NYSE:BOOT Boot Barn Q2 2024 Earnings Report $160.41 -2.70 (-1.65%) As of 12:02 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Boot Barn EPS ResultsActual EPS$0.91Consensus EPS $0.88Beat/MissBeat by +$0.03One Year Ago EPSN/ABoot Barn Revenue ResultsActual Revenue$374.46 millionExpected Revenue$378.44 millionBeat/MissMissed by -$3.98 millionYoY Revenue GrowthN/ABoot Barn Announcement DetailsQuarterQ2 2024Date11/2/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time4:30PM ETUpcoming EarningsBoot Barn's Q1 2026 earnings is scheduled for Wednesday, August 6, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Boot Barn Q2 2024 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Put Ban Holdings Second Quarter 2024 Earnings Call. As a reminder, this call is being recorded. Now I would like to turn the conference over to your host, Mr. Marc Derouisz, Senior Vice President of Investor Relations and Financial Planning. Please go ahead. Speaker 100:00:23Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's Q2 fiscal 2024 earnings results. With me on today's call are Jim Conroy, President and 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 of Bupart's website atbupart.com. Speaker 100:00:46Shortly 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 in this presentation are forward looking statements. These forward looking statements reflect Boot Barn's judgment and analysis only as of today, actual results may differ materially from current expectations based on a number of factors affecting Boot Barn's business. Accordingly, you should not place undue reliance on these forward looking statements. For a more thorough discussion of the risks and uncertainties 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 included in our Q2 fiscal 2024 earnings release as well as our filings with the SEC referenced in that disclaimer. Speaker 100:01:28We do not undertake any obligation to update or alter I will now turn the call over to Jim Conroy, Guparn's President and Chief Executive Officer. Jim? Speaker 200:01:43Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our Q2 fiscal 2024 results, discuss the progress we have made across each of our 4 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 up for questions. We are pleased with our 2nd quarter results, which reflect the continued expansion of the brand's national footprint. Speaker 200:02:11During the quarter, total sales increased 6.5% driven by the 50 new stores added over the last 12 months, including the 10 stores opened during the Q2, new store sales were partially offset by a mid single digit decline of 4.8% in consolidated same store sales, which was within our guidance range. We feel good about this performance considering that the business cycling a +2 percent comp last year on top of a +62 percent in the prior year period. Additionally, we achieved 50 basis points of merchandise margin expansion during the quarter, driven primarily by more than 1 hundred basis points of growth in exclusive brand penetration. Strength in sales and margin combined with solid expense control Drove earnings per diluted share of $0.90 during the quarter, which was at the high end of our earnings range. Our consistent success is a result of team's execution of our 4 strategic initiatives and underscores the future growth potential of the brand. Speaker 200:03:17I will now spend some time discussing each of our 4 strategic initiatives. Let's begin with expanding our store base. A key growth trend for Boot Barn is to build out our store portfolio across the country to solidify our position as the market leader. With the opening of 10 new units in the Q2, we have now opened 50 new stores in the last 12 months and 93 stores in the last 2 years. We continue to be quite pleased with the success of our store rollout as the group of stores opened over the past few years is projected to pay back within 18 months, With each individual store expected to pay back in less than 3 years, we believe we have the potential for 900 or more stores in the United States, With our store remodel and relocation program, we evaluate every store in our portfolio on a continual basis looking for opportunities to either secure better real estate Or to remodel the store in place. Speaker 200:04:24Given the progress over the past few years, we are encouraged that only about 60 stores remain to be refreshed we're moved. This ongoing focus not only provides a financial payback in many cases, but ensures that our stores are keeping pace with the recent transformation of the Boot Barn brand. Moving to our second initiative driving same store sales growth. 2nd quarter consolidated same store sales declined 4.8% with retail store same store sales declining 3.8% and e commerce same store sales declining 11.7%. Average store sales remain at elevated levels with a 3 year stack in retail store same store sales growth of more than 66%. Speaker 200:05:14Our comp sales were in line with expectations through August, but September experienced softer than expected results. The softening trend in same store sales was broad based across both geographies and merchandise categories, leading us to believe that the change in trajectory was driven by macro pressures and a decline in consumer spending. The trend in our more functional categories such as work boots and men's western merchandise has experienced less of a decline there are more discretionary categories like women's western merchandise. It is also worth noting that while we have seeing a greater decline in our more discretionary businesses, we are cycling a 3 year comp growth in Ladies Western Boots and Apparel of more than 100%. Geographically, our Texas business was weaker than chain average with our North and West regions outperforming the change. Speaker 200:06:11While we believe that the macro pressures are transitory, we are managing our inventory levels, markdown plans and expense structure closely to maximize earnings despite pressure in same store sales growth. In fact, the team has done a very good job of positioning our assortment and inventory levels as we enter the holiday season. At the end of the quarter, our inventory was down 9% year over year in total And down 14% on a comp store basis. It is partly due to this rigor and discipline that we were able to expand merchandise margin by 50 basis team is building the brand nationally and fueling the ongoing growth in customer count. Over the past few years, we have created several new partnerships with NASCAR teams, additional rodeos, country music artists and professional athletes. Speaker 200:07:06We have 2 new collaborations that we are particularly excited about. First, we have entered into a partnership with the Dallas Cowboys as the official sponsor for this NFL season. As Americas team, we believe the Cowboys organization is a strong partner for us to connect with consumers across the country As well as strengthen our position locally in the important Dallas market. 2nd, Boot Barn will be the 2024 headline tour sponsor for Morgan Wallen, A country music megastar that has tremendous appeal to a very broad consumer market. Morgan has an undeniable connection with his fans across the world as evidenced by his recent tour spanning 57 shows across 5 countries in 3 continents. Speaker 200:07:50His latest album, One Thing at a Time, topped the Billboard 200 chart for 12 consecutive weeks upon release, which is the most for a country artist in over 30 years and his prior record, The Double Album is the longest running Billboard Top 10 album in history for any solo artist. As part of our sponsorship of his 1 Night At A Time World Tour, we will have in arena exposure, core bus marketing, product placement opportunities and the chance to use him in our merch. We are excited for both of these new partnerships as we expect they will continue to expand the Boot Barn brand nationally and enable us to reach new customer segments. Moving to our 3rd initiative, strengthening our omni channel leadership. In the 2nd quarter, e commerce sales, which represent Approximately 10% of total revenue declined 11.7%. Speaker 200:08:47Our main site, bootbarn.com, posted a modest low single digit sales decline faring much better than the balance of our e commerce business. It is encouraging that our namesake Boot Barn site is maintaining its volume and we would like to grow our other sites. They serve a different strategic purpose And cater to a more price sensitive customer. The digital team has contributed greatly to the broader business adding numerous omnichannel capabilities over the past few years, one significant improvement led by the omnichannel team is the ability to fulfill consumer demand from any store or any distribution facility. This enables us to fulfill orders more quickly and efficiently than shipping everything from a single e commerce fulfillment center. Speaker 200:09:34It also allows us to move through in store markdowns quicker and with less erosion in price. Now to our 4th strategic initiative, exclusive brands. During the second quarter, our exclusive brands We continue to demonstrate strong double digit sales growth with penetration increasing by over 600 basis points to 38.6%. This is our 4th consecutive quarter of greater than 500 basis points of year over year growth, significantly outstripping Our historical stated goal of 250 to 300 basis points of growth. The product design and development team continues to find opportunities to build market share Our exclusive brand business alone is on track to generate more than $600,000,000 in annual revenue. Speaker 200:10:22Turning to current business. We have seen the softness in same store sales in September continue into October. On a consolidated basis, October same store sales declined 9.2% with our retail store same store sales declining 8 point 2% and our e commerce business down 16.7%. Fortunately, we have other growth drivers that continue to perform. We expect to build approximately 26 stores in the final two quarters of the year, which will drive top line sales and build our market share. Speaker 200:10:56We also expect to see ongoing expansion in our merchandise margin rate for the balance of the year despite a decline in same store sales, which is a testament to nimble execution by the entire merchandising team. In summary, we believe we have positioned our inventory levels and holiday staffing plans to maximize sales and profitability for the remainder of the quarter the year, I'd like to now turn the call over to Jim. Operator00:11:21Thank you, Jim. Speaker 300:11:23In the 2nd quarter, net sales increased 6.5% to $374,000,000 our sales performance benefited from new stores opened during the past 12 months, partially offset by a same store sales decline of 4.8%, comprised of a decrease in retail store same store sales of 3.8% and a decrease in e commerce same store sales of 11.7%. Gross profit increased 4% to $134,000,000 or 35.8 percent of sales compared to gross profit of $129,000,000 or 36.7 percent of sales in the prior year period. The 90 basis point decrease in gross profit rate resulted from 140 basis points of deleverage in buying, occupancy and distribution center costs, partially offset by a 50 basis point increase in merchandise margin rate. The increase in merchandise margin rate was driven by 35 basis points of product margin expansion, resulting primarily from a 6 20 basis point increase in exclusive brand penetration and a 15 basis point improvement from lower freight expense as a percentage of sales. Selling, general and expenses for the quarter were $95,000,000 or 25.5 percent of sales compared to $85,000,000 or 24.2 percent of sales in the prior year period. Speaker 300:12:44The increase in SG and A expenses compared to the prior year period was primarily a result of higher store payroll and store related expenses associated operating an additional 50 stores when compared to the prior year period and general and administrative costs in the current year. Income from operations was $39,000,000 or 10.3 percent of sales in the quarter, compared to $44,000,000 or 12 point 6% of sales in the prior year period. Net income was $28,000,000 or $0.90 per diluted share compared to $32,000,000 or 1.06 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory decreased 9% from the prior year period to $586,000,000 We finished the quarter with $39,000,000 in cash and 0 drawn on our $250,000,000 revolving line of credit. Speaker 300:13:41Turning to our outlook for the remainder of fiscal 2024. As outlined in our supplemental financial presentation, we are lowering our guidance for both the Q3 and full year. As the presentation lays out the low and high end of our guidance range for both periods, I will only speak to the high end of the range in my following remarks. As we look to the Q3, we expect total sales to be $535,000,000 we expect the same store sales decline of 8.0 percent with retail store same store sales declining 7% an e commerce same store sales declining 12.5%. We expect gross profit to be $204,000,000 approximately 38.2 percent of sales. Speaker 300:14:25Gross profit reflects an estimated 310 basis point increase in merchandise margin, including a 2 60 basis point improvement in freight expense year over year and a 50 basis point improvement in product margin. We anticipate 150 basis points of deleverage in buying, occupancy and distributions in our costs. Our income from operations is expected to be $75,000,000 or 14 percent of sales. We expect earnings per diluted share to be 1.79 As a result of our year to date performance and our updated estimates for the rest of the year, we are lowering our full year guidance. For the full fiscal year, we now expect total sales to be $1,701,000,000 representing growth of 2.7% over fiscal 2023, Which as a reminder was 53 week year. Speaker 300:15:15This compares to our previous guidance of $1,750,000,000 we expect same store sales to decline 5% with a retail store same store sales decline of 4% and an e commerce same store sales decline of 11%. This update compares to our previous guidance of a same store sales decline of 3%. We now expect gross profit to be $631,000,000 approximately 37.1 percent of sales. Gross profit reflects an estimated 190 basis point increase in merchandise margin, including a 130 basis point improvement from freight expense and a 60 basis point improvement from product margin, we anticipate 170 basis points of deleverage in buying, occupancy and distribution center costs. Our income from operations is expected to be $210,000,000 or 12.3 percent of sales. Speaker 300:16:07We expect net income for fiscal 2024 to be $153,000,000 and earnings per diluted share to be $5 We also expect our interest to be $2,400,000 and capital expenditures to be $105,000,000 Now, I would like to turn the call back to Jim for some closing remarks. Speaker 200:16:28Thank you, Jim. We are pleased with our financial performance during the Q2 and are looking forward to the balance of the year. I do want to thank the entire Boot Barn team across the country for their hard work and briefly acknowledge some well deserved third party recognition. Last month Boot Barn was recognized by Fortune Magazine as 1 of the top 100 global companies evaluated by 3 year growth in sales, earnings and shareholder returns. It was humbling to be included on a list that includes the world's fastest growing businesses across all sectors, not just retailing. Speaker 200:17:02It was a great demonstration of strong teamwork and solid execution and congratulations to the entire Boot Barn family. Now I would like to open the call to take your questions. Renju? Operator00:17:18Thank you. We will now be conducting a question and answer a confirmation tone will indicate your line is in the question for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, please restrict yourself to one question and one follow-up. One moment please while we poll for questions. The first question comes from the line of Matthew Boss with JPMorgan. Operator00:18:00Please go ahead. Speaker 400:18:02Great. Thanks. So Jim, maybe could you help elaborate on the monthly volatility in trends that you're seeing? Maybe if we looked at it by category or by region, and I know you cited the macro, what factors from the macro backdrop do you believe have worsened for your core consumer? And lastly, just as you think about the back half of the year, maybe how did you dissect or what's your comfort today on the negative high single digit comp guide as we think about the back half? Speaker 200:18:37I can start and maybe Jim Watkins will contribute to the tail end of your question. On a monthly basis, we had a very strong July. Our August business was sort of right in line with our expectations. And then we started to see a slowing in September. And there was 2 different things that happened. Speaker 200:19:00Number 1, it was broad based. So Essentially every category saw a step down. The step down though was more Market and more significant in ladies Western Boots and ladies Western Apparel, which we tend to believe are more discretionary Spend businesses than the more functional businesses. And we've seen that same dynamic roll forward into October. So I think when we look at all the news out there about inflation and pullback in consumer spending, potentially the repayment of college loans, geopolitical risk and tensions across the world, There does feel like a bit of a pullback in consumer spending across the board and it makes sense that we would see that more in the discretionary businesses versus our more functional businesses. Speaker 200:20:01In terms of the outlook for the balance of the year, I'll let Jim complete the response. Speaker 300:20:09Yes. So similar to how we guided last quarter and frankly the quarter before, we looked at the most recent business and for this period, we looked at the last 4 to 6 weeks of sales volume and projected those sales for the balance of the year using Our historical weekly sales curves and that contributed to the guidance that we've got for the second half The year which equates in Q3 to a minus 8 at the high end of the range consolidated, and then for the full year, a minus 5 at the high end of the range Consolidated from a same store sales perspective. As far as our comfort level, if we go back 3 months and the guide that we provided In July, using the similar methodology, where we had guided August to be minus 4 in the stores and September to be minus 4, It played out pretty nicely as we got through August. We were minus 3.7 percent in September, as Jim mentioned, the Sales trend softened and we were below that. And so we feel good using October, which was probably our toughest month of the year and projecting that forward. Speaker 300:21:24If things soften further from here, then that's not reflected in the high end of the range. It is reflected in the low end of the range. And if things improve, then obviously, we'd be above that. Speaker 400:21:39Great. And then maybe as a follow-up, just in light of the softening, how are you proactively managing inventories today? Are there any areas of markdown exposure across the categories in the back half? And could you just maybe break down the gross margin outlook as we think about the drivers both back half and runway remaining beyond this year. Speaker 200:22:06Sure. Maybe we'll tag in this as well. On the first piece, on the merchandise margin part of it, We've been, I think, very vigilant about continuing to work through Slower moving inventory in the categories that aren't performing as well. And most of our fashion risk is in ladies western boots and ladies western apparel and those businesses are down the most. As we called out, our inventory on a comp store basis is down 14% and our inventory in those categories, those categories that you might otherwise think our riskier, we've actually managed the inventory down more than we've managed the chain wide inventory down. Speaker 200:22:54So we feel like we've been On top of markdowns and the margin erosion that we would expect from that is already embedded in the quarter. And when you think about a slowing same store sales line and an increase in markdowns, We're pretty proud of the fact that we were still able to grow merchandise margin in the quarter. In terms of the outlook On gross profit for the balance of the year, I'll let Jim Watkins take that one. Speaker 300:23:26Yes. So for the full year, we're planning 190 basis points of merch margin expansion, which includes 130 basis points of freight improvement, which is up from the 100 basis points We saw, we had previously guided and we continue to expect 60 basis points of product margin improvement And that's the product margin improvement coming primarily from the increase in exclusive brand penetration of 500 basis points. And Q3 is going to drive more of that. We're expecting it to drive more of the freight improvement in the margin rate. As we get into next year, Speaker 500:24:08it's still a Speaker 300:24:09little bit early to call that. But as we're thinking about our inventory planning and The makeup of it, we continue to expect to drive exclusive brand penetration growth as we go into next year. We're not expecting that to be 500 basis point. It probably looks something more like what we've historically guided. Maybe it's 200 basis points as we get into next year, we'll update you in a few months. Speaker 300:24:34And then we're continuing to work with our vendors and really refocus Getting volume discounts and improving our IMU as we've doubled the size of the business over the last few years And continuing to get some merchandise margin growth on top of what we would see from exclusive brands. Operator00:25:04Thank you. Next question comes from the line of Steven Zaccone with Citi. Please go ahead. Speaker 600:25:11Great. Thank you very much for taking my question. I wanted to dig into the softness that you've seen in the past couple of months. Speaker 700:25:18Can you just talk about Speaker 600:25:19what you've seen from customer behavior? Has it been weaker traffic trends or has been or has conversion been more of the issue? And if you think about pricing going forward, the category has taken a good amount of price. Speaker 700:25:32Do you see less opportunity to take price up going forward? Speaker 200:25:39Sure. On the same store sales line, From a store's perspective, essentially all of the decline in same store sales There's an erosion in average transactions per store. We don't have traffic counters. I can't tell you if that's fewer people The store, fewer of them converting. My intuition tells you tells me that it's just lighter foot traffic into the store. Speaker 200:26:12When we look at our customer database, we're still seeing decent repeat customer frequency both for our legacy customers and for newly added customers, I just think in total, they're Shopping a little bit less frequently, which is why our transactions were down helped a little bit by our basket size has been up modestly in the quarter. In terms of pricing opportunities, I think pricing going forward will be either neutral. There may be opportunities as we've been in an inflationary environment for a while, where if we start seeing any input costs come down or if we are able to negotiate better discounts from vendors on cost, we'll likely pass that through to the consumer as lower retail prices, maintaining our merchandise margin rate. So I don't think there is price inflation going forward. I don't think there is or significant price inflation going forward, nor do I expect to see opportunities to grow our same store sales from that going forward. Speaker 200:27:32But we do want to uphold sort of our position in the market as essentially an everyday low price provider of high quality product, good value. Speaker 600:27:45Okay. Thanks for that. Just a brief follow-up then. I mean, weather has been choppy. 1 of your farm and ranch competitors talked about choppy weather, especially in Texahoma. Speaker 600:27:56So have you seen anything has weather changed? Speaker 200:28:04So the weather in Texas, If you were to play out over the summer, and we tend to not refer back to weather as a Excuse or a big reason for changes in our business. Our Texas business was pretty soft For the quarter like minus 10 ish and if the weather was slightly better Speaker 100:28:29or cooler, it would still Speaker 200:28:30have been significantly depressed. So think it would have been specious thinking for us to blame it all on weather. That said, as it's cooled off and it's only been in the last few days, our Texas business Has seen a nice improvement. It's less than a week's worth of time. I certainly don't want to extrapolate that for the balance of the quarter, but at least in this very short window, there does seem to be some reaction to a more traditional fall like temperatures going across Texas. Speaker 600:29:09Okay, very helpful. Thanks guys. Speaker 700:29:12Thank you. Operator00:29:15Thank you. Next question comes from the line of Max Ratlenko with TD Cowen. Please go ahead. Speaker 600:29:23Great. Thanks a lot guys. So first, can you remind us much of your business you view to be discretionary? And then how are you thinking about that part of the portfolio could trend if the consumer backdrop softens versus the more functional part? Speaker 200:29:39Sure. I would say discretionary businesses are between 20% 25% of total sales. Ladies' boot and ladies apparel are each roughly 10% of sales. Not all of that is discretionary, but that's sort of how it we think about it. And the balance of our business, Work Boots and Work Apparel, Men's Western Boots and Men's Western Apparel tend to be just much more functional in nature. Speaker 200:30:10And while many of those categories are also down, they tend to fluctuate much less variability than The more fashionable categories of ladies boots and apparel. Speaker 600:30:29Great. Thanks a lot. And then can you just remind us how your comparison book Versus last year, just by month. And then you lost some very heavy sale days last December right around the holiday period. So just any changes in how you're looking to attack those days to maybe make up some of the comp? Speaker 600:30:47Thanks and best regards. Speaker 200:30:51Sure. From a stores basis, as we look at last year, we were plus 1.5% to 2% in October November. And then we got into December, We were about a negative 3 from a store's perspective. As a reminder and as 5 minutes after I say we don't use weather as an excuse. The last 3 or 4 days leading into Christmas Last year, there was a pretty pronounced snowstorm and we did at some point Talk about a $4,000,000 sales erosion in December due to that. Speaker 200:31:39So If you think about where we're running now and what our guide is, part of the bridge is that $4,000,000 which on the balance of the quarter is About a point, a little bit more than a point of comp. Speaker 300:31:53And Max, we've got on slide 10 the same store sales by month laid out too, if That's easier Speaker 600:32:01to reference. Great. Thanks a lot. Speaker 300:32:06Thanks, Mac. Operator00:32:09Thank you. Next question comes from the line of Jason Haas with Bank of America. Please go ahead. Speaker 300:32:16Hey, good afternoon. Thanks for taking my questions. I'm curious, Jim Conroy, what gives you confidence that this Slowdown is a macro issue and it's not that sales per store are starting to revert back to pre pandemic levels? Speaker 200:32:34Well, the sales per store, We've grown them from roughly $2,700,000 to about 4,500,000 And our comp is down 3% 3.8% in the quarter and a bit more than that Towards the end of the quarter, so we would have to give up much more of that to get back to the $2,700,000 right? You'd have to give up 30% to 40 Your sales to get back to that number. And I think when you look just across retail and what other people are reporting, there's been a pretty pronounced and I think pretty widespread call out of a pullback in consumer spending from Target to tractor to floor and decor, you can kind of go through the growth retailers and they're all sort of saying the same thing. Speaker 300:33:34Got it. That certainly makes sense. And then, I was curious about the non Boot Barn, I believe that's the Sheplers e Commerce business, I think there was an expectation that we would start to lap some of those declines, but it sounds like it's continuing to be soft there. So I'm just curious what's changed there? And, yes, why hasn't that business started to show some signs of improvement? Speaker 200:34:00So it's a good question and candidly that surprised us a little bit. We did expect as we cycled softer business that we would See some relief there. One of the unique Aspects of that business is as different than bootbarndot More of the sheplers.com traffic is driven by paid search. And what we have found is that PayPay has become relatively more expensive for us or Perhaps relatively less effective and we just manage that part of our business Almost algorithmically where we spend to drive traffic with a certain return on ad spend Hurdle to meet and if we fall below that hurdle, we pull back on the spend. So That's been the biggest, I think, surprise and there's been a number of changes in Google and how they manage their AdWords and the shift towards shopping, etcetera, but when we put all of that together, We've just made a decision to overspend to get that business back. Speaker 200:35:26But again in the spirit of full transparency, we did expect that business to be a bit better than it has been. If we had our druthers, we'd certainly prefer to have softness outside of bootbarn.com, so that's fortunately where it is. We do hope that we can get that business back to, if not growth, at least less of a drag on same store sales. Speaker 300:35:52Got it. That's helpful. Thank you. Thanks, Chetan. Operator00:35:57Thank you. Next question comes from the line of Janine Spichter with BTIG. Please go ahead. Speaker 800:36:05Hi, everyone. Just wondering if you could Walk us through some of the changes in the store paybacks. They're still super strong, but did notice that there's a slightly higher investment embedded in your expectation for new store build out And it looks like slightly lower sales per store. Just walk us through how you're thinking about the cost to open a new store, the paybacks and what's changed? Thank you. Speaker 200:36:28Sure. Well, the change since we first went public is quite positive, right? We used to model of 3 year payback and a $1,700,000 1st year sales and we're essentially at double that now and paying back at 1.5 years. So it's been quite good and much better than we sort of ever anticipated when we laid out our original earnings Over the last couple of years as we were comping up so strongly and the tone of the business was extremely positive That probably flowed over to new stores as well. And I think we've given back a little bit of that layer at the top, But still at a $3,300,000 1st year sales, 66% Return on invested capital, it's just a phenomenal use of our capital and we're Pretty excited about our ability to continue to blanket the United States and add 15% new units Going forward for the foreseeable future. Speaker 800:37:39Great. And then just maybe anything you're seeing in terms of new markets that you've opened stores in? Any differences there between the broader fleet? Speaker 200:37:50Nothing significant on a market by market basis. We're quite pleased that essentially all of our new stores are performing extremely well. I think in the script we talked about every new store is has either achieved at least a 3 year payback or projected to hit a 3 year payback. And as a basket of stores, the payback is about 18 months. So as we think about our continued growth in sales, the 52 stores this year and call it 50 plus stores next year, we'll give you a specific number when we guide. Speaker 200:38:35That will contribute several $100,000,000 over the next couple of years. And it's just It's a very low beta and high payback investment for us. So we're going to continue to build the business. We think we can add 600 more stores and we feel great about the team that's doing that. Speaker 800:39:00Great. Thanks so much. Operator00:39:05Thank you. Next question comes from the line of Dylan Gardon with William Blair. Please go ahead. Speaker 900:39:13Okay. Thanks. Just trying to sort of think through, I take the point and I think you're right that there are some broad based sort of macro headwinds from a discretionary spend standpoint, but your business has historically been viewed as somewhat above that. And if you look at some of your bigger end markets, construction, oil and gas, you're seeing general stability, if not strong wage growth there. How do you kind of square that in your thinking about sort of what's happening right now? Speaker 200:39:47I think our business has puts and takes across the board like any good portfolio and we have some solid businesses. Our work boots business was down slightly, so kind of much more stable than our More fashionable ladies, Western apparel business. So I think that we do have a bit of a risk Spread across businesses. And I think the second piece is as you well know, right, I mean our business has grown So much and frankly so much more than essentially every other retailer that as we go up against the comparisons we're up against even in solid part of our business, we're comping 60%, 70% 2 or 3 year comp numbers. So if we give back 3% of that, I view that as a success, if I'm honest. Speaker 200:40:46I think most people have expected us to give back All of it, and it doesn't appear that that's happening. Speaker 900:40:54Got it. And then on the 600 just the continued sort of monster growth in your own brands, is part of that a function of a decline in other parts of the business? And is there then, I guess, a risk that you kind of give some of that back if the broader box recovers? Speaker 200:41:16No, I wouldn't do it that way. I think We've expanded legacy brands and we've added some new brands at least over the last year or 2. And that has given us some nice growth. There was a time where we had some of our 3rd party brands Struggling to keep up with our sales growth and the math then worked against them and their penetration came down. Most of our big brands now are past that and have the ability to ship us. Speaker 200:41:54So I think now we sort of Have a fair horse race between brands that we've developed and the 3rd party brands. So I don't think we expect to see a slowdown in exclusive brands based on that. I do think though as Jim Watkins called out with 500 or 600 basis points of growth over the last 4 quarters, I'm not sure that's sustainable. It was sort of never really planned that way, just that the businesses have done so well and the brand launches have done so well We've outperformed our expectations, but our long term model anyway doesn't need to have Five points of increased penetration. We would do just fine with half of that. Speaker 200:42:46So I think your sort of composition concern or percent to total concern would play out. But I do expect that 500 basis points to 600 basis points this quarter was 620. I don't expect that's going to continue forever going forward. Speaker 900:43:04Got it. Thanks a lot. Sure. Operator00:43:10Thank you. Next question comes from the line of Jonathan Komp with Baird. Please go ahead. Speaker 1000:43:17Yes. Hi, good afternoon. Thank you. I want to follow-up on the merchandise margin. You're doing an excellent job of holding and growing that. Speaker 1000:43:25I want to just ask, are you seeing any incremental discounting competitive pressure that you would need to respond to, just trying to think through Any levers you may have to pull if you choose to or not and maybe separate of discounting, what are some of the ways you could move the needle to offset the trend you're seeing? Speaker 200:43:49So there's as you know, we compete typically against a single store There's one regional competitor that's about a fourth of our size. We don't really follow their promotional calendar. We don't really respond to other people in the industry Doing running sales or discounting. If I wanted to or we wanted to drive Same store sales, sure, we could discount and advertise more, but we make less money and then have to cycle next year and wind up down a sort of vicious cycle that essentially every other retailer has found themselves So we don't intend to do that just to drive same store sales. We're really happy that sales grew 6.5% in the quarter And to try to artificially boost comps, we just don't have that in our DNA. Speaker 200:44:51We are trying to do other things though like how do we make the most of the traffic we do have coming into the stores, how do we build the size of the basket? The field team is doing a really nice job Trying to increase units per transaction. We try to incent them in different ways to do more of that. We are trying to sort of build the basket as much as we possibly can. We're also doing a number of things on an e com from an e commerce perspective, resorting the site, remerchandising it, trying to really showcase best selling items More prominently, continually tweaking our marketing and media mix. Speaker 200:45:40So we're doing everything we can To try to get as much same store sales in a healthy way that we can, but we also are managing the downside, which why I think we feel pretty good about the fact that we've gotten our inventory into a position that if the same store sales trend turns around, I think we'll be fine And can maximize our business. And if it doesn't, I don't expect that we'll have any significant merchandise margin erosion. And as Jim called out for the quarter, we expect to see merchandise margin accretion in the Q3 and for the balance of the year. Speaker 1000:46:21Yes, that's really encouraging to hear. And just one other follow-up on the new unit growth. Jim, I think you mentioned Yes, 50 plus is the right way to think about next year again without committing today. But maybe to ask differently, what would have to change or are any scenarios where you would slow unit growth if the macro piece became even more impactful? Or just trying to think about how you're How set you are on the units or not and how you view that? Speaker 200:46:50I think retailers Tend to slow their new unit growth if 1 or 2 different things happen. 1 is New stores are cannibalizing existing stores more than they expected or 2, they feel like their underlying model is broken or they can't I don't think either of those are true with us. So for when we look at our business and we look at sort of very laser focused on same store sales line, we can look at a quarter or a month down or we can look at it in a multiyear period and say we're up massively. We also don't see any outsized cannibalization and we don't see any significant changes Competition. So at this point, I see no reason to certainly no reason to slowdown our new store growth. Speaker 200:47:43Many would argue that we could if we could do more, we should because the payback is so strong. But right now, we feel good about the 15% planned for this year and Likely roughly 15% for our next fiscal year. Speaker 300:47:57And I would just add, John, that with a really strong balance sheet, no debt, every comp store and the chain is contributing positive EBITDA. We're in a really nice situation, particularly compared 8 years ago when that wasn't the case and maybe we did have to slow that a little bit or chose to slow that. Speaker 1000:48:20That makes sense. Thanks again. Speaker 200:48:23Thanks, John. Operator00:48:26Thank you. Next question comes from the line of Cory Carlo with Jefferies. Please go ahead. Speaker 700:48:35Hi, good afternoon. So just wanted to ask about marketing. So Correct me if I'm wrong, but I think this is the first time that Boot Barn has been the sponsor for an NFL team. So with sales continuing to grow. Obviously, that's fed your marketing machine with, I believe, marketing relatively consistent at a mid single digit percentage of sales, so curious as sales have continued to grow, the marketing budget seemingly has grown as well and which is unlock the opportunity to use things or partnerships like with the Dallas Cowboys or being the 2024 headline tour sponsor for Morgan Wallen, so just curious how you think about the opportunity and scale of Boot Barn's marketing budget as sales have continued to grow and what that means from a brand awareness and sales perspective? Speaker 200:49:46Great. That's a great question. Very strategic question. You're right, right? Our Total revenue in the last 3 years has essentially doubled and our marketing as a rate of sale is roughly exactly the same as it was 3 years ago, so our marketing dollars have essentially doubled as well. Speaker 200:50:08And that does give us the ability to just continue To beat the drum of national brand, largest seller in the industry, leading market leader and There is overused term, but there is that virtuous cycle of Reaching out, getting more consumers, expanding the reach of the brand outside of sort of a pure Western customer, maybe we shouldn't have gone after the Cowboys specifically, they're a little bit narrow minded. But as we go to sort of professional athletes or Country Music Stars that have a broader reach than sort of our core legacy customer, with twice as much marketing dollars spend, we have a competitive advantage that nobody else in the industry has to sort of play Sort of at the major leagues and we're going to continue to do that. And that will build the brand, that will build brand awareness. We hope that will be a national phenomenon. It of course is opportunistic that it's also in Dallas Specifically, which is in our top 3 markets in the country. Speaker 200:51:33So it's a very insightful call out to recognize that our marketing has continued to evolve as we've gone from a small regional player 10 years ago to a pretty big national player today and I'd expect more of that as we go forward. Speaker 700:51:58Great. That's very helpful. And then I just had a longer term strategic or structural question around merchandise margin. So clearly exclusive brand penetration has continue to grow and it seems as if there's still pretty substantial opportunity for merchandise margins and freight, it seems like was also a slight benefit as well in the quarter. So just curious given the momentum that you've seen within that component of the gross margin, how high do you think What do you think the opportunity could be longer term for merchandise margin and gross margin over time? Speaker 300:52:48Yes. I'll take that, Corey. The you're right. We've seen Some nice benefit, whether that's from exclusive brand penetration growth and also better IMU from our 3rd party vendors, Yes, some really great partners who have helped us. Yes, as we've grown in size and we've been able to get better volume discounts and purchase container loads at times has been helpful and that will continue to be a driver as we head into the long term. Speaker 300:53:20As far as freight is concerned, I think as we get through this year, we will have recouped some of the headwinds that we've seen over the last couple of years, But we're continuing to look at freight rates with our vendors and how we can get those down And are pretty optimistic of what that means going forward. And then as we return comp growth and we're able to leverage some more of the buying occupancy distribution center costs, that's something that Yes, we'll continue to we expect to continue to drive our gross margin rate Back up above 38%. This year at the high end of the range, we're guiding that at 37.1%. So we feel like there are plenty of drivers ahead and I would just also throw in, as it relates to SG and A expense and as we look at some of the service We have there and we get through some of these inflationary costs that we've been fighting the last few years. We think there's opportunity to focus and bring some of those costs down as we move into long term. Speaker 300:54:32So all those things obviously helping to drive EBIT margin back up. Speaker 700:54:40Great. That's very helpful. Thank you so much and best of luck. Speaker 200:54:44Thank you. Operator00:54:47Thank you. Next question comes from the line of Jay Sole with UBS. Please go ahead. Speaker 1100:54:54Great, thank you so much. Jim, I just want to follow-up on some of the marketing discussion. With someone like Morgan Wallen, can you just talk about what a little bit more about what you want him to accomplish for the company. Are you looking for him to raise awareness of the Boot Barn brand? Are you looking maybe to just elevate the Boot Barn brand or maybe promote Some of the private some of the owned brands that the company has, can you give a little bit more about what specifically how he can help company and sort of what the KPIs are that you're using to measure the return on that investment? Speaker 500:55:24Sure. Speaker 100:55:25It's a Speaker 200:55:26great question. I think it's Brand awareness, he is just an absolute megastar in our industry. He also uniquely has a younger fan base, younger follower. So if you look at the demographics of a Boot Barn customer, one of the implied objectives we've had for the last several years Is to ensure that our customer doesn't age out and we've made some progress on lowering our average age And I think he will help us continue to do that. We do have the ability to use him and We very much view it as a partnership. Speaker 200:56:13I mean, he's got some really great ideas as well. So we've already Contemplated using him as a spokesperson for spokesperson may be too trite of a way to describe it, but someone to really get behind one of our existing exclusive brands or just Boot Barn in general or potentially do a line specifically with him. So All of those things are on the table right now. The actual agreement really focuses on his tour at the moment, but we do have the ability to use him and his likeness and his image in much of our marketing on social media, Speaker 300:56:59when Speaker 200:56:59he's out and performing, We'll be we'll have a lot of prevalent prominence in arenas, on his tour buses, etcetera. So I think it's a number of those things, but the biggest strategic purpose is to bring in more customers that age younger. And you've got a very strong following on the female side. So that might help kind of get that business Sort of back on more solid ground. Speaker 1100:57:33Got it. Thank you so much. Speaker 200:57:36Of course. Operator00:57:39Thank you. Next question comes from the line of Sam Poser with William Trading. Please go ahead. Speaker 1200:57:47Good afternoon. Thank you for taking my questions. I've got 4. I'm just going to read through them. One, outside of work, what other categories outperformed in the quarter? Speaker 1200:58:002, have you seen any Benefit from store traffic or anything from the Cowboys. 3, what are you doing to I understand the macro, But what's being done to actively drive traffic to the stores and conversion? So how are using your omnichannel activities or whatever to bring more people to the stores, hopefully, again to buy something. And then There had been a big differential between with the exclusive brands between the online and store performance. And I sort of wonder how that gap if that gap is closing and what that variance is? Speaker 1200:58:41Thanks. Speaker 200:58:45Okay. On the first part of your question, outside of work, what's outperforming, it does fall somewhat tightly into the functional business of work boots and men's western boots and men's western apparel are doing better than ladies western boots Ladies Western Apparel. So the notion of our functional business is less volatile is playing out Just as you might expect, in terms of store traffic from the Cowboys, it's a little bit early to see if we've had specific change in store traffic. Sorry, I don't have a great answer for you on that one. What's being done to drive traffic to the stores? Speaker 200:59:28Yes, we've got a pretty good playbook for driving traffic, right? And our business is twice what it was 3 years ago. So it's not a lack of ability to add customers or drive them into the store. We are making some changes or some modifications kind of on the fringe. So we are marketing, As I mentioned earlier, we have no intention of becoming more promotional or more sales driven or more markdown focused, But there are times when we've made a decision to have the marketing feel a little bit more commercial and a little bit less pure branding or brand aesthetic. Speaker 201:00:10I mentioned earlier on this call, we've got the field really focused on how do we build a basket once somebody comes into the store? We are constantly trying to build an omnichannel customer From a digital customer. So your question alluded to what are we doing with a digital customer and how do we build them into a bigger Boot Barn customer. Speaker 601:00:39Well, if Speaker 201:00:39that digital customer is near a store and we know that, we market to them differently than if they are a digital customer that has shopped on bootbarn.com, But isn't within a radius of a drive time to a store. And then in terms of the exclusive brand penetration between stores and online, In total, we're approaching 3%. Stores are a little bit higher than that and our e commerce business is Roughly 30%, a little bit north of 30%. So that gap has changed substantially. And what drove that mostly is our ability to ship our exclusive brands out of our stores to our digital customers, so while our e commerce sales On a same store sales basis are down a bit. Speaker 201:01:41Our margin rate is being helped by the exclusive brand penetration going up. Speaker 301:02:02Okay. Thanks, Sam. Operator01:02:03Thank you. Thank you. Next question comes from the line of Jeremy Hamblin with Craig Hallum. Please go ahead. Speaker 1301:02:14Thanks. First, I wanted to start with just Returning to the gross margin visibility, so it's pretty impressive given where the comp trends are, your expectations here on gross margins both in the December quarter, but also for the year, in terms of getting back to what you might feel like is the baseline, can you give us a sense for either kind of the comps you need to produce to get back to, let's say, the 38% plus for the full fiscal year or maybe another way to think about it might be just like an AUV level that you think you need to achieve given the build out costs you've had on the real estate side? Speaker 301:03:08Yes, sure. So I guess just kind of level setting and you know this Jeremy, but Speaker 501:03:13for Speaker 301:03:13everyone else, I guess, if you go back to fiscal 2020, Yes, our gross profit rate was 32.7% and we're able to grow that up to a peak of above 38% Yes, 2 years later, and that was up from fiscal 2018 was 30%. So we feel really good about the 37 point 1% that we're marching towards this fiscal year and I think that we'll continue to find that opportunity, as I mentioned earlier, to march Towards 38%. As far as drivers in getting there, I think with the new stores that we've opened over the last 2 years and the stores will continue to open and as those march towards maturity and the average Unit volume of those stores rise, that's going to help drive some profitability and leveraging the occupancy cost of those stores. We've got the new Kansas City distribution center that we've brought online. There's some duplicative costs we've had this year between the legacy distribution center and the new one that will go away and we'll get more efficient in those operations and then continuing to drive just the merchandise margin rate from a product margin and the things talked about. Speaker 301:04:33So I think we're not far away from the 38%. We're thrilled with the growth that we've seen over a few short years and that it's sustainable, particularly in this environment when we're You've seen a little bit of a growth on the full year. And as we return back to our regular growth, what opportunity that provides us. Speaker 1301:05:02Great. And then a follow-up here. In terms of thinking about how the macro could play out that's out of your control. We've got low unemployment rates. If that were to track back up to 5%, 6% and we end up in a recessionary environment, consumer discretionary spend slows further. Speaker 1301:05:28What type of ability do you think you have to reduce SG and A spend overall? And then kind of connected to this question is, how would you think about potentially changing if at all the unit growth plan of kind of this mid teens level that you guys have been delivering on? Speaker 301:05:55Yes. I think I'll start with just I think Jim kind of alluded to the answer on the unit growth question earlier, the fact We've got such a strong financial position. These stores pay back in 1.5 years. Even if those stores were to slip Payback in 2 years or even 3 years, which is the model we had when we went public, we would continue to expect to open those new stores at that rate, it's hard for us, I guess, to imagine a scenario where we would slow that to any significant Degree. As far as reducing SG and A spend, about roughly half of our spend is variable in nature. Speaker 301:06:36And so as the sales come down, we're able to reduce labor in the stores and some of Speaker 201:06:43the store related costs Over time Speaker 301:06:47in the fixed level of expenses, it gets a little bit tougher. But one of the things that we've really been focused on over the last few months and as we look forward is the last 3 years we've just seen this growth and we've been very focused on meeting the needs of those customers and keeping up pace with the business and we've seen that in the growth of earnings and, up and down the P and L and the improvement in the balance sheet. However, we haven't been able to focus as much on driving those expenses down. And so we've hired up in our procurement department and we're looking at where in all departments and are starting in earnest Really over the last few months to start to drive to get those SG and A expenses down as tight as we can. And so that's something we're looking forward to regardless of what happens with the overall macro that we'll start to see some benefit from. Speaker 1301:07:52Great. Thanks for taking the questions. Best wishes. Speaker 201:07:55Thanks, Jeremy. Thanks, Jeremy. Operator01:07:58Thank you. Next question comes from the line of Mitch Kummetz with Seaport Search. Please go ahead. Speaker 1201:08:07Yes. Thanks for taking my questions. Can you give us the 2Q comp for ladies boots And ladies apparel. And then can you also tell us how those businesses were in the quarter on a 3 year? Speaker 201:08:27Out of 3, they were approximately 100%. And on the quarter, we'll look it up, but they were like minus 15 or something. But let's give you a real number. I think what you're really asking is how did those businesses evolve throughout the quarter? So In quarter specifically, now keep in mind the quarter, the business didn't change all that much from the Q1 to the Q2. Speaker 201:09:03It just all happened in September October. So for the quarter ladies boots and ladies apparel were around minus 8, minus 9. As we got into September October that became like a minus 17%. So it's really more the tail end of the quarter and as we turned the page Into the Q3 or into October where those businesses got sort of meaningfully worse. And so that's where we stand. Speaker 201:09:35But to your point, as we look at that business, the team that runs that business, They've doubled the business in a few years and they're giving a bit of it back now And they've sort of demonstrated their ability to now play defense and skate backwards a bit. So we feel good about the fact They've been able to take inventory levels down more in line with sales and been kind of very Vigilant in working through their markdowns. Speaker 1201:10:08Got it. And then Jim, you guys ran double digit positive from late 2021 into early 2023, and if I recall it correctly, a healthy portion of that came from acquiring new customers. Can you speak to kind of any metrics with regard to kind of new customer retention, how are you thinking about how well you've been able to Some of those customers that you added over that period in particular. Speaker 201:10:42So it's a very good question. But we you're right. If we look sort of big picture, roughly half of our growth over the last 2 or 3 years, sort of that 60 ish percent growth was from was transaction based and much of that was from new customers. And they've proven to be Loyal to us, sticky, if you will. So we continue we were a bit worried that we were going to get an influx of customers either due to a snapback coming out of COVID We had product during difficult supply chain times and nobody else did, or we were open and other people were closed, etcetera. Speaker 201:11:31But it seems more than seems what we see in the data now is that those customers are now Boot Barn customers and they're shopping with us at roughly the same frequency that our legacy customers would shop with us. And while we're comping slightly negative now, if we were to have lost all those customers, we'd be down sort of significant double digit. So we feel pretty good about the customer file, the Be Rewarded program, the growth in our customer count, I just think in general, they're shopping less frequently. Speaker 1201:12:13That's helpful. Thanks. Good luck. Operator01:12:16Thanks, Mitch. Thank you. Next question comes from the line of John Lawrence with Benchmark Company. Please go ahead. Speaker 501:12:27Yes. Thanks, guys. Thanks for squeezing me in. Jim, it was only a few quarters ago that you threw out the number of 40% for private label. That's back when you were in the 28s 30s and now we're there. Speaker 501:12:45Can you speak to a little bit when you look at the softness overall, which one of these, I was in some stores last couple of weeks and surprised that Rank 45 and Cheyenne or I'm sorry, Cody James, really were presented right in your face at the front of the store. Can you speak to obviously, to the strong private label names just getting stronger or some of the newer names really taking off with traction? Speaker 201:13:18I see. Good question. Well, Cody James tends to be very Prominently featured in the store, right? It's our number one brand of all brands in the company. So we tend to lead with that in the front. Speaker 201:13:36In terms of broadening to coming back to your question, we've seen really nice growth in our 2 most historical brands, which are CooteJam's and Cheyenne. We added Idle Wind in 2018 about 5 years ago and that's just been a runaway Great partnership for us. And now we have some new brands that we've launched, brothers and sons, Blue Ranch were ranked 45 and they're emerging. And we've seen some really nice pockets of success there, and we expect that they'll continue to build their market share in the store as well over the next few years, which will enable us to take the 40% up to 50% EB in call it 3 or 4 years. So we feel we just feel great about the product design and development team, their partnership with our buyers, our field team that gets behind the exclusive brands and understands the functions and features of the product to showcase that to our customers And we do that in the context of still being a really important customer for the top Western brands in the space, Wrangler Aria, Justin Carhartt, etcetera. Speaker 201:15:07So I think we feel really good about the composition of brands in general And still believe there's some growth opportunities ahead for us for our exclusive brands. Speaker 501:15:23Great, thanks. And the last question for me, does the Cowboys agreement include any retail placement at the Cowboy Shops or at AT and T? Speaker 201:15:36No, no. It's really a marketing agreement. We can do brand activations there, but we won't see significant Product selling at all. Speaker 501:15:49Great. Thanks. Congrats. Speaker 601:15:52Thank you. Operator01:15:55Thank you. There are no further questions at this time. I would now like to turn the floor over to Jim Conroy for closing comments. Speaker 201:16:05Well, thank you everybody for joining the call today and we look forward to speaking with you on our Q3 earnings call. Take care. Operator01:16:16Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by Key Takeaways Boot Barn reported Q2 fiscal 2024 results with total sales up 6.5% (driven by 50 new stores), a consolidated same-store sales decline of 4.8%, 50 basis points of merchandise margin expansion, and EPS of $0.90 at the high end of guidance. The company opened 10 stores in Q2 (50 stores in 12 months, 93 in two years), achieves a 1.5-year payback on new units, and sees a potential long-term runway for 900+ stores in the U.S. Same-store sales fell 4.8% (retail down 3.8%, e-commerce down 11.7%) amid broad‐based macro pressures and discretionary pullback, while inventory was reduced 9% year‐over‐year (14% on a comp basis) to protect margin. Boot Barn maintains a mid-single-digit marketing budget as a percentage of sales and launched national partnerships as the official Dallas Cowboys sponsor and Morgan Wallen tour sponsor to boost brand awareness and attract younger customers. The company lowered Q3 guidance to an 8% same-store sales decline (retail ‑7%, e-commerce ‑12.5%), and expects fiscal 2024 sales of $1.701 billion (+2.7%), a 37.1% gross margin, and EPS of $5.00. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallBoot Barn Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Boot Barn Earnings HeadlinesJPMorgan Chase & Co. Raises Boot Barn (NYSE:BOOT) Price Target to $207.00May 28 at 1:51 AM | americanbankingnews.comThe Zacks Analyst Blog Highlights Deckers Outdoor, Boot Barn, Adidas and Skechers U.S.AMay 21, 2025 | finance.yahoo.comElon’s 2025 Silver Crisis (What It Means for You)Elon Musk is back in the spotlight—this time for fueling a global scramble for silver. Tesla's relentless production of electric vehicles and solar technology is driving demand for the precious metal to unprecedented levels. Silver—critical for EV batteries, solar panels, and advanced electronics—is now at the center of a supply crisis.May 28, 2025 | GoldenCrest Metals (Ad)Boot Barn Holdings, Inc. Announces May and June Conference ScheduleMay 21, 2025 | businesswire.comBear of the Day: Boot Barn (BOOT)May 20, 2025 | finance.yahoo.comEarnings Update: Here's Why Analysts Just Lifted Their Boot Barn Holdings, Inc. (NYSE:BOOT) Price Target To US$182May 20, 2025 | finance.yahoo.comSee More Boot Barn Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Boot Barn? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Boot Barn and other key companies, straight to your email. Email Address About Boot BarnBoot Barn (NYSE:BOOT), a lifestyle retail chain, operates specialty retail stores in the United States. The company's specialty retail stores offer western and work-related footwear, apparel, and accessories for men, women, and kids. It offers boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, and flame-resistant and high-visibility clothing. The company also provides gifts and home merchandise. The company also sells its products through e-commerce websites, including bootbarn.com; sheplers.com; and countryoutfitter.com. The company was formerly known as WW Top Investment Corporation and changed its name to Boot Barn Holdings, Inc. in June 2014. Boot Barn Holdings, Inc. was founded in 1978 and is based in Irvine, California.View Boot Barn ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsAdvance Auto Parts: Did Earnings Defuse Tariff Concerns?Booz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again? 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There are 14 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Put Ban Holdings Second Quarter 2024 Earnings Call. As a reminder, this call is being recorded. Now I would like to turn the conference over to your host, Mr. Marc Derouisz, Senior Vice President of Investor Relations and Financial Planning. Please go ahead. Speaker 100:00:23Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's Q2 fiscal 2024 earnings results. With me on today's call are Jim Conroy, President and 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 of Bupart's website atbupart.com. Speaker 100:00:46Shortly 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 in this presentation are forward looking statements. These forward looking statements reflect Boot Barn's judgment and analysis only as of today, actual results may differ materially from current expectations based on a number of factors affecting Boot Barn's business. Accordingly, you should not place undue reliance on these forward looking statements. For a more thorough discussion of the risks and uncertainties 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 included in our Q2 fiscal 2024 earnings release as well as our filings with the SEC referenced in that disclaimer. Speaker 100:01:28We do not undertake any obligation to update or alter I will now turn the call over to Jim Conroy, Guparn's President and Chief Executive Officer. Jim? Speaker 200:01:43Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our Q2 fiscal 2024 results, discuss the progress we have made across each of our 4 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 up for questions. We are pleased with our 2nd quarter results, which reflect the continued expansion of the brand's national footprint. Speaker 200:02:11During the quarter, total sales increased 6.5% driven by the 50 new stores added over the last 12 months, including the 10 stores opened during the Q2, new store sales were partially offset by a mid single digit decline of 4.8% in consolidated same store sales, which was within our guidance range. We feel good about this performance considering that the business cycling a +2 percent comp last year on top of a +62 percent in the prior year period. Additionally, we achieved 50 basis points of merchandise margin expansion during the quarter, driven primarily by more than 1 hundred basis points of growth in exclusive brand penetration. Strength in sales and margin combined with solid expense control Drove earnings per diluted share of $0.90 during the quarter, which was at the high end of our earnings range. Our consistent success is a result of team's execution of our 4 strategic initiatives and underscores the future growth potential of the brand. Speaker 200:03:17I will now spend some time discussing each of our 4 strategic initiatives. Let's begin with expanding our store base. A key growth trend for Boot Barn is to build out our store portfolio across the country to solidify our position as the market leader. With the opening of 10 new units in the Q2, we have now opened 50 new stores in the last 12 months and 93 stores in the last 2 years. We continue to be quite pleased with the success of our store rollout as the group of stores opened over the past few years is projected to pay back within 18 months, With each individual store expected to pay back in less than 3 years, we believe we have the potential for 900 or more stores in the United States, With our store remodel and relocation program, we evaluate every store in our portfolio on a continual basis looking for opportunities to either secure better real estate Or to remodel the store in place. Speaker 200:04:24Given the progress over the past few years, we are encouraged that only about 60 stores remain to be refreshed we're moved. This ongoing focus not only provides a financial payback in many cases, but ensures that our stores are keeping pace with the recent transformation of the Boot Barn brand. Moving to our second initiative driving same store sales growth. 2nd quarter consolidated same store sales declined 4.8% with retail store same store sales declining 3.8% and e commerce same store sales declining 11.7%. Average store sales remain at elevated levels with a 3 year stack in retail store same store sales growth of more than 66%. Speaker 200:05:14Our comp sales were in line with expectations through August, but September experienced softer than expected results. The softening trend in same store sales was broad based across both geographies and merchandise categories, leading us to believe that the change in trajectory was driven by macro pressures and a decline in consumer spending. The trend in our more functional categories such as work boots and men's western merchandise has experienced less of a decline there are more discretionary categories like women's western merchandise. It is also worth noting that while we have seeing a greater decline in our more discretionary businesses, we are cycling a 3 year comp growth in Ladies Western Boots and Apparel of more than 100%. Geographically, our Texas business was weaker than chain average with our North and West regions outperforming the change. Speaker 200:06:11While we believe that the macro pressures are transitory, we are managing our inventory levels, markdown plans and expense structure closely to maximize earnings despite pressure in same store sales growth. In fact, the team has done a very good job of positioning our assortment and inventory levels as we enter the holiday season. At the end of the quarter, our inventory was down 9% year over year in total And down 14% on a comp store basis. It is partly due to this rigor and discipline that we were able to expand merchandise margin by 50 basis team is building the brand nationally and fueling the ongoing growth in customer count. Over the past few years, we have created several new partnerships with NASCAR teams, additional rodeos, country music artists and professional athletes. Speaker 200:07:06We have 2 new collaborations that we are particularly excited about. First, we have entered into a partnership with the Dallas Cowboys as the official sponsor for this NFL season. As Americas team, we believe the Cowboys organization is a strong partner for us to connect with consumers across the country As well as strengthen our position locally in the important Dallas market. 2nd, Boot Barn will be the 2024 headline tour sponsor for Morgan Wallen, A country music megastar that has tremendous appeal to a very broad consumer market. Morgan has an undeniable connection with his fans across the world as evidenced by his recent tour spanning 57 shows across 5 countries in 3 continents. Speaker 200:07:50His latest album, One Thing at a Time, topped the Billboard 200 chart for 12 consecutive weeks upon release, which is the most for a country artist in over 30 years and his prior record, The Double Album is the longest running Billboard Top 10 album in history for any solo artist. As part of our sponsorship of his 1 Night At A Time World Tour, we will have in arena exposure, core bus marketing, product placement opportunities and the chance to use him in our merch. We are excited for both of these new partnerships as we expect they will continue to expand the Boot Barn brand nationally and enable us to reach new customer segments. Moving to our 3rd initiative, strengthening our omni channel leadership. In the 2nd quarter, e commerce sales, which represent Approximately 10% of total revenue declined 11.7%. Speaker 200:08:47Our main site, bootbarn.com, posted a modest low single digit sales decline faring much better than the balance of our e commerce business. It is encouraging that our namesake Boot Barn site is maintaining its volume and we would like to grow our other sites. They serve a different strategic purpose And cater to a more price sensitive customer. The digital team has contributed greatly to the broader business adding numerous omnichannel capabilities over the past few years, one significant improvement led by the omnichannel team is the ability to fulfill consumer demand from any store or any distribution facility. This enables us to fulfill orders more quickly and efficiently than shipping everything from a single e commerce fulfillment center. Speaker 200:09:34It also allows us to move through in store markdowns quicker and with less erosion in price. Now to our 4th strategic initiative, exclusive brands. During the second quarter, our exclusive brands We continue to demonstrate strong double digit sales growth with penetration increasing by over 600 basis points to 38.6%. This is our 4th consecutive quarter of greater than 500 basis points of year over year growth, significantly outstripping Our historical stated goal of 250 to 300 basis points of growth. The product design and development team continues to find opportunities to build market share Our exclusive brand business alone is on track to generate more than $600,000,000 in annual revenue. Speaker 200:10:22Turning to current business. We have seen the softness in same store sales in September continue into October. On a consolidated basis, October same store sales declined 9.2% with our retail store same store sales declining 8 point 2% and our e commerce business down 16.7%. Fortunately, we have other growth drivers that continue to perform. We expect to build approximately 26 stores in the final two quarters of the year, which will drive top line sales and build our market share. Speaker 200:10:56We also expect to see ongoing expansion in our merchandise margin rate for the balance of the year despite a decline in same store sales, which is a testament to nimble execution by the entire merchandising team. In summary, we believe we have positioned our inventory levels and holiday staffing plans to maximize sales and profitability for the remainder of the quarter the year, I'd like to now turn the call over to Jim. Operator00:11:21Thank you, Jim. Speaker 300:11:23In the 2nd quarter, net sales increased 6.5% to $374,000,000 our sales performance benefited from new stores opened during the past 12 months, partially offset by a same store sales decline of 4.8%, comprised of a decrease in retail store same store sales of 3.8% and a decrease in e commerce same store sales of 11.7%. Gross profit increased 4% to $134,000,000 or 35.8 percent of sales compared to gross profit of $129,000,000 or 36.7 percent of sales in the prior year period. The 90 basis point decrease in gross profit rate resulted from 140 basis points of deleverage in buying, occupancy and distribution center costs, partially offset by a 50 basis point increase in merchandise margin rate. The increase in merchandise margin rate was driven by 35 basis points of product margin expansion, resulting primarily from a 6 20 basis point increase in exclusive brand penetration and a 15 basis point improvement from lower freight expense as a percentage of sales. Selling, general and expenses for the quarter were $95,000,000 or 25.5 percent of sales compared to $85,000,000 or 24.2 percent of sales in the prior year period. Speaker 300:12:44The increase in SG and A expenses compared to the prior year period was primarily a result of higher store payroll and store related expenses associated operating an additional 50 stores when compared to the prior year period and general and administrative costs in the current year. Income from operations was $39,000,000 or 10.3 percent of sales in the quarter, compared to $44,000,000 or 12 point 6% of sales in the prior year period. Net income was $28,000,000 or $0.90 per diluted share compared to $32,000,000 or 1.06 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory decreased 9% from the prior year period to $586,000,000 We finished the quarter with $39,000,000 in cash and 0 drawn on our $250,000,000 revolving line of credit. Speaker 300:13:41Turning to our outlook for the remainder of fiscal 2024. As outlined in our supplemental financial presentation, we are lowering our guidance for both the Q3 and full year. As the presentation lays out the low and high end of our guidance range for both periods, I will only speak to the high end of the range in my following remarks. As we look to the Q3, we expect total sales to be $535,000,000 we expect the same store sales decline of 8.0 percent with retail store same store sales declining 7% an e commerce same store sales declining 12.5%. We expect gross profit to be $204,000,000 approximately 38.2 percent of sales. Speaker 300:14:25Gross profit reflects an estimated 310 basis point increase in merchandise margin, including a 2 60 basis point improvement in freight expense year over year and a 50 basis point improvement in product margin. We anticipate 150 basis points of deleverage in buying, occupancy and distributions in our costs. Our income from operations is expected to be $75,000,000 or 14 percent of sales. We expect earnings per diluted share to be 1.79 As a result of our year to date performance and our updated estimates for the rest of the year, we are lowering our full year guidance. For the full fiscal year, we now expect total sales to be $1,701,000,000 representing growth of 2.7% over fiscal 2023, Which as a reminder was 53 week year. Speaker 300:15:15This compares to our previous guidance of $1,750,000,000 we expect same store sales to decline 5% with a retail store same store sales decline of 4% and an e commerce same store sales decline of 11%. This update compares to our previous guidance of a same store sales decline of 3%. We now expect gross profit to be $631,000,000 approximately 37.1 percent of sales. Gross profit reflects an estimated 190 basis point increase in merchandise margin, including a 130 basis point improvement from freight expense and a 60 basis point improvement from product margin, we anticipate 170 basis points of deleverage in buying, occupancy and distribution center costs. Our income from operations is expected to be $210,000,000 or 12.3 percent of sales. Speaker 300:16:07We expect net income for fiscal 2024 to be $153,000,000 and earnings per diluted share to be $5 We also expect our interest to be $2,400,000 and capital expenditures to be $105,000,000 Now, I would like to turn the call back to Jim for some closing remarks. Speaker 200:16:28Thank you, Jim. We are pleased with our financial performance during the Q2 and are looking forward to the balance of the year. I do want to thank the entire Boot Barn team across the country for their hard work and briefly acknowledge some well deserved third party recognition. Last month Boot Barn was recognized by Fortune Magazine as 1 of the top 100 global companies evaluated by 3 year growth in sales, earnings and shareholder returns. It was humbling to be included on a list that includes the world's fastest growing businesses across all sectors, not just retailing. Speaker 200:17:02It was a great demonstration of strong teamwork and solid execution and congratulations to the entire Boot Barn family. Now I would like to open the call to take your questions. Renju? Operator00:17:18Thank you. We will now be conducting a question and answer a confirmation tone will indicate your line is in the question for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, please restrict yourself to one question and one follow-up. One moment please while we poll for questions. The first question comes from the line of Matthew Boss with JPMorgan. Operator00:18:00Please go ahead. Speaker 400:18:02Great. Thanks. So Jim, maybe could you help elaborate on the monthly volatility in trends that you're seeing? Maybe if we looked at it by category or by region, and I know you cited the macro, what factors from the macro backdrop do you believe have worsened for your core consumer? And lastly, just as you think about the back half of the year, maybe how did you dissect or what's your comfort today on the negative high single digit comp guide as we think about the back half? Speaker 200:18:37I can start and maybe Jim Watkins will contribute to the tail end of your question. On a monthly basis, we had a very strong July. Our August business was sort of right in line with our expectations. And then we started to see a slowing in September. And there was 2 different things that happened. Speaker 200:19:00Number 1, it was broad based. So Essentially every category saw a step down. The step down though was more Market and more significant in ladies Western Boots and ladies Western Apparel, which we tend to believe are more discretionary Spend businesses than the more functional businesses. And we've seen that same dynamic roll forward into October. So I think when we look at all the news out there about inflation and pullback in consumer spending, potentially the repayment of college loans, geopolitical risk and tensions across the world, There does feel like a bit of a pullback in consumer spending across the board and it makes sense that we would see that more in the discretionary businesses versus our more functional businesses. Speaker 200:20:01In terms of the outlook for the balance of the year, I'll let Jim complete the response. Speaker 300:20:09Yes. So similar to how we guided last quarter and frankly the quarter before, we looked at the most recent business and for this period, we looked at the last 4 to 6 weeks of sales volume and projected those sales for the balance of the year using Our historical weekly sales curves and that contributed to the guidance that we've got for the second half The year which equates in Q3 to a minus 8 at the high end of the range consolidated, and then for the full year, a minus 5 at the high end of the range Consolidated from a same store sales perspective. As far as our comfort level, if we go back 3 months and the guide that we provided In July, using the similar methodology, where we had guided August to be minus 4 in the stores and September to be minus 4, It played out pretty nicely as we got through August. We were minus 3.7 percent in September, as Jim mentioned, the Sales trend softened and we were below that. And so we feel good using October, which was probably our toughest month of the year and projecting that forward. Speaker 300:21:24If things soften further from here, then that's not reflected in the high end of the range. It is reflected in the low end of the range. And if things improve, then obviously, we'd be above that. Speaker 400:21:39Great. And then maybe as a follow-up, just in light of the softening, how are you proactively managing inventories today? Are there any areas of markdown exposure across the categories in the back half? And could you just maybe break down the gross margin outlook as we think about the drivers both back half and runway remaining beyond this year. Speaker 200:22:06Sure. Maybe we'll tag in this as well. On the first piece, on the merchandise margin part of it, We've been, I think, very vigilant about continuing to work through Slower moving inventory in the categories that aren't performing as well. And most of our fashion risk is in ladies western boots and ladies western apparel and those businesses are down the most. As we called out, our inventory on a comp store basis is down 14% and our inventory in those categories, those categories that you might otherwise think our riskier, we've actually managed the inventory down more than we've managed the chain wide inventory down. Speaker 200:22:54So we feel like we've been On top of markdowns and the margin erosion that we would expect from that is already embedded in the quarter. And when you think about a slowing same store sales line and an increase in markdowns, We're pretty proud of the fact that we were still able to grow merchandise margin in the quarter. In terms of the outlook On gross profit for the balance of the year, I'll let Jim Watkins take that one. Speaker 300:23:26Yes. So for the full year, we're planning 190 basis points of merch margin expansion, which includes 130 basis points of freight improvement, which is up from the 100 basis points We saw, we had previously guided and we continue to expect 60 basis points of product margin improvement And that's the product margin improvement coming primarily from the increase in exclusive brand penetration of 500 basis points. And Q3 is going to drive more of that. We're expecting it to drive more of the freight improvement in the margin rate. As we get into next year, Speaker 500:24:08it's still a Speaker 300:24:09little bit early to call that. But as we're thinking about our inventory planning and The makeup of it, we continue to expect to drive exclusive brand penetration growth as we go into next year. We're not expecting that to be 500 basis point. It probably looks something more like what we've historically guided. Maybe it's 200 basis points as we get into next year, we'll update you in a few months. Speaker 300:24:34And then we're continuing to work with our vendors and really refocus Getting volume discounts and improving our IMU as we've doubled the size of the business over the last few years And continuing to get some merchandise margin growth on top of what we would see from exclusive brands. Operator00:25:04Thank you. Next question comes from the line of Steven Zaccone with Citi. Please go ahead. Speaker 600:25:11Great. Thank you very much for taking my question. I wanted to dig into the softness that you've seen in the past couple of months. Speaker 700:25:18Can you just talk about Speaker 600:25:19what you've seen from customer behavior? Has it been weaker traffic trends or has been or has conversion been more of the issue? And if you think about pricing going forward, the category has taken a good amount of price. Speaker 700:25:32Do you see less opportunity to take price up going forward? Speaker 200:25:39Sure. On the same store sales line, From a store's perspective, essentially all of the decline in same store sales There's an erosion in average transactions per store. We don't have traffic counters. I can't tell you if that's fewer people The store, fewer of them converting. My intuition tells you tells me that it's just lighter foot traffic into the store. Speaker 200:26:12When we look at our customer database, we're still seeing decent repeat customer frequency both for our legacy customers and for newly added customers, I just think in total, they're Shopping a little bit less frequently, which is why our transactions were down helped a little bit by our basket size has been up modestly in the quarter. In terms of pricing opportunities, I think pricing going forward will be either neutral. There may be opportunities as we've been in an inflationary environment for a while, where if we start seeing any input costs come down or if we are able to negotiate better discounts from vendors on cost, we'll likely pass that through to the consumer as lower retail prices, maintaining our merchandise margin rate. So I don't think there is price inflation going forward. I don't think there is or significant price inflation going forward, nor do I expect to see opportunities to grow our same store sales from that going forward. Speaker 200:27:32But we do want to uphold sort of our position in the market as essentially an everyday low price provider of high quality product, good value. Speaker 600:27:45Okay. Thanks for that. Just a brief follow-up then. I mean, weather has been choppy. 1 of your farm and ranch competitors talked about choppy weather, especially in Texahoma. Speaker 600:27:56So have you seen anything has weather changed? Speaker 200:28:04So the weather in Texas, If you were to play out over the summer, and we tend to not refer back to weather as a Excuse or a big reason for changes in our business. Our Texas business was pretty soft For the quarter like minus 10 ish and if the weather was slightly better Speaker 100:28:29or cooler, it would still Speaker 200:28:30have been significantly depressed. So think it would have been specious thinking for us to blame it all on weather. That said, as it's cooled off and it's only been in the last few days, our Texas business Has seen a nice improvement. It's less than a week's worth of time. I certainly don't want to extrapolate that for the balance of the quarter, but at least in this very short window, there does seem to be some reaction to a more traditional fall like temperatures going across Texas. Speaker 600:29:09Okay, very helpful. Thanks guys. Speaker 700:29:12Thank you. Operator00:29:15Thank you. Next question comes from the line of Max Ratlenko with TD Cowen. Please go ahead. Speaker 600:29:23Great. Thanks a lot guys. So first, can you remind us much of your business you view to be discretionary? And then how are you thinking about that part of the portfolio could trend if the consumer backdrop softens versus the more functional part? Speaker 200:29:39Sure. I would say discretionary businesses are between 20% 25% of total sales. Ladies' boot and ladies apparel are each roughly 10% of sales. Not all of that is discretionary, but that's sort of how it we think about it. And the balance of our business, Work Boots and Work Apparel, Men's Western Boots and Men's Western Apparel tend to be just much more functional in nature. Speaker 200:30:10And while many of those categories are also down, they tend to fluctuate much less variability than The more fashionable categories of ladies boots and apparel. Speaker 600:30:29Great. Thanks a lot. And then can you just remind us how your comparison book Versus last year, just by month. And then you lost some very heavy sale days last December right around the holiday period. So just any changes in how you're looking to attack those days to maybe make up some of the comp? Speaker 600:30:47Thanks and best regards. Speaker 200:30:51Sure. From a stores basis, as we look at last year, we were plus 1.5% to 2% in October November. And then we got into December, We were about a negative 3 from a store's perspective. As a reminder and as 5 minutes after I say we don't use weather as an excuse. The last 3 or 4 days leading into Christmas Last year, there was a pretty pronounced snowstorm and we did at some point Talk about a $4,000,000 sales erosion in December due to that. Speaker 200:31:39So If you think about where we're running now and what our guide is, part of the bridge is that $4,000,000 which on the balance of the quarter is About a point, a little bit more than a point of comp. Speaker 300:31:53And Max, we've got on slide 10 the same store sales by month laid out too, if That's easier Speaker 600:32:01to reference. Great. Thanks a lot. Speaker 300:32:06Thanks, Mac. Operator00:32:09Thank you. Next question comes from the line of Jason Haas with Bank of America. Please go ahead. Speaker 300:32:16Hey, good afternoon. Thanks for taking my questions. I'm curious, Jim Conroy, what gives you confidence that this Slowdown is a macro issue and it's not that sales per store are starting to revert back to pre pandemic levels? Speaker 200:32:34Well, the sales per store, We've grown them from roughly $2,700,000 to about 4,500,000 And our comp is down 3% 3.8% in the quarter and a bit more than that Towards the end of the quarter, so we would have to give up much more of that to get back to the $2,700,000 right? You'd have to give up 30% to 40 Your sales to get back to that number. And I think when you look just across retail and what other people are reporting, there's been a pretty pronounced and I think pretty widespread call out of a pullback in consumer spending from Target to tractor to floor and decor, you can kind of go through the growth retailers and they're all sort of saying the same thing. Speaker 300:33:34Got it. That certainly makes sense. And then, I was curious about the non Boot Barn, I believe that's the Sheplers e Commerce business, I think there was an expectation that we would start to lap some of those declines, but it sounds like it's continuing to be soft there. So I'm just curious what's changed there? And, yes, why hasn't that business started to show some signs of improvement? Speaker 200:34:00So it's a good question and candidly that surprised us a little bit. We did expect as we cycled softer business that we would See some relief there. One of the unique Aspects of that business is as different than bootbarndot More of the sheplers.com traffic is driven by paid search. And what we have found is that PayPay has become relatively more expensive for us or Perhaps relatively less effective and we just manage that part of our business Almost algorithmically where we spend to drive traffic with a certain return on ad spend Hurdle to meet and if we fall below that hurdle, we pull back on the spend. So That's been the biggest, I think, surprise and there's been a number of changes in Google and how they manage their AdWords and the shift towards shopping, etcetera, but when we put all of that together, We've just made a decision to overspend to get that business back. Speaker 200:35:26But again in the spirit of full transparency, we did expect that business to be a bit better than it has been. If we had our druthers, we'd certainly prefer to have softness outside of bootbarn.com, so that's fortunately where it is. We do hope that we can get that business back to, if not growth, at least less of a drag on same store sales. Speaker 300:35:52Got it. That's helpful. Thank you. Thanks, Chetan. Operator00:35:57Thank you. Next question comes from the line of Janine Spichter with BTIG. Please go ahead. Speaker 800:36:05Hi, everyone. Just wondering if you could Walk us through some of the changes in the store paybacks. They're still super strong, but did notice that there's a slightly higher investment embedded in your expectation for new store build out And it looks like slightly lower sales per store. Just walk us through how you're thinking about the cost to open a new store, the paybacks and what's changed? Thank you. Speaker 200:36:28Sure. Well, the change since we first went public is quite positive, right? We used to model of 3 year payback and a $1,700,000 1st year sales and we're essentially at double that now and paying back at 1.5 years. So it's been quite good and much better than we sort of ever anticipated when we laid out our original earnings Over the last couple of years as we were comping up so strongly and the tone of the business was extremely positive That probably flowed over to new stores as well. And I think we've given back a little bit of that layer at the top, But still at a $3,300,000 1st year sales, 66% Return on invested capital, it's just a phenomenal use of our capital and we're Pretty excited about our ability to continue to blanket the United States and add 15% new units Going forward for the foreseeable future. Speaker 800:37:39Great. And then just maybe anything you're seeing in terms of new markets that you've opened stores in? Any differences there between the broader fleet? Speaker 200:37:50Nothing significant on a market by market basis. We're quite pleased that essentially all of our new stores are performing extremely well. I think in the script we talked about every new store is has either achieved at least a 3 year payback or projected to hit a 3 year payback. And as a basket of stores, the payback is about 18 months. So as we think about our continued growth in sales, the 52 stores this year and call it 50 plus stores next year, we'll give you a specific number when we guide. Speaker 200:38:35That will contribute several $100,000,000 over the next couple of years. And it's just It's a very low beta and high payback investment for us. So we're going to continue to build the business. We think we can add 600 more stores and we feel great about the team that's doing that. Speaker 800:39:00Great. Thanks so much. Operator00:39:05Thank you. Next question comes from the line of Dylan Gardon with William Blair. Please go ahead. Speaker 900:39:13Okay. Thanks. Just trying to sort of think through, I take the point and I think you're right that there are some broad based sort of macro headwinds from a discretionary spend standpoint, but your business has historically been viewed as somewhat above that. And if you look at some of your bigger end markets, construction, oil and gas, you're seeing general stability, if not strong wage growth there. How do you kind of square that in your thinking about sort of what's happening right now? Speaker 200:39:47I think our business has puts and takes across the board like any good portfolio and we have some solid businesses. Our work boots business was down slightly, so kind of much more stable than our More fashionable ladies, Western apparel business. So I think that we do have a bit of a risk Spread across businesses. And I think the second piece is as you well know, right, I mean our business has grown So much and frankly so much more than essentially every other retailer that as we go up against the comparisons we're up against even in solid part of our business, we're comping 60%, 70% 2 or 3 year comp numbers. So if we give back 3% of that, I view that as a success, if I'm honest. Speaker 200:40:46I think most people have expected us to give back All of it, and it doesn't appear that that's happening. Speaker 900:40:54Got it. And then on the 600 just the continued sort of monster growth in your own brands, is part of that a function of a decline in other parts of the business? And is there then, I guess, a risk that you kind of give some of that back if the broader box recovers? Speaker 200:41:16No, I wouldn't do it that way. I think We've expanded legacy brands and we've added some new brands at least over the last year or 2. And that has given us some nice growth. There was a time where we had some of our 3rd party brands Struggling to keep up with our sales growth and the math then worked against them and their penetration came down. Most of our big brands now are past that and have the ability to ship us. Speaker 200:41:54So I think now we sort of Have a fair horse race between brands that we've developed and the 3rd party brands. So I don't think we expect to see a slowdown in exclusive brands based on that. I do think though as Jim Watkins called out with 500 or 600 basis points of growth over the last 4 quarters, I'm not sure that's sustainable. It was sort of never really planned that way, just that the businesses have done so well and the brand launches have done so well We've outperformed our expectations, but our long term model anyway doesn't need to have Five points of increased penetration. We would do just fine with half of that. Speaker 200:42:46So I think your sort of composition concern or percent to total concern would play out. But I do expect that 500 basis points to 600 basis points this quarter was 620. I don't expect that's going to continue forever going forward. Speaker 900:43:04Got it. Thanks a lot. Sure. Operator00:43:10Thank you. Next question comes from the line of Jonathan Komp with Baird. Please go ahead. Speaker 1000:43:17Yes. Hi, good afternoon. Thank you. I want to follow-up on the merchandise margin. You're doing an excellent job of holding and growing that. Speaker 1000:43:25I want to just ask, are you seeing any incremental discounting competitive pressure that you would need to respond to, just trying to think through Any levers you may have to pull if you choose to or not and maybe separate of discounting, what are some of the ways you could move the needle to offset the trend you're seeing? Speaker 200:43:49So there's as you know, we compete typically against a single store There's one regional competitor that's about a fourth of our size. We don't really follow their promotional calendar. We don't really respond to other people in the industry Doing running sales or discounting. If I wanted to or we wanted to drive Same store sales, sure, we could discount and advertise more, but we make less money and then have to cycle next year and wind up down a sort of vicious cycle that essentially every other retailer has found themselves So we don't intend to do that just to drive same store sales. We're really happy that sales grew 6.5% in the quarter And to try to artificially boost comps, we just don't have that in our DNA. Speaker 200:44:51We are trying to do other things though like how do we make the most of the traffic we do have coming into the stores, how do we build the size of the basket? The field team is doing a really nice job Trying to increase units per transaction. We try to incent them in different ways to do more of that. We are trying to sort of build the basket as much as we possibly can. We're also doing a number of things on an e com from an e commerce perspective, resorting the site, remerchandising it, trying to really showcase best selling items More prominently, continually tweaking our marketing and media mix. Speaker 200:45:40So we're doing everything we can To try to get as much same store sales in a healthy way that we can, but we also are managing the downside, which why I think we feel pretty good about the fact that we've gotten our inventory into a position that if the same store sales trend turns around, I think we'll be fine And can maximize our business. And if it doesn't, I don't expect that we'll have any significant merchandise margin erosion. And as Jim called out for the quarter, we expect to see merchandise margin accretion in the Q3 and for the balance of the year. Speaker 1000:46:21Yes, that's really encouraging to hear. And just one other follow-up on the new unit growth. Jim, I think you mentioned Yes, 50 plus is the right way to think about next year again without committing today. But maybe to ask differently, what would have to change or are any scenarios where you would slow unit growth if the macro piece became even more impactful? Or just trying to think about how you're How set you are on the units or not and how you view that? Speaker 200:46:50I think retailers Tend to slow their new unit growth if 1 or 2 different things happen. 1 is New stores are cannibalizing existing stores more than they expected or 2, they feel like their underlying model is broken or they can't I don't think either of those are true with us. So for when we look at our business and we look at sort of very laser focused on same store sales line, we can look at a quarter or a month down or we can look at it in a multiyear period and say we're up massively. We also don't see any outsized cannibalization and we don't see any significant changes Competition. So at this point, I see no reason to certainly no reason to slowdown our new store growth. Speaker 200:47:43Many would argue that we could if we could do more, we should because the payback is so strong. But right now, we feel good about the 15% planned for this year and Likely roughly 15% for our next fiscal year. Speaker 300:47:57And I would just add, John, that with a really strong balance sheet, no debt, every comp store and the chain is contributing positive EBITDA. We're in a really nice situation, particularly compared 8 years ago when that wasn't the case and maybe we did have to slow that a little bit or chose to slow that. Speaker 1000:48:20That makes sense. Thanks again. Speaker 200:48:23Thanks, John. Operator00:48:26Thank you. Next question comes from the line of Cory Carlo with Jefferies. Please go ahead. Speaker 700:48:35Hi, good afternoon. So just wanted to ask about marketing. So Correct me if I'm wrong, but I think this is the first time that Boot Barn has been the sponsor for an NFL team. So with sales continuing to grow. Obviously, that's fed your marketing machine with, I believe, marketing relatively consistent at a mid single digit percentage of sales, so curious as sales have continued to grow, the marketing budget seemingly has grown as well and which is unlock the opportunity to use things or partnerships like with the Dallas Cowboys or being the 2024 headline tour sponsor for Morgan Wallen, so just curious how you think about the opportunity and scale of Boot Barn's marketing budget as sales have continued to grow and what that means from a brand awareness and sales perspective? Speaker 200:49:46Great. That's a great question. Very strategic question. You're right, right? Our Total revenue in the last 3 years has essentially doubled and our marketing as a rate of sale is roughly exactly the same as it was 3 years ago, so our marketing dollars have essentially doubled as well. Speaker 200:50:08And that does give us the ability to just continue To beat the drum of national brand, largest seller in the industry, leading market leader and There is overused term, but there is that virtuous cycle of Reaching out, getting more consumers, expanding the reach of the brand outside of sort of a pure Western customer, maybe we shouldn't have gone after the Cowboys specifically, they're a little bit narrow minded. But as we go to sort of professional athletes or Country Music Stars that have a broader reach than sort of our core legacy customer, with twice as much marketing dollars spend, we have a competitive advantage that nobody else in the industry has to sort of play Sort of at the major leagues and we're going to continue to do that. And that will build the brand, that will build brand awareness. We hope that will be a national phenomenon. It of course is opportunistic that it's also in Dallas Specifically, which is in our top 3 markets in the country. Speaker 200:51:33So it's a very insightful call out to recognize that our marketing has continued to evolve as we've gone from a small regional player 10 years ago to a pretty big national player today and I'd expect more of that as we go forward. Speaker 700:51:58Great. That's very helpful. And then I just had a longer term strategic or structural question around merchandise margin. So clearly exclusive brand penetration has continue to grow and it seems as if there's still pretty substantial opportunity for merchandise margins and freight, it seems like was also a slight benefit as well in the quarter. So just curious given the momentum that you've seen within that component of the gross margin, how high do you think What do you think the opportunity could be longer term for merchandise margin and gross margin over time? Speaker 300:52:48Yes. I'll take that, Corey. The you're right. We've seen Some nice benefit, whether that's from exclusive brand penetration growth and also better IMU from our 3rd party vendors, Yes, some really great partners who have helped us. Yes, as we've grown in size and we've been able to get better volume discounts and purchase container loads at times has been helpful and that will continue to be a driver as we head into the long term. Speaker 300:53:20As far as freight is concerned, I think as we get through this year, we will have recouped some of the headwinds that we've seen over the last couple of years, But we're continuing to look at freight rates with our vendors and how we can get those down And are pretty optimistic of what that means going forward. And then as we return comp growth and we're able to leverage some more of the buying occupancy distribution center costs, that's something that Yes, we'll continue to we expect to continue to drive our gross margin rate Back up above 38%. This year at the high end of the range, we're guiding that at 37.1%. So we feel like there are plenty of drivers ahead and I would just also throw in, as it relates to SG and A expense and as we look at some of the service We have there and we get through some of these inflationary costs that we've been fighting the last few years. We think there's opportunity to focus and bring some of those costs down as we move into long term. Speaker 300:54:32So all those things obviously helping to drive EBIT margin back up. Speaker 700:54:40Great. That's very helpful. Thank you so much and best of luck. Speaker 200:54:44Thank you. Operator00:54:47Thank you. Next question comes from the line of Jay Sole with UBS. Please go ahead. Speaker 1100:54:54Great, thank you so much. Jim, I just want to follow-up on some of the marketing discussion. With someone like Morgan Wallen, can you just talk about what a little bit more about what you want him to accomplish for the company. Are you looking for him to raise awareness of the Boot Barn brand? Are you looking maybe to just elevate the Boot Barn brand or maybe promote Some of the private some of the owned brands that the company has, can you give a little bit more about what specifically how he can help company and sort of what the KPIs are that you're using to measure the return on that investment? Speaker 500:55:24Sure. Speaker 100:55:25It's a Speaker 200:55:26great question. I think it's Brand awareness, he is just an absolute megastar in our industry. He also uniquely has a younger fan base, younger follower. So if you look at the demographics of a Boot Barn customer, one of the implied objectives we've had for the last several years Is to ensure that our customer doesn't age out and we've made some progress on lowering our average age And I think he will help us continue to do that. We do have the ability to use him and We very much view it as a partnership. Speaker 200:56:13I mean, he's got some really great ideas as well. So we've already Contemplated using him as a spokesperson for spokesperson may be too trite of a way to describe it, but someone to really get behind one of our existing exclusive brands or just Boot Barn in general or potentially do a line specifically with him. So All of those things are on the table right now. The actual agreement really focuses on his tour at the moment, but we do have the ability to use him and his likeness and his image in much of our marketing on social media, Speaker 300:56:59when Speaker 200:56:59he's out and performing, We'll be we'll have a lot of prevalent prominence in arenas, on his tour buses, etcetera. So I think it's a number of those things, but the biggest strategic purpose is to bring in more customers that age younger. And you've got a very strong following on the female side. So that might help kind of get that business Sort of back on more solid ground. Speaker 1100:57:33Got it. Thank you so much. Speaker 200:57:36Of course. Operator00:57:39Thank you. Next question comes from the line of Sam Poser with William Trading. Please go ahead. Speaker 1200:57:47Good afternoon. Thank you for taking my questions. I've got 4. I'm just going to read through them. One, outside of work, what other categories outperformed in the quarter? Speaker 1200:58:002, have you seen any Benefit from store traffic or anything from the Cowboys. 3, what are you doing to I understand the macro, But what's being done to actively drive traffic to the stores and conversion? So how are using your omnichannel activities or whatever to bring more people to the stores, hopefully, again to buy something. And then There had been a big differential between with the exclusive brands between the online and store performance. And I sort of wonder how that gap if that gap is closing and what that variance is? Speaker 1200:58:41Thanks. Speaker 200:58:45Okay. On the first part of your question, outside of work, what's outperforming, it does fall somewhat tightly into the functional business of work boots and men's western boots and men's western apparel are doing better than ladies western boots Ladies Western Apparel. So the notion of our functional business is less volatile is playing out Just as you might expect, in terms of store traffic from the Cowboys, it's a little bit early to see if we've had specific change in store traffic. Sorry, I don't have a great answer for you on that one. What's being done to drive traffic to the stores? Speaker 200:59:28Yes, we've got a pretty good playbook for driving traffic, right? And our business is twice what it was 3 years ago. So it's not a lack of ability to add customers or drive them into the store. We are making some changes or some modifications kind of on the fringe. So we are marketing, As I mentioned earlier, we have no intention of becoming more promotional or more sales driven or more markdown focused, But there are times when we've made a decision to have the marketing feel a little bit more commercial and a little bit less pure branding or brand aesthetic. Speaker 201:00:10I mentioned earlier on this call, we've got the field really focused on how do we build a basket once somebody comes into the store? We are constantly trying to build an omnichannel customer From a digital customer. So your question alluded to what are we doing with a digital customer and how do we build them into a bigger Boot Barn customer. Speaker 601:00:39Well, if Speaker 201:00:39that digital customer is near a store and we know that, we market to them differently than if they are a digital customer that has shopped on bootbarn.com, But isn't within a radius of a drive time to a store. And then in terms of the exclusive brand penetration between stores and online, In total, we're approaching 3%. Stores are a little bit higher than that and our e commerce business is Roughly 30%, a little bit north of 30%. So that gap has changed substantially. And what drove that mostly is our ability to ship our exclusive brands out of our stores to our digital customers, so while our e commerce sales On a same store sales basis are down a bit. Speaker 201:01:41Our margin rate is being helped by the exclusive brand penetration going up. Speaker 301:02:02Okay. Thanks, Sam. Operator01:02:03Thank you. Thank you. Next question comes from the line of Jeremy Hamblin with Craig Hallum. Please go ahead. Speaker 1301:02:14Thanks. First, I wanted to start with just Returning to the gross margin visibility, so it's pretty impressive given where the comp trends are, your expectations here on gross margins both in the December quarter, but also for the year, in terms of getting back to what you might feel like is the baseline, can you give us a sense for either kind of the comps you need to produce to get back to, let's say, the 38% plus for the full fiscal year or maybe another way to think about it might be just like an AUV level that you think you need to achieve given the build out costs you've had on the real estate side? Speaker 301:03:08Yes, sure. So I guess just kind of level setting and you know this Jeremy, but Speaker 501:03:13for Speaker 301:03:13everyone else, I guess, if you go back to fiscal 2020, Yes, our gross profit rate was 32.7% and we're able to grow that up to a peak of above 38% Yes, 2 years later, and that was up from fiscal 2018 was 30%. So we feel really good about the 37 point 1% that we're marching towards this fiscal year and I think that we'll continue to find that opportunity, as I mentioned earlier, to march Towards 38%. As far as drivers in getting there, I think with the new stores that we've opened over the last 2 years and the stores will continue to open and as those march towards maturity and the average Unit volume of those stores rise, that's going to help drive some profitability and leveraging the occupancy cost of those stores. We've got the new Kansas City distribution center that we've brought online. There's some duplicative costs we've had this year between the legacy distribution center and the new one that will go away and we'll get more efficient in those operations and then continuing to drive just the merchandise margin rate from a product margin and the things talked about. Speaker 301:04:33So I think we're not far away from the 38%. We're thrilled with the growth that we've seen over a few short years and that it's sustainable, particularly in this environment when we're You've seen a little bit of a growth on the full year. And as we return back to our regular growth, what opportunity that provides us. Speaker 1301:05:02Great. And then a follow-up here. In terms of thinking about how the macro could play out that's out of your control. We've got low unemployment rates. If that were to track back up to 5%, 6% and we end up in a recessionary environment, consumer discretionary spend slows further. Speaker 1301:05:28What type of ability do you think you have to reduce SG and A spend overall? And then kind of connected to this question is, how would you think about potentially changing if at all the unit growth plan of kind of this mid teens level that you guys have been delivering on? Speaker 301:05:55Yes. I think I'll start with just I think Jim kind of alluded to the answer on the unit growth question earlier, the fact We've got such a strong financial position. These stores pay back in 1.5 years. Even if those stores were to slip Payback in 2 years or even 3 years, which is the model we had when we went public, we would continue to expect to open those new stores at that rate, it's hard for us, I guess, to imagine a scenario where we would slow that to any significant Degree. As far as reducing SG and A spend, about roughly half of our spend is variable in nature. Speaker 301:06:36And so as the sales come down, we're able to reduce labor in the stores and some of Speaker 201:06:43the store related costs Over time Speaker 301:06:47in the fixed level of expenses, it gets a little bit tougher. But one of the things that we've really been focused on over the last few months and as we look forward is the last 3 years we've just seen this growth and we've been very focused on meeting the needs of those customers and keeping up pace with the business and we've seen that in the growth of earnings and, up and down the P and L and the improvement in the balance sheet. However, we haven't been able to focus as much on driving those expenses down. And so we've hired up in our procurement department and we're looking at where in all departments and are starting in earnest Really over the last few months to start to drive to get those SG and A expenses down as tight as we can. And so that's something we're looking forward to regardless of what happens with the overall macro that we'll start to see some benefit from. Speaker 1301:07:52Great. Thanks for taking the questions. Best wishes. Speaker 201:07:55Thanks, Jeremy. Thanks, Jeremy. Operator01:07:58Thank you. Next question comes from the line of Mitch Kummetz with Seaport Search. Please go ahead. Speaker 1201:08:07Yes. Thanks for taking my questions. Can you give us the 2Q comp for ladies boots And ladies apparel. And then can you also tell us how those businesses were in the quarter on a 3 year? Speaker 201:08:27Out of 3, they were approximately 100%. And on the quarter, we'll look it up, but they were like minus 15 or something. But let's give you a real number. I think what you're really asking is how did those businesses evolve throughout the quarter? So In quarter specifically, now keep in mind the quarter, the business didn't change all that much from the Q1 to the Q2. Speaker 201:09:03It just all happened in September October. So for the quarter ladies boots and ladies apparel were around minus 8, minus 9. As we got into September October that became like a minus 17%. So it's really more the tail end of the quarter and as we turned the page Into the Q3 or into October where those businesses got sort of meaningfully worse. And so that's where we stand. Speaker 201:09:35But to your point, as we look at that business, the team that runs that business, They've doubled the business in a few years and they're giving a bit of it back now And they've sort of demonstrated their ability to now play defense and skate backwards a bit. So we feel good about the fact They've been able to take inventory levels down more in line with sales and been kind of very Vigilant in working through their markdowns. Speaker 1201:10:08Got it. And then Jim, you guys ran double digit positive from late 2021 into early 2023, and if I recall it correctly, a healthy portion of that came from acquiring new customers. Can you speak to kind of any metrics with regard to kind of new customer retention, how are you thinking about how well you've been able to Some of those customers that you added over that period in particular. Speaker 201:10:42So it's a very good question. But we you're right. If we look sort of big picture, roughly half of our growth over the last 2 or 3 years, sort of that 60 ish percent growth was from was transaction based and much of that was from new customers. And they've proven to be Loyal to us, sticky, if you will. So we continue we were a bit worried that we were going to get an influx of customers either due to a snapback coming out of COVID We had product during difficult supply chain times and nobody else did, or we were open and other people were closed, etcetera. Speaker 201:11:31But it seems more than seems what we see in the data now is that those customers are now Boot Barn customers and they're shopping with us at roughly the same frequency that our legacy customers would shop with us. And while we're comping slightly negative now, if we were to have lost all those customers, we'd be down sort of significant double digit. So we feel pretty good about the customer file, the Be Rewarded program, the growth in our customer count, I just think in general, they're shopping less frequently. Speaker 1201:12:13That's helpful. Thanks. Good luck. Operator01:12:16Thanks, Mitch. Thank you. Next question comes from the line of John Lawrence with Benchmark Company. Please go ahead. Speaker 501:12:27Yes. Thanks, guys. Thanks for squeezing me in. Jim, it was only a few quarters ago that you threw out the number of 40% for private label. That's back when you were in the 28s 30s and now we're there. Speaker 501:12:45Can you speak to a little bit when you look at the softness overall, which one of these, I was in some stores last couple of weeks and surprised that Rank 45 and Cheyenne or I'm sorry, Cody James, really were presented right in your face at the front of the store. Can you speak to obviously, to the strong private label names just getting stronger or some of the newer names really taking off with traction? Speaker 201:13:18I see. Good question. Well, Cody James tends to be very Prominently featured in the store, right? It's our number one brand of all brands in the company. So we tend to lead with that in the front. Speaker 201:13:36In terms of broadening to coming back to your question, we've seen really nice growth in our 2 most historical brands, which are CooteJam's and Cheyenne. We added Idle Wind in 2018 about 5 years ago and that's just been a runaway Great partnership for us. And now we have some new brands that we've launched, brothers and sons, Blue Ranch were ranked 45 and they're emerging. And we've seen some really nice pockets of success there, and we expect that they'll continue to build their market share in the store as well over the next few years, which will enable us to take the 40% up to 50% EB in call it 3 or 4 years. So we feel we just feel great about the product design and development team, their partnership with our buyers, our field team that gets behind the exclusive brands and understands the functions and features of the product to showcase that to our customers And we do that in the context of still being a really important customer for the top Western brands in the space, Wrangler Aria, Justin Carhartt, etcetera. Speaker 201:15:07So I think we feel really good about the composition of brands in general And still believe there's some growth opportunities ahead for us for our exclusive brands. Speaker 501:15:23Great, thanks. And the last question for me, does the Cowboys agreement include any retail placement at the Cowboy Shops or at AT and T? Speaker 201:15:36No, no. It's really a marketing agreement. We can do brand activations there, but we won't see significant Product selling at all. Speaker 501:15:49Great. Thanks. Congrats. Speaker 601:15:52Thank you. Operator01:15:55Thank you. There are no further questions at this time. I would now like to turn the floor over to Jim Conroy for closing comments. Speaker 201:16:05Well, thank you everybody for joining the call today and we look forward to speaking with you on our Q3 earnings call. Take care. Operator01:16:16Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by