Boot Barn Holdings, Inc. Q3 FY2025 earnings call

Expanding our store base

• Opened 13 stores in the third quarter, ending with 438 stores in 46 states. Planned to open 21 stores in the fourth quarter, with a full year total of 60 new stores, aiming to double the store account in the US over several years.

Driving same store sales

• Consolidated same store sales grew 8.6% in the third quarter, with brick and mortar up 8.2% and e-commerce up 11.1%. All major merchandise categories had positive comp sales. Marketing efforts expanded brand awareness, and loyalty program active customers reached 9.4 million, a 15% increase over the prior year.

Strengthening our omnichannel leadership

• E-commerce comp sales grew 11.1% in the third quarter. Approximately half of online orders were shipped from stores during critical holiday weeks. Hired a new Chief Digital Officer.

Merchandise margin expansion and exclusive brands

• Merchandise margin expanded 130 basis points in the third quarter driven by supply chain efficiencies, better buying economies of scale, and growth in exclusive brand penetration. Exclusive brand penetration increased 180 basis points.

In the third quarter, revenue increased by 17%, including a consolidated same store sales growth of 8.6%. Same store sales in stores increased by 8.2% and in e-commerce increased by 11.1%. Net sales reached $608 million, a 16.9% increase. Gross profit was $239 million, a 20% increase, with a gross profit rate of 39.3%, a 100 basis point increase from the prior year. Inventory increased 23% over the prior year period to $690 million. Earnings per diluted share were $2.43, $0.36 above the high end of the guidance range and $0.62 higher than the prior year period.

Fourth quarter guidance

• Expected total sales at the high end of the range to be $460 million. Consolidated same store sales expected to increase 7.8%, with retail store same store sales up 7.2% and e-commerce same store sales up 12.1%. Gross profit expected to be $168 million, income from operations $51 million, and earnings per diluted share $1.26.

Full year 2025 guidance

• Raised full year total sales to the high end of the range at $1.92 billion, up 15% from fiscal '24. Same store sales expected to increase 5.9%. Gross profit expected to be $716 million, income from operations $241 million, net income $182 million, and earnings per diluted share $5.90, a $0.30 increase from prior guidance. Expected to open 60 new stores this fiscal year, with capital expenditures of $120 million.

• Tariff risk: Mexico accounts for 25% of orders for leather-soled cowboy boots. If tariffs are imposed, may need to negotiate pricing with vendors or pass some on to consumers.

Q: Matthew Boss asked about traffic and demand in January and business change relative to historical mid-single-digit comp growth. John Hazen said January saw acceleration in men's and women's Western categories, boots and apparel, with no major changes expected in the remainder of the quarter and Easter having little impact.

A: John Hazen Q: Peter Keith inquired about inventory and same store sales growth. John Hazen replied inventory is in a good position, markdown inventory is lower than last year and pre-COVID, and products have no fashion risk.

A: John Hazen Q: Steven Zaccone asked about Mexico tariff exposure. John Hazen said Mexico accounts for 25% of orders, testing other countries, and may negotiate pricing or pass on tariffs if significant. Jim Watkins added tariff number affects impact and previous concessions were made.

A: John Hazen, Jim Watkins Q: Max Rakhlenko asked about store density and cannibalization. Jim Watkins said it depends on the market, new stores factor in cannibalization and payback, mature stores perform well, and taking share from local competitors and existing customers.

A: Jim Watkins Q: Ethan Saghi asked about private label opportunities. Jim Watkins mentioned Hawks and Cody James brands, with Hawks having more opportunity in work boots.

A: Jim Watkins Q: Corey Tarlowe asked about merchandise margin long-term drivers and B&O deleveraging. Jim Watkins said buying and occupancy deleveraging is affected by 15% new unit growth, and details for the next few years will be updated later.

A: Jim Watkins Q: Jeremy Hamblin asked about merchandise assortment and future opportunities. John Hazen said happy with current assortment, with small tweaks like targeting Just Country customers more.

A: John Hazen Q: Ashley Owens asked about ATV trend. Jim Watkins said same store sales growth is transaction-driven, with trends expected to continue.

A: Jim Watkins Q: Jonathan Komp asked about e-commerce acceleration and store marketing campaigns. Jim Watkins said e-commerce is traffic-driven, using Connected TV and artist collaborations, and continuing traditional radio.

A: Jim Watkins