Boot Barn Holdings, Inc. Q2 FY2026 earnings call

New Store Growth

• Opened 30 stores halfway through fiscal '26, expect 40 more by end of year, total 70 new stores. New stores average $3.2 million in annual sales and pay back initial investment in <2 years. New stores opened over last 6 years provide ~100 basis point tailwind to consolidated annual comps.

Total Addressable Market and Long-Term Store Count

• Total addressable market expanded from $40 billion to $58 billion. Long-term store count potential at 1,200 stores, expecting 12%-15% new units annually. Projected 20 openings in first quarter of fiscal '27 starting April.

Merchandising

• Broad-based growth across categories: ladies up mid-teens, men's high single digits, denim high teens, work boots low single digits, work apparel mid single digits. Continued growth from first to second quarter.

Marketing

• Sponsors hundreds of rodeos/events, partnerships with country music artists, official boot retailer for Stagecoach Music Festival.

Omnichannel

• E-commerce comp sales up 14.4%, AI used to improve website search, product copy, and training. New exclusive brand websites for Hawx and Cody James driving traffic and new customers.

Merchandise Margin Expansion

• Margin up 80 basis points, exclusive brand penetration 41%. Limited exclusive brand price increases to evaluate customer reaction, plan to raise prices on exclusive brands post-holiday to mitigate tariff impact.

In the second quarter, revenue increased 19% to $505 million. Consolidated same-store sales growth was 8.4%. Merchandise margin rate increased 80 basis points. Exclusive brand penetration was 41% of sales. Net sales growth was driven by new stores and same-store sales growth. Gross profit increased 20% to $184 million, with gross profit rate at 36.4%. SG&A expenses decreased to 25.3% of sales from 26.5% in the prior year. Net income per diluted share was $1.37, up 44% from $0.95 in the prior year.

Full Year Fiscal '26

• Total sales expected $2.235B (+17% y/y), same-store sales +6% (retail store +5.3%, e-commerce +13%), merchandise margin ~50.6% of sales, income from operations $294M, net income $219.6M, EPS $7.15. Open 70 new stores. Capital expenditures $125M-$130M. Effective tax rate 26%.

Third Quarter Fiscal '26

• Sales at high end of $700M, same-store sales +4.5%, merchandise margin ~49.7% of sales, income from operations $107M, EPS $2.59. Excludes one-time benefit from prior year related to CEO resignation.

• Tariffs impacting product costs, may require price increases on exclusive brands. - Macro uncertainty affecting consumer sentiment and sales.

Q: And congrats on a great quarter. So John, could you elaborate on the drivers of October's further comp acceleration? And then on the more than 30% increase to your long-term store target today, does this embed any moderation in unit economics? And maybe if you could speak to regions of largest white space opportunity?

A: Yes, absolutely. Starting with the October business, it was very much in line with the major merchandise categories that we saw in Q2. The one exception being a nice build or acceleration in work boots from a low single-digit comp to a mid-single-digit comp. But otherwise, if we look at women's -- men's and women's boots, men's and women's apparel, it was very much in line with the performance and the comps that we saw in Q2. As we look at the 1,200 store count across the country, our average store right now is a $3.2 million door. And we think that the 1,200 stores will be on average with those stores. We have stores today that do a little bit less than that. We have stores who do a lot more than that. So the 1,200 store count is within the algorithm we have for the current stores that we are building.

Q: The TAM increase is pretty impressive from $40 billion to $58 billion, so a 45% increase. I was hoping if you could just unpack that a little bit. And is it specific categories, age demographics, the proliferation of Western wear? Like what's driving this large increase just after taking up about 3 years ago?

A: Sure. So Peter, we partnered with a third party that looked at the demographics, of course, across the country, anyone older than 18. We surveyed roughly 8,000 consumers, looked at the familiarity they had with different brands, eliminated categories that should not be part of the TAM for obvious reasons, looked at the trend of casualization of wearing occasions in the United States, asked some questions about how likely they were to wear certain products. Were they aware of certain types of stores and kind of combined all that information to come up with the new TAM that admittedly included a portion of mainstream denim, by no means all of mainstream denim, but we acknowledge that we've become a little more of a denim destination over the last few years, and that was incorporated into the TAM as well.

Q: John, I want to ask you about your comments about the success of the websites for Hawx and Cody James. Given the momentum that you've seen in the success of those plans, what's your vision now for where you can take the exclusive brands? Like what can they become beyond just brands in the Boot Barn store? Can they become bigger? And how would you do that now that you've seen that new websites have been successful?

A: Yes. We're going to continue to focus on making them big as their own brands, which means they're selling kind of pseudo direct-to-consumer on codyjames.com and hawxwork.com. And then -- but the real goal of these sites is to drive the customer into Boot Barn stores. So there's no plans to sell them wholesale or international at the moment. But looking at the number -- the spend that we've put out, the number of impressions we've had on the sites, the number of folks more importantly, that have clicked through to the sites and then again, this was never about driving sales, but it's been a nice additional sales driver. In Q2, it was a couple of points of comp on the e-comm business. And we weren't expecting much, if anything, from a sales standpoint. It was about the storytelling. So if I think about the goal going forward for the next 12 to 18 months, it's to make the customer excited about Cody James and Hawx and Cheyenne and Idyllwind and then realized the best place to buy those brands is inside of the Boot Barn store.

Q: Congrats on a nice quarter. To follow up on pricing, can you help us think through the second half? What should AUR be up in the second half relative to some of the commentary you gave? And then I guess a bigger picture of question, why do you think pricing elasticity has performed better than planned? You seem to be bucking the consumer backdrop and transactions are still strong. How much of this is fashion being a tailwind and you kind of positioning yourself as more of a denim destination?

A: Yes. Starting with the AUR portion, we think AUR in the back half of the year will be up 2% to 3% with slowing transactions. And we think that will -- that the slowing of the transactions, as Jim said, will be more about the macro than the AUR being up 2% to 3%. We've raised the price on third-party brands by mid-single digits. And as I said, as we went through this test, we never really saw a change in consumer behavior, and they continue to buy both exclusive brands and the third-party brands, which is a good thing in some ways. So I think our customer, as we look at -- and I know there's been a lot of discussion in the market about the bifurcation between the higher income customer and the lower income customer. We're not seeing that. We've been looking at our income brackets, and it is incredibly consistent, almost identical to last year in terms of the penetration of the lower-end brackets and the higher-end brackets. So our customer is need-based, more so perhaps than others. I don't think it's driven by a fashion trend. If I had to point to one difference in our business than perhaps others out there is the needs-based component of it.