514.6 million from $485.9 million generated in the 2021 fourth quarter.

Consolidated same-store sales decreased 3.6 percent compared to the prior-year period, comprised of a decrease in retail store same-store sales of 0.8 percent and a decrease in e-commerce same store sales of 15.2 percent.

The increase in net sales was the result of the incremental sales from new stores opened over the past 12 months, partially offset by the decrease in consolidated same-store sales. Higher average unit retail (AUR) prices, driven in part by inflation, further contributed to the increase in net sales, Boot Barn said.

Net Earnings: Net income was $52.8 million, or $1.74 per diluted share, compared to net income of $69.2 million in year-ago third quarter, or $2.27 per diluted share in the prior-year period.

Income from operations dipped $19.7 million year over year to $72.5 million, or 14.1 percent of net sales, compared to $92.2 million, or 19 percent of net sales in the prior-year period.

CEO’s Take: While Boot Barn’s store base continues to expand nationwide, the retailer’s overall brick-and-mortar strategy evolved to generate mass appeal across a broader customer base, according to Conroy.

“Historically, and this goes back five or 10 years, we were really looking for a destination location that somebody who was squarely in the Western and perhaps work customer segment would drive to us to shop,” Conroy said. “Then when we tried to take the brand and broaden its definition to attract more customers, and we expanded the merchandise assortment that was outside of just Western product and run in some more casual country products…our new store locations followed suit. So we are now in more traditional power centers that might be next to a Costco or a Home Depot or a Walmart or Dick’s Sporting Goods, etc., where in the past, we were sometimes sort of by ourselves in maybe a third-rate center.”