NYSE:BOOT Boot Barn Q3 2024 Earnings Report $161.48 -1.63 (-1.00%) As of 03:19 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Boot Barn EPS ResultsActual EPS$1.81Consensus EPS $1.80Beat/MissBeat by +$0.01One Year Ago EPSN/ABoot Barn Revenue ResultsActual Revenue$520.40 millionExpected Revenue$520.34 millionBeat/MissBeat by +$60.00 thousandYoY Revenue GrowthN/ABoot Barn Announcement DetailsQuarterQ3 2024Date1/31/2024TimeN/AConference Call DateWednesday, January 31, 2024Conference Call Time4:00PM 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 Q3 2024 Earnings Call TranscriptProvided by QuartrJanuary 31, 2024 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Boot Barn Holdings Third Quarter 2024 Earnings Call. As a reminder, this call is being recorded. Now, I'd like to turn the conference over to your host, Mr. Mark Dedovish, Senior Vice President of Financial Planning. Please go ahead, sir. Speaker 100:00:19Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's Q3 fiscal 2024 earnings results. With me on today's call are Jim Connery, President and Chief Executive Officer and Jim Watkins, Chief Financial Officer. A copy of today's press Along with a supplemental financial presentation is available on the Investor Relations section of Boot Barn's website atbuparn.com. Speaker 100:00:40Shortly after we end this 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, and 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 During this conference call and webcast, we refer you to the disclaimer regarding forward looking statements that is included in our Q3 fiscal 2024 earnings release as well as our filings with the SEC referenced in that disclaimer. Speaker 100:01:22We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information, future events or otherwise. I will now turn the call over to Jim Conroy, Boot Barn's President and Chief Executive Officer. Jim? Speaker 200:01:37Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our Q3 fiscal 'twenty four 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 3rd quarter results, which marks the highest sales volume in Boot Barn's history. Speaker 200:02:03During the quarter, total sales grew by 1.1% driven by the 49 new stores added over the last 12 It's worth noting that except for 3 COVID impacted quarters, we have grown sales on a year over year basis every quarter since went public nearly 10 years ago. The incremental revenue from new stores was partially offset by a 9.7% decline in same store sales. To put this performance in perspective, our 3rd quarter sales are up 83% from pre pandemic levels, with our same store sales up almost 50% on a 4 year stack basis over that same period. Additionally, we achieved 300 basis points of merchandise margin expansion during the quarter comprised of 250 basis points of freight improvement and 50 basis points of product margin expansion. The growth in product margin was driven by more than 300 basis points increase in exclusive brand penetration, a reduced level of promotional activity and buying economies of scale. Speaker 200:03:07The strength in sales and gross margin combined with solid expense control drove a 30 basis point increase in operating margin and earnings per diluted share of $1.81 during the quarter, up from $1.74 a year ago and more than double our earnings per share in the same quarter pre pandemic. We believe this demonstrates the ability of the Boot Barn model to utilize multiple levers to drive earnings growth and the team's ability to execute at a high level. As we approach the last 2 months of fiscal 2024 and prepare for 2025, We will maintain our focus on executing against our 4 strategic initiatives. I would like to spend a few minutes providing an update on each of them, Beginning with expanding our store base. With 3 82 stores today, we are the largest player in the Western Workwear industry. Speaker 200:04:03In the quarter, we added 11 new stores as we expand our footprint across the country. As a reminder, we typically underwrite in a new store expecting revenue of approximately $2,000,000 with a 2 to 3 year payback. The performance of the most recent 100 new stores has been considerably better than this model, with new store revenue projected to generate more than $3,000,000 on average or 50% higher than the typical investment thesis with an accelerated payback of approximately 18 months. And if we view this on a shorter timeline, the most recent 45 stores that have been opened 1 full calendar year opening before December 2022 have generated approximately $3,300,000 of annual revenue on average over the last 12 months. We believe that the combination of 15% new store openings, a 60% return on capital And the opportunity to more than double our units is one of the strongest most compelling growth stories in the retail industry. Speaker 200:05:09Moving to our second initiative driving same store sales growth. Our 3rd quarter same store sales declined 9.7% within the guidance range we outlined in November. The decline was driven by lower transactions, partially offset by higher AUR and transaction size. The more functional categories such as men's Western Boots and Apparel and Work Boots, while still negative mid single digit on a comp basis, outperformed the more discretionary ladies western departments. Geographically, the West and North regions were slightly better than chain average and the South and East were slightly worse than chain average. Speaker 200:05:50As I reflect on our execution in the quarter, I'm very proud of the entire cross functional team. The merchandising team managed inventory levels extremely well, improving product margin and constraining growth in clearance merchandise despite a nearly double digit decline in same store sales. The stores team also performed quite well as evidenced by earning the highest customer service for any holiday quarter in the history of Boot Barn. They also supported our omnichannel business by fulfilling more than 45% of our total e commerce orders over the holiday period. Before moving on to the next strategic initiative, I do want to provide a bit of historical perspective to our recent same store sales results. Speaker 200:06:32I think it is helpful to remember that our average Store volume increased by more than 50% beginning in March of 2021 and has remained at elevated levels for nearly 3 full years now. On a year to date basis, our retail store same store sales have declined by approximately 6%, cycling plus 2% for the full year of fiscal 2023 and plus 57% the year prior to that. Going forward, while same store sales may continue to be negative for the near future, we believe it is unlikely that we will forfeit a significant portion the higher average store sales volume. Similarly, when we look at our customer count metrics, we reached the same conclusion. The elevated level of average store volume that began a few years ago was a result of a nearly 50% growth in new customers in a comp store and most of those customers became repeat purchasers. Speaker 200:07:30These two statistics give us confidence and our belief that we will likely maintain most of the elevated sales in an average store going forward. Moving to our 3rd In the 3rd quarter, our e commerce sales declined 11.5%. Our online channel has felt pressure due to less efficient online marketing spend, partly caused by an increase in digital spend by a handful of vendors and competitors. To add some more color, our bootbarn.combusinesscomped down low single digits in the quarter And approximately 3 fourths of the decline was due to the erosion of paid demand. Our other two sites, Sheplers and Country Outfitters are more dependent on paid traffic, so the erosion of paid demand has a significant impact on them. Speaker 200:08:23Our objective continues to be to maximize profitability for our online business, so we will remain disciplined with our digital spend so as not to erode earnings and our to grow top line sales. Operationally, we've improved our ability to fill demand from nearly all of our store and warehouse locations across the country. This enabled us to commit to a pre Christmas delivery later in the season than ever before. Now to our 4th strategic initiative, Exclusive Brands. Exclusive Brands' penetration increased 310 basis points in the quarter to 37.3%. Speaker 200:09:01I am pleased with this result, particularly as we were able to achieve healthy growth despite softness in our ladies business, which over indexes to exclusive brands. In the quarter, we did launch a brand extension in approximately 50 stores called Cody James Black, which targets a higher end customer for men's cowboy boots and cowboy hats. While this will be a relatively small contributor to the overall exclusive brand business, we do feel great about the initial results and are in the process of extending The new assortment to 200 stores. Looking back over the last 3 years, we've expanded Inclusive Brands penetration 1400 basis points far exceeding our historical goal of 2 50 basis points per year. This growth is a testament to the team's ability develop world class brands and compelling merchandise assortments. Speaker 200:09:56Turning to current business. Through the 1st 4 weeks of our fiscal Q4, our preliminary consolidated same store sales have declined 8.1% compared to the prior year period. On the surface, this is only a modest sequential improvement in our sales trend. However, we did see significant disruption in the business in the 2nd and third week of the month due to a winter weather pattern that forced store closures, reduced operating hours and presented significant travel challenges for customers. When we evaluate the business by region, the same store sales in the South and West regions, which were less impacted by the weather, have improved sequentially from the prior quarter by more than 5 points of comp. Speaker 200:10:44Conversely, the North and East regions, which were impacted by the weather, have deteriorated sequentially from the 3rd quarter by approximately 4 points of comp. While significant variability in weekly comp sales persists, we believe the underlying tone of the business has improved compared to the holiday quarter. I'd like to now turn the call over to Jim. Speaker 300:11:10Thank you, Jim. In the 3rd quarter, net sales increased 1.1% $520,000,000 Our sales performance benefited from new stores opened during the past 12 months, partially offset by a same store sales decline of 9 7% comprised of a decrease in retail store same store sales of 9.4% and a decrease in e commerce same store sales of 11.5 Gross profit increased 6% to $199,000,000 or 38.3 percent of sales compared to gross profit of $188,000,000 or 36.5 percent of sales in the prior year period. The 180 basis point increase in gross profit rate resulted from a 300 basis point increase in merchandise margin rate, partially offset by 120 basis points of deleverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was driven by a 2 50 basis point improvement in freight expense as a percentage of sales and 50 basis points of product margin expansion. Selling, general and administrative expenses for the quarter were $124,000,000 or 23.8 percent of sales compared to $115,000,000 or 22.4 percent of sales in the prior year period. Speaker 300:12:28The increase in SG and A expenses compared to the prior year period was primarily a result of higher overhead costs and store payroll associated with operating an additional 49 stores when compared to the prior year period. Income from operations was $75,000,000 or 14.4 percent of sales in the quarter, compared to $72,000,000 or 14.1 percent of sales in the prior year period. Net income was $56,000,000 or $1.81 per diluted share compared to $53,000,000 or $1.74 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory decreased 5% over the prior year period to $563,000,000 and decreased 1% on a same store basis. Speaker 300:13:16We finished the quarter with $107,000,000 in cash and 0 drawn on our $250,000,000 revolving line of credit. I would now like to provide an update on our 4th quarter guidance, which is outlined in our supplemental financial presentation. As the presentation lays out the low and high end of our guidance range, I will only speak to the high end of the range in my following remarks. As we look to the Q4, we expect total sales to be $386,000,000 We expect the Same store sales declined of 6.3% with retail store same store sales declining 5.5% and e commerce same store sales declining 13%. We expect to open 15 new stores with all openings scheduled for the second half of the quarter. Speaker 300:14:06As a reminder, this year's 4th quarter includes 13 weeks of sales compared to 14 weeks of sales in the Q4 last year. We expect 4th quarter gross profit to be $136,000,000 or approximately 35.2 percent of sales. Gross profit reflects an estimated 160 basis point increase in merchandise margin rate including a 140 basis point improvement in freight expense year over year and a 20 basis point improvement in product margin. Included in the product margin growth, we expect 4th quarter exclusive brand penetration to be to down 100 basis points when compared to last year. As a reminder, exclusive brand penetration grew 7 70 basis points in the Q4 last year. Speaker 300:14:54The driver of the slowdown besides wrapping remarkable growth the past few years is primarily due to the softer ladies business which penetrates at a higher rate of exclusive brand sales. We anticipate 3 10 basis points of deleverage in buying occupancy and distribution center cost as we cycle a 15 week quarter in the 4th quarter last year 14 week quarter in the 4th quarter last year. Our income from operations is expected to be $38,000,000 or 9.8 percent of sales. We expect earnings per diluted share to be $0.92 As a result of our year to date performance and our updated estimates for the rest of the year, We're updating our full year guidance. For the full fiscal year, we now expect total sales to be $1,660,000,000 representing growth of 0.4% over fiscal 2023, which as a reminder was a 53 week year. Speaker 300:15:52This compares to our previous guidance of $1,701,000,000 We expect same store sales to decline 6.3% with the retail store same store sales decline of 5.5% an e commerce same store sales decline of 11.7%. This update compares to our previous guidance of a consolidated same store sales decline of 5%. We now expect gross profit to be $611,000,000 or approximately 36.7 percent of sales. Gross profit reflects an estimated 170 basis point increase in merchandise margin, including a 130 basis point improvement from freight expense and a 40 basis point improvement from product margin. We anticipate 180 basis points of deleverage distribution center costs. Speaker 300:16:44We now project 3 70 basis points of growth in exclusive brand penetration for the full year, bringing our total penetration to 37.7%. Our income from operations is expected to be $198,000,000 or 11.9 percent of sales. We expect net income for fiscal 2024 to be $146,000,000 and earnings per diluted share to be $4.75 I'd now like to talk about our fiscal year 2025 that begins on March 31. While it is premature to fully outline our guidance for next year, We thought it would be helpful to share our thoughts on select components of the P and L as we get ready to begin our annual budget planning process. During fiscal year 2025, we again plan to open 15% new units and these new stores are expected to generate at least $3,000,000 of during the 1st 12 months of business. Speaker 300:17:43We expect to achieve approximately 25 basis points of product margin expansion through exclusive brand penetration growth and better economies of scale with our vendor partners. Additionally, We expect to see a reduction in our overall supply chain costs that will benefit our merchandise margin beyond the 25 basis points of product margin expansion I just mentioned. These improvements are part of our larger efforts to manage expenses and drive efficiency in the business. As we look to SG and A expenses, we have outgrown our corporate office building in Irvine, California, which we first moved into in 2016. We've signed a lease for a building nearby and will move during the 3rd or Q4 of fiscal 2025. Speaker 300:18:30The increased lease costs and associated depreciation will put some pressure on the SG and A line. We will provide more detailed financial projections on our May earnings call. Now, I would like to turn the call back to Jim for some closing remarks. Speaker 200:18:44Thank you, Jim. We are pleased with our ability to execute during the Q3. We were able to grow sales and earnings despite a negative same store sales result. Further, it is encouraging to see that there has been only a modest decline in our average store sales volume since the outsized increase that began in March of 2021. I'm very proud of the team across the country. Speaker 200:19:08I want to thank you all for your dedication to Boot Barn. Now, I would like to open the call to take your questions. Camilla? Operator00:19:17Thank you. We will now be conducting a question and answer session. Our first question will come from the line of Matthew Boss with JPMorgan. Please proceed with your question. Speaker 400:19:53Great, thanks. So maybe first question, Jim, near term, could you elaborate on the regional improvement that you cited in January sales relative to November, December outside of weather, maybe at a category level. And then just to follow-up on your on the total company average unit volume. So multi year, You've seen average unit volumes move from, I think it was 2,600,000 pre pandemic, to a peak of a bit over 4 I think we're just under 4 today. Speaker 500:20:30I guess what do you Speaker 400:20:31see as the sustainable AUV for the company going forward? And what supports Speaker 200:20:40Sure. On the first one, your first question was around sales by week in January and actually it was sales by week in January by category. Essentially what happened was weeks 14 had temperate weather, weeks 23 we had The winter storm that went across most of the country, the two regions for us, the West, which is Arizona and California and Nevada and a couple of others. And the South, which is Texas and few other states, didn't feel the weather quite as much as the other regions. So their business actually improved by about 5 points sequentially from the holiday quarter. Speaker 200:21:32The other two regions we had just and as you know, Matt, we almost Never call out weather. In this case, we had stores closing early or not opening at all and we had a lot of customers that couldn't get out and drive to stores. So those two regions, our North region and our East region, their business decelerated by 4 points of comp from the 3rd quarter. So We as I said in my prepared remarks, we believe that the overall tone of the business is improved from the holiday quarter. In terms of your second question around average unit volume, I think your before number is in the ballpark. Speaker 200:22:18We used to be 2.6. Actually, if you go back just 5 years We used to be 2.6. Actually, if you go back just 5 years or something, we're 2,200,000. And then we've You've grown to much more than that. One of the ways to think about it is We looked at a base of stores that were open in Q3 of fiscal 2020 or had been we looked at a comp base if you will of 2 34 stores And those stores were at 2,900,000 average unit volume. Speaker 200:22:58Those same stores are now at $4,400,000 average unit volume. So that $2,900,000 went to $4,400,000 for that base of stores. And I think that's greater than a 50% increase, right? 1.5% on Q9. I like doing math live with 200 people listening. Speaker 200:23:18If we want to think of the whole chain and what our average unit volume is going forward, it's still north of 4. And Embedded in your question is what's driven that. The single biggest thing that's driven that is we've added customers Tremendously over the last 4 or 5 years in total, of course part of that driven by new stores, But also on a comp store basis, our customer count on a comp store basis is up approximately 50% also. When you put all those facts together, we look at the business over an extended period of time and see nothing but tremendous growth. And on a year to date basis, we're down roughly 6% in our retail stores. Speaker 200:24:11When we cycle plus 2 and a +57, we actually feel pretty good about that number. Speaker 400:24:18Got it. And then maybe for Jim Watkins, just on flow through in the model. Could you elaborate On the magnitude of buying an occupancy and SG and A deleverage in the Q4, and just how best to size up as we think multi year, the magnitude of the supply chain efficiencies you cited and how that may impact fixed cost leverage hurdles in the model moving forward? Speaker 300:24:45Sure. Yes. So as we look to the 4th quarter, you're right, given that 10 week period, we do have higher deleverage. And so if I look to the high end of the guide, and again, I'd point To the slide on Page 20, where we kind of go through the different components of that, but it was 310 basis points of buying occupancy in DC deleverage during that Q4. And then as we look to SG and A For the same period, the OpEx, it's 3.40 basis points. Speaker 300:25:22And the one thing I would remind you on particularly around the SG and A deleverage, it's a little more outsized and part of that is because of some unique factors that are working against us. Besides the negative same store sales for the quarter and the 14 week period, you'll remember last year in 4th when we gave our report on that, as our sales turned negative as we got out of January and went into February and they deteriorated a little bit more as we got into March. We pulled back on several expenses such as marketing and then we reverse incentive based compensation. And so those are things that create a little bit more deleverage as we get into the Q4 around SG As far as the magnitude of the supply chain improvements that we're expecting to see as we get into next year, We'll give you more color on that and how they impact the leverage points. But the way I would model those out right now is around $6,000,000 of an annual run rate in next year. Speaker 300:26:32And again, we'll give you more color on that as we look beyond, but that should be something that continues with us as we get into the years beyond fiscal 2025. Speaker 400:26:46Great. That's great color. Thanks again. Best of luck. Speaker 200:26:49Thanks, Matt. Speaker 600:26:50Thanks, Matt. Operator00:26:53Thank you. Your next question comes from the line of Steven Zaccone with Citi. Please proceed with your question. Speaker 700:27:00Great. Good afternoon. Thanks for taking my question. I wanted to follow-up on Matt's question and maybe drill down on the preliminary commentary you gave about fiscal 2025. So you gave some details there, but I was curious for how you think about the potential recovery in same store sales. Speaker 700:27:19Do you see that being transaction driven? How do you think about that happening by category? Do you need business to get a bit better. Any sort of commentary you gave would be appreciated. Speaker 300:27:36Sure. Yes, as we look to on the same store sales guide for the year, again, It's a little early for us to guide that, so we're not providing a lot of commentary around that. As far as the recovery goes, if we look at the components The average unit retail, I think a lot of the big price increases are behind us. Low single digit increase in AUR is probably the way I think about that. And so any recovery that we see as we get into next year, We would expect to be transaction based in nature. Speaker 700:28:16And from a category perspective, does it I guess from a discretionary standpoint, that's your most challenged category, do you think that needs to stabilize or could we start to see that improve at some point? How do you think about that? Speaker 200:28:32I think it's a good question. I think the ladies businesses, which In an abbreviated way, we call all discretionary, which isn't completely true. But that business has been a drag on recent same store sales. And we'd like that to get back to even just flat, so it's less of a drag. We do think that business has unique challenges simply in the sense that we're cycling Just giant numbers, 100% comp in the ladies business a couple of years ago. Speaker 200:29:12So that if that can get back to low single digit declines or flat that would help the overall math of course. What we'd really like to see though is when we look at our Q3, the declines were were broad based. So ladies was worse, but most of the other businesses also were down on a comp basis. So Going forward, I do think there's some optimism that our core customer is relatively healthy and is Mostly employed. I think they are feeling the impacts of inflation still. Speaker 200:29:59And I think there is an overall concern around the economy, maybe geopolitical factors, etcetera. So I think there is a tendency to push off spending, but I don't think there's any Endemic challenges with the health of our customer. So as I as we look into fiscal 2025, I think there is a possibility that we'll get back to positive comps over the next few quarters. Speaker 700:30:31Okay. Thanks for the detail. Operator00:30:36Thank you. Our next question comes from the line of Max with TD Cowen. Please proceed with your question. Speaker 500:30:44Great. Thanks a lot. Jim, just curious if you could actually elaborate on that last Just any color on when you think comps could flip positive as the underlying trends do appear to be improving? And then compares will ease pretty meaningfully sequentially over the next couple of months. Speaker 200:31:03Max, I wish I could give you A day, a month, a quarter, it's very difficult to predict comps going forward. And I recognize that's very important to the folks on this call. What we can predict With a fairly high degree of certainty is we're going to open 50 or 60 stores next year. They're going to do $3,000,000 or more. We think we still have the opportunity to grow merchandise margin. Speaker 200:31:36We still are by far the biggest company in the industry. So, I can't give you a specific day or timing for reversion to positive same store sales growth, nearly everything else in the business is just operating extraordinarily well. So we'll manage our inventory levels based on the same store sales trend that we're currently facing. We are able to continue to grow merchandise margin even in a negative same store sales environment. We haven't built up a tremendous amount of clearance markdowns. Speaker 200:32:19So we're managing through the current sales trend, I think, extremely well. For the folks that work for the company, we all recognize that we've had sort of a once in a lifetime uptick in sales a couple of years ago. And to give back just small portion of it really hasn't bothered the company. And again, I recognize that the folks on the call were that buy and sell the stock based on The most recent quarter same store sales that may not give you a lot of comfort, but overall the company is still pretty darn healthy. Speaker 500:32:50Got it. That's helpful. And then just on the new store economics, is it fair to assume that you now view 3,000,000 as potentially trough level. And then just any color on dispersion between maybe some of the faster and slower ramping stores? And then just within that, if we are closer to the bottom, how are you thinking that the new store waterfall could look like ahead? Speaker 200:33:14So there's a few things embedded in that question. The new stores and the new store volumes Just every bit of it is a home run success, right? So Historically, we would think a new store would open at 1 point in 3 years and that was a great growth vehicle for us and we were happy about it. Wall Street was happy about it. To some degree, we've been a victim of our success because we spiked that number up to $3,500,000 and now it's at 3.3. Speaker 200:33:52I don't view that as a bottom. It could go down. It could go up from there. What I do know is it's a 60% cash on cash return, which is double what we had promised when we first went public and we'll continue to open stores in a very accelerated way. In terms of the new store waterfall, if the stores were opening at 1.7%, we would Really want them to start growing into an average store volume over time and get up to $3,000,000 someday, but they're not. Speaker 200:34:27They're opening a double bet. And while we'd love the waterfall to start right away, I'd circle back to my comment a minute ago, to some degree, we're a victim of our own success where they're opening up at extremely strong volumes. And In their 1st year, the ones that just turned comp are comping kind of in line with the company's trend. One of the reasons for that, if you want to think about it category by category is oftentimes our new stores have outsized success on the ladies side of the business when they open. And because the ladies business is under pressure from a bit of a fashion cycle, we think that's one of the reasons why we're not seeing the waterfall. Speaker 200:35:23Once again, recognizing that Wall Street does tend to be extremely focused on same store sales, We're actually not that worried about that. We're getting more volume faster and a higher return on capital than we ever expected we could. If we give a little bit of that back in the 2nd year, that's fine. I mean, I suppose we could do something to constrain the 1st year sales, so we get back to the waterfall, but I don't think we have plans to do that. Speaker 500:35:52I appreciate that color. Thanks a lot guys. Speaker 200:35:55Of course. Thanks, Max. Operator00:35:59Thank you. Our next question comes from the line of Jason Haas with Bank of America. Please proceed with your question. Speaker 800:36:07Hey, good afternoon and thanks for taking my questions. I was curious if you could provide some color on how you thought through the comp guidance fiscal 4Q, since it does seem to imply a deceleration Speaker 700:36:18through the quarter on Speaker 800:36:19a 2 year stack basis. And I'm especially curious about it because you talked about January being impacted by weather. Speaker 300:36:31Yes. Jason, so in guiding the Q4, we followed the same approach we've been using all year, which is to apply the historical seasonality of the business to the most recent sales. And while it hasn't been perfect, this has been a much better predictor of the business than looking at a 2 or 3 year stack. And in this case, we use the recent non holiday sales, so really October, November in January and applied the historical seasonality of the business. And when we talk about using the historical seasonality, In this case, we tried to exclude the COVID noise and looked at last year, the year before and then 2 of the pre COVID years and kind of blended out how the flow of those sales rolled out from the month of January. Speaker 300:37:23And that's what we used to project out the rest of the quarter. Interestingly enough, when you use just the January's business and exclude October November and roll that forward to February, March, you get to almost an identical answer in the guide. So we've continued to look at it Based off kind of the recent business and historical seasonality and it kicks out a number And oftentimes, it's not what you would expect when looking at a multiyear trend, but it's been a little bit more reliable. Speaker 800:38:00Got it. That's helpful. And then as a follow-up, I was curious if you could give us your sourcing exposure to China since there's some talk about potential for more tariffs coming in. And so I'm curious how that would impact you and the industry overall? Speaker 300:38:14Yes. Generally speaking, rough numbers, about half of what we sell comes from China, about 25% from Mexico and the balance coming from the U. S. And other countries. Speaker 800:38:30Got it. That's helpful. Thank you. Speaker 200:38:33Yes. I would add to Jim's comment. We've lived through a tariff environment before and didn't really impact us and we certainly would prefer that that doesn't come back to us. That said, It certainly doesn't make us uniquely less competitive in the industry. We could actually construct an argument that it makes us more competitive because we're the biggest player. Speaker 200:39:00We have exclusive brands that are margin drivers, etcetera. So it's something we're watching and being cognizant of. But I don't think it's really keeping us awake at night either. Speaker 800:39:12Got it. Thank you. That makes sense. Speaker 300:39:15Thanks, Jason. Operator00:39:18Thank you. Our next question comes from the line of Dylan Carden with William Blair. Please proceed with your question. Speaker 600:39:25Thanks a lot. Just anticipation that those comments on private label penetration flat to down in the 4th quarter might raise some eyebrows. Any more color You can add there. It sounds like you're anticipating back to growth next year. But Anthony, that would be helpful. Speaker 200:39:44Sure. I wouldn't worry really at all about the exclusive brands. It's not weaker brands or bad product. It's The result of arithmetic essentially. So our Businesses are penetrated at different levels and our ladies businesses are penetrated the highest with brands. Speaker 200:40:08And because those are a smaller portion of our sales in this quarter because they're comping down more, It's taking the exclusive brand penetration down with it. We're facing 300 basis points of headwind and penetration simply due to the composition of the business. So if we were If said differently, if the composition of sales didn't change in the quarter, we would have seen we'd be projecting growth for this particular quarter, Exclusive Brands. So I hope that answers the question. I mean, of course, we prefer to have growth. Speaker 200:40:49We get more margin that way it helps build our merchandise margin, but it's truly just a result of the math of the business. And I think we also have other abilities to grow our merchandise margin in addition to exclusive brands. Speaker 300:41:08And Dylan, as we look into fiscal 2025, we are planning on returning to growth and exclusive brand penetration, right? So This is a 1 quarter drag on the business. Speaker 600:41:25Great. And it kind of bleeds into another question around one way to think about the unit volume question perhaps is what business you're losing. And as you kind of look through some of the categories where you've been weaker, obviously women's, Do you feel like you're reaching a point where the discretionary nature of some of the what's remaining or just the behavior of newer customers or anything to kind of give you some comfort in and around how much more in theory you could lose. Does that make sense? Speaker 200:41:58It does. I think we continue to have a very solid base functional business. So all of Work business, both men's and ladies, most of men's Western business is functional and a portion of our ladies business is functional. So the bit that is more cyclical perhaps caught up in a fashion cycle a couple of years ago, There's it could still decline further and we still have fashion ladies business in the store and still are doing some Relatively significant sales there, but it's tempered to a large extent by the overall business that does tend to be much more functional. So I don't think we're necessarily out of the woods in the ladies business yet. Speaker 200:42:54I do think at some point we'll probably in the next few quarters start to see that trend improve and hopefully get to flatten, perhaps positive after that. But I don't think that's going to happen in the next 1 or 2 quarters. Speaker 600:43:09Understood. Thanks a lot, guys. Operator00:43:14Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed with your question. Speaker 900:43:22Hi, everyone. Yes, I wanted to ask about the e commerce business. It seems like it's still kind of hovering down in that negative low double digit range. To know how you think about the piece of the business that are not the bootbarn.com business. Remind us of the strategic importance of having Sheplers Country Outfitter, the Amazon business? Speaker 900:43:39And then I'd love to hear just how you're thinking about driving that business into next year. We're hearing of ad rates continuing to push higher. So how do you think about how that business evolves just in light of maybe higher cost on ad spend into next year? Thank you. Speaker 200:43:53Sure. Very good question. So the 4 pieces, boobarn.com, of course, is an extension of the store. And we do really pride ourselves on that channel experience and I think those two channels have been stitched together quite well and they also share the same retail prices. Sheplers.com, true to its heritage, is a very price conscious customer and oftentimes, frankly, has a lower price than boobarn.com. Speaker 200:44:27And we like that brand because it enables us to compete against other online players that are playing a price game. So that's kind of the Sheplers strategic importance. Country Outfitters was an acquisition Several years ago, it tends to be focused on ladies fashion, which is one of the reasons why it's having so much difficulty right now. We do think there is some long term possibility for that business to get back to growth. It also gives us a testing ground trying new things without impacting the 2 bigger business. Speaker 200:45:09The Amazon business is, I think, a necessary evil. We Sell some product on there, so do a lot of other people. It tends to be a low margin business for us, but it's still profitable. So we participate in sort of the behemoth of Amazon And that business is Speaker 1000:45:34gives us Speaker 200:45:35a read on sort of the general public demand that might be more casual purchasers of our product. In terms of the future of the online business and the growth, The online spend and the inefficiency of that is real. We could quite easily get more sales and spend more money and those sales would be EBIT eroding, so we just don't do it. So we manage it somewhat algorithmically. I do think that will normalize at some point. Speaker 200:46:10There'll be sort of new equilibrium. That is another business though when we look at a historical perspective. It's grown extremely strongly over a few years. And While we'd like it to get back to positive sales, the fact that it's giving a portion of the business back after such outsized growth It might be kind of expected, but we do think it can get back to positive sometime in fiscal 2025. Speaker 900:46:37Perfect. Thank you. And then just want to follow-up on the tariff question. Do you have an estimate of what you directly import from understand that I think you said half of your products are from China, but only a portion of that is from the exclusive brands. Speaker 300:46:50Yes, it's similar with the exclusive brands. Between exclusive brands and third party, it's still about 50%. Speaker 900:47:00Perfect. Thanks. Speaker 200:47:03The direct import would be half of 37% roughly. Speaker 900:47:09Got it. Thank you very much. Operator00:47:14Thank you. Our next question comes from the line of Jonathan Komp with Baird. Please proceed with your question. Speaker 1100:47:21Yes. Hi. Thank you. Maybe just a follow-up once more. When you run through the exercise and look at the sales volumes that you called out for projecting the 4th quarter sales and comps. Speaker 1100:47:32Can you just share a little more insight when you do that same exercise? What does that inform you to when the comps of the business could turn back positive and how should we think about any swing factors one way or another? Speaker 800:47:49Sure. Speaker 300:47:52It's encouraging as we look to this current quarter and Well, it's a deceleration on a 2 year stack and maybe a couple of other stacks if we go back far enough. In the February and March period, we're guiding that business in the stores to be minus 4 or minus 5, right? And so that's an improvement off of what we've seen more recently. And so that's encouraging. I would also say, I think if you go back a couple of quarters, we talked about this time period where February, March, April over the last several years has had a lot of macro noise in it between COVID and Omicron and tax stimulus and tax refund payments and different things in there. Speaker 300:48:42So it is a little bit harder to read kind of where that business is going. But what I would say is February March of Last year, so just a year ago, we did see a slowing in the trend of the business that was abnormal for the seasonality of that. So as We're planning this year and at least getting through February March, if there's any kind of Reversion back to what's been normal, there's some upside to February, March and that would be As well as we look to fiscal 2025. It's a long way to not answer your question, John, but the As we look to fiscal 2025, I think we really just have to get through the next 3 months or so to give you a better read on when that turns positive. Speaker 1100:49:34Yes, that's helpful color. Maybe just a couple of follow ups quickly. The Q4, Jim, could you just confirm, it looks like Maybe the implied product margin is a little lower today than it was previously even after you account for the Exclusive brand update you gave. So I just want to confirm if that's the case, if anything is changing on the product margin side. And then just clarify that SG and A comments for fiscal 2025, are you implying you still need more than a 4% comp to leverage that's Similar to how the setup was in 2024. Speaker 1100:50:08Just trying to read kind of the reason for giving that commentary today on the SG and A. Speaker 300:50:12Sure. Thanks, Ken. Sure. So, yes, no problem, John. So, on the product margin for Q4, we're guiding that plus 20 basis points year over year on the product margin and the freight would be 140 basis points. Speaker 300:50:26And so despite flat to maybe a little bit negative exclusive brand penetration, we still expect that to grow from better economies of scale. And then as we look to fiscal 25% on the SG and A side of things. I guess I'll talk to both the buying and occupancy and SG and A. On buying and occupancy, we had talked about kind of that 4% comp needed to leverage buying and occupancy. We'll update you to see or to let you know if there are any changes to that as we get to next year. Speaker 300:50:58Assuming that there are not changes to that, then the benefits we called out on supply chain would help lower that leverage point, but it's too early to kind of say before we've done our full buildup of next year's budget, Whether that is 4% precisely for next year or not. And then on SG and A, that the leverage point there, Same store sales required to get leverage at SG and A has historically been at 2.5%, called out the new corporate building will put some pressure on that. That's going to be again, it's still a little early to tell, but similarly, Probably a $5,000,000 or $6,000,000 hurt on SG and A next year. But again, we're working on things that will help offset some of that hopefully. And we'll give you an update on kind of what that leverage point looks like as we get into next year on our May call. Speaker 1100:52:01Understood. Thanks again. Speaker 200:52:03Thanks, John. Thanks, John. Operator00:52:07Thank you. Our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question. Speaker 1000:52:15Thanks for taking the questions. And just wanted to start with the new store openings. I think I caught in the script that you were expecting for fq4 that all of the openings for the March quarter were going to be in the back half of the quarter? And then just if you could provide a little bit color on that. And then related, as we look ahead To your commentary on FY 2025 unit growth, is there anything notable that you would point out on the expected cadence of those openings? Speaker 200:52:51I think you recounted the script comments. We are back loaded into this quarter. In terms of our fiscal 2025, at the risk of laying out guidance that we're certainly not prepared to do today, we'll do it on the next call, There's nothing unique to call out that they're all going to be in the Q1, all going to be we're going to try to make them relatively spread out throughout the year. So nothing specific to call out. Speaker 300:53:21And I would just add, Jeremy, the pipeline is healthy. We've got a lot of leases that we've signed and so we're headed into next year with a very healthy pipeline. Speaker 1000:53:34Got it. And then if I could just dig in a little bit here on the new headquarter, which I guess the move is expected at Q3 or Q4 of fiscal 2025. What is the annual lease cost higher than what you currently are paying? And then what is the expected depreciation on an annualized basis? Yes. Speaker 1000:54:05So it's Speaker 300:54:07still a little early to give you all of those costs because we haven't build out the property add and the space, but the number I just threw out there $5,000,000 to $6,000,000 would be the P and L expense for next year and that includes the increased lease cost and it's important to point out that when we moved into this building that we're currently in several years ago, we're a much smaller organization where we just don't fit anymore. And so it will be It's a bigger building. The lease costs are higher just given that it's a new lease as well. Included in that $6,000,000 though is a period of some double rent, some depreciation that starts later in the year. And my expectation is we get into the following year, As we get into the following year, the $5,000,000 to $6,000,000 will likely be a little bit lower than that kind of run rate basis as we will incur some costs that are more one time in nature this year and moving. Speaker 300:55:11So again, the purpose of calling that out was that We'll have some benefits and benefit in some of our supply chain costs to the tune of $1,000,000 and a little bit of a drag due to the corporate office building and the SG and A line. It's kind of a neutral between the two, but may create a little geography work for you and your models and wanted to just make sure you're aware of that. Speaker 1000:55:41Got it. That's helpful. Best of luck. Speaker 200:55:44Thank you. Thank you. Thank Operator00:55:49you. Our next question comes from the line of Jeff Licht with B. Riley Securities. Please proceed with your question. Speaker 1200:56:00Jim Conroy, I was wondering if by my math, it seems like You've taken your Q4 guidance down by about $23,000,000 I'm just curious relative to when you previously gave kind of the implied guidance. If you could just elaborate on what's changed in terms of your thoughts Over that time period. And then another quick question would be, could you give us as it relates to the new store openings in kind of non traditional markets. I was wondering, usually you have a couple of good anecdotes like you did with Scottsdale. If there's anything that just kind of shows how the concept is resonating in places like Connecticut or New Hampshire? Speaker 200:56:42Well, I'll take the one on New stores and Jim Watkins can take the one on the guidance for Q4. New stores are working pretty much everywhere in new markets and in legacy markets. I think the PhoenixScottsdale example that you might be alluding to is we used to have 4 stores there. Now we have 8 stores there And with more development opportunities in our view Speaker 300:57:13are still there. Speaker 200:57:13And those Four stores used to their volume has gone up. We've comped up while we're adding stores there. So we've kind of learned that we continue to build out legacy markets and have it be net new business and not erode our comp. We've also been able to open up in Northeast and have had some real nice successes in markets that wouldn't traditionally be considered Western. Speaker 300:57:42Yes. On the first part of your question, the change in the Q4 sales, the $23,000,000 is really a function of when we guided November 2 on the we had the October business done and we guided based off of kind of late September, October business. And unfortunately, things softened a little bit more in the sales trend as we got particularly into December more than what we had anticipated. And so we've and January was softer than what we had anticipated also. So we've just rolled that forward based off of what we've seen in the recent business. Speaker 1200:58:20And I'm assuming I guess what I was looking for is it that's primarily the ladies business or what you call the discretionary fashion business? Speaker 300:58:30Yes, I mean, it's kind of a broad based, just lower than what we had thought. It's not That one business got significantly worse and everything else kind of stayed the same, but it's more broad based than that. Speaker 1200:58:45Great. Thanks for taking my question and best of luck. Look forward to chatting with you soon. Speaker 300:58:49All right. Thanks, Jeff. Operator00:58:53Thank you. As we are coming up on the 1 hour limit, our final question will come from the line of Mitch Kummetz with Seaport Global Securities. Please proceed with your question. Speaker 1300:59:04Yes. Thanks for taking my questions. A few things. One, I was hoping to get a little bit more clarity on the January comp. I do appreciate the regional break Given the weather, but Jim Condra, I think you said that like weeks 14 were pretty normal weather wise across the country. Speaker 1300:59:23When you sort of isolate those weeks, was your store comp kind of in that low to mid single digit range? Or is there anything more you can say about Those sort of non weather impacted weeks? Speaker 200:59:36Yes. So January in total was minus 8 ish and the non weather impacted businesses were low single digit negative. And then, of course, the others were double digit negative with some markets just getting really, really hurt with the weather. So that's the color I'd provide. Speaker 1301:00:05Okay. Could you say what your ladies' comp was for January or for the 1st 4 weeks of the quarter? Speaker 201:00:14In line with Q3, Maybe a little bit worse, not the least functional of our businesses, Certainly, somebody making a special trip during difficult weather to go by. So in seeing a slight erosion or deterioration sequentially from our Q3 business. Speaker 1301:00:40And then I guess lastly, just given your comments Around exclusive brands penetration in the Q4 and how that business skews to the ladies. The fact that you expect the penetration to be down, does that suggest that there's going to be a bigger delta in your performance between kind of ladies and non ladies of Q4 than what you've seen sort of year to date. Is that the right kind of takeaway from those comments? Speaker 601:01:16I feel Speaker 201:01:16like I'm doing a math problem with my son. It's a fair hypothesis. I think the reason we called it out this time is because it pushed the penetration from positive to negative, right? If you work back to the most recent quarter, we had the same dynamic, But because exclusive brands still grew 3 points, we I suppose we could have called out that it would have grown, I'm making this number up, but 500 basis points rather than 300 basis points. But for composition, we just didn't because we didn't think it was going to raise any eyebrows. Speaker 201:01:57We had a feeling that when we called out that exclusive brands could be could decline from a penetration standpoint in this particular quarter, we worked up the math. So I wouldn't read anything further into that other than the fact that because it pushed it to a Decline rather than an improvement in penetration, we thought it was important to call out. Speaker 1301:02:21Okay, fair enough. All right, thanks and good luck. Speaker 201:02:26Thanks, Mitch. Operator01:02:27Thank you. We have reached the end of our question and answer session. And I would like to turn the floor back over to Mr. Jim Conroy for closing comments. Speaker 201:02:36Thank you everyone for joining the call today. We look forward to speaking with you on our 4th quarter earnings call. Take care. Operator01:02:45This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by Key Takeaways Boot Barn delivered its highest sales volume in company history in Q3, with 1.1% total sales growth driven by 49 new stores, offset by a 9.7% same-store sales decline, and achieved 300 basis points of merchandise margin expansion, lifting operating margin by 30 basis points and EPS to $1.81. The company now operates 382 stores after adding 11 in the quarter, and its latest 100 new stores are averaging more than $3 million in annual revenue—50% above underwriting expectations—with a payback of about 18 months and a 60% return on capital. Same-store sales remained pressured at –9.7% in Q3 and preliminary Q4 sales are down 8.1%, though weather-impacted disruptions skewed results and non-impacted regions are seeing sequential mid-single digit improvement. E-commerce sales declined 11.5% in Q3 due to less efficient online marketing spend, but omnichannel execution strengthened with stores fulfilling over 45% of holiday digital orders and improved supply chain agility. Exclusive brands penetration rose 310 basis points to 37.3% in Q3, helped by reduced promotions and economies of scale, and the company launched the high-end Cody James Black line with plans to expand it from 50 to 200 stores. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallBoot Barn Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Boot Barn Earnings HeadlinesBoot Barn targets 5% China sourcing share for exclusive brandsMay 28 at 1:51 PM | finance.yahoo.comJPMorgan Chase & Co. Raises Boot Barn (NYSE:BOOT) Price Target to $207.00May 28 at 1:51 AM | americanbankingnews.comF1 Engineering Powers This Electric Marine MotorThe future of marine propulsion has arrived - powered by F-1 grade engineering. In collaboration with McLaren Engineering, a NASDAQ-listed marine tech company unveiled a groundbreaking new electric powertrain set to transform the industry.May 28, 2025 | The Tomorrow Investor (Ad)The Zacks Analyst Blog Highlights Deckers Outdoor, Boot Barn, Adidas and Skechers U.S.AMay 21, 2025 | finance.yahoo.comBoot Barn Holdings, Inc. Announces May and June Conference ScheduleMay 21, 2025 | businesswire.comBear of the Day: Boot Barn (BOOT)May 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. 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There are 14 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Boot Barn Holdings Third Quarter 2024 Earnings Call. As a reminder, this call is being recorded. Now, I'd like to turn the conference over to your host, Mr. Mark Dedovish, Senior Vice President of Financial Planning. Please go ahead, sir. Speaker 100:00:19Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's Q3 fiscal 2024 earnings results. With me on today's call are Jim Connery, President and Chief Executive Officer and Jim Watkins, Chief Financial Officer. A copy of today's press Along with a supplemental financial presentation is available on the Investor Relations section of Boot Barn's website atbuparn.com. Speaker 100:00:40Shortly after we end this 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, and 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 During this conference call and webcast, we refer you to the disclaimer regarding forward looking statements that is included in our Q3 fiscal 2024 earnings release as well as our filings with the SEC referenced in that disclaimer. Speaker 100:01:22We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information, future events or otherwise. I will now turn the call over to Jim Conroy, Boot Barn's President and Chief Executive Officer. Jim? Speaker 200:01:37Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our Q3 fiscal 'twenty four 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 3rd quarter results, which marks the highest sales volume in Boot Barn's history. Speaker 200:02:03During the quarter, total sales grew by 1.1% driven by the 49 new stores added over the last 12 It's worth noting that except for 3 COVID impacted quarters, we have grown sales on a year over year basis every quarter since went public nearly 10 years ago. The incremental revenue from new stores was partially offset by a 9.7% decline in same store sales. To put this performance in perspective, our 3rd quarter sales are up 83% from pre pandemic levels, with our same store sales up almost 50% on a 4 year stack basis over that same period. Additionally, we achieved 300 basis points of merchandise margin expansion during the quarter comprised of 250 basis points of freight improvement and 50 basis points of product margin expansion. The growth in product margin was driven by more than 300 basis points increase in exclusive brand penetration, a reduced level of promotional activity and buying economies of scale. Speaker 200:03:07The strength in sales and gross margin combined with solid expense control drove a 30 basis point increase in operating margin and earnings per diluted share of $1.81 during the quarter, up from $1.74 a year ago and more than double our earnings per share in the same quarter pre pandemic. We believe this demonstrates the ability of the Boot Barn model to utilize multiple levers to drive earnings growth and the team's ability to execute at a high level. As we approach the last 2 months of fiscal 2024 and prepare for 2025, We will maintain our focus on executing against our 4 strategic initiatives. I would like to spend a few minutes providing an update on each of them, Beginning with expanding our store base. With 3 82 stores today, we are the largest player in the Western Workwear industry. Speaker 200:04:03In the quarter, we added 11 new stores as we expand our footprint across the country. As a reminder, we typically underwrite in a new store expecting revenue of approximately $2,000,000 with a 2 to 3 year payback. The performance of the most recent 100 new stores has been considerably better than this model, with new store revenue projected to generate more than $3,000,000 on average or 50% higher than the typical investment thesis with an accelerated payback of approximately 18 months. And if we view this on a shorter timeline, the most recent 45 stores that have been opened 1 full calendar year opening before December 2022 have generated approximately $3,300,000 of annual revenue on average over the last 12 months. We believe that the combination of 15% new store openings, a 60% return on capital And the opportunity to more than double our units is one of the strongest most compelling growth stories in the retail industry. Speaker 200:05:09Moving to our second initiative driving same store sales growth. Our 3rd quarter same store sales declined 9.7% within the guidance range we outlined in November. The decline was driven by lower transactions, partially offset by higher AUR and transaction size. The more functional categories such as men's Western Boots and Apparel and Work Boots, while still negative mid single digit on a comp basis, outperformed the more discretionary ladies western departments. Geographically, the West and North regions were slightly better than chain average and the South and East were slightly worse than chain average. Speaker 200:05:50As I reflect on our execution in the quarter, I'm very proud of the entire cross functional team. The merchandising team managed inventory levels extremely well, improving product margin and constraining growth in clearance merchandise despite a nearly double digit decline in same store sales. The stores team also performed quite well as evidenced by earning the highest customer service for any holiday quarter in the history of Boot Barn. They also supported our omnichannel business by fulfilling more than 45% of our total e commerce orders over the holiday period. Before moving on to the next strategic initiative, I do want to provide a bit of historical perspective to our recent same store sales results. Speaker 200:06:32I think it is helpful to remember that our average Store volume increased by more than 50% beginning in March of 2021 and has remained at elevated levels for nearly 3 full years now. On a year to date basis, our retail store same store sales have declined by approximately 6%, cycling plus 2% for the full year of fiscal 2023 and plus 57% the year prior to that. Going forward, while same store sales may continue to be negative for the near future, we believe it is unlikely that we will forfeit a significant portion the higher average store sales volume. Similarly, when we look at our customer count metrics, we reached the same conclusion. The elevated level of average store volume that began a few years ago was a result of a nearly 50% growth in new customers in a comp store and most of those customers became repeat purchasers. Speaker 200:07:30These two statistics give us confidence and our belief that we will likely maintain most of the elevated sales in an average store going forward. Moving to our 3rd In the 3rd quarter, our e commerce sales declined 11.5%. Our online channel has felt pressure due to less efficient online marketing spend, partly caused by an increase in digital spend by a handful of vendors and competitors. To add some more color, our bootbarn.combusinesscomped down low single digits in the quarter And approximately 3 fourths of the decline was due to the erosion of paid demand. Our other two sites, Sheplers and Country Outfitters are more dependent on paid traffic, so the erosion of paid demand has a significant impact on them. Speaker 200:08:23Our objective continues to be to maximize profitability for our online business, so we will remain disciplined with our digital spend so as not to erode earnings and our to grow top line sales. Operationally, we've improved our ability to fill demand from nearly all of our store and warehouse locations across the country. This enabled us to commit to a pre Christmas delivery later in the season than ever before. Now to our 4th strategic initiative, Exclusive Brands. Exclusive Brands' penetration increased 310 basis points in the quarter to 37.3%. Speaker 200:09:01I am pleased with this result, particularly as we were able to achieve healthy growth despite softness in our ladies business, which over indexes to exclusive brands. In the quarter, we did launch a brand extension in approximately 50 stores called Cody James Black, which targets a higher end customer for men's cowboy boots and cowboy hats. While this will be a relatively small contributor to the overall exclusive brand business, we do feel great about the initial results and are in the process of extending The new assortment to 200 stores. Looking back over the last 3 years, we've expanded Inclusive Brands penetration 1400 basis points far exceeding our historical goal of 2 50 basis points per year. This growth is a testament to the team's ability develop world class brands and compelling merchandise assortments. Speaker 200:09:56Turning to current business. Through the 1st 4 weeks of our fiscal Q4, our preliminary consolidated same store sales have declined 8.1% compared to the prior year period. On the surface, this is only a modest sequential improvement in our sales trend. However, we did see significant disruption in the business in the 2nd and third week of the month due to a winter weather pattern that forced store closures, reduced operating hours and presented significant travel challenges for customers. When we evaluate the business by region, the same store sales in the South and West regions, which were less impacted by the weather, have improved sequentially from the prior quarter by more than 5 points of comp. Speaker 200:10:44Conversely, the North and East regions, which were impacted by the weather, have deteriorated sequentially from the 3rd quarter by approximately 4 points of comp. While significant variability in weekly comp sales persists, we believe the underlying tone of the business has improved compared to the holiday quarter. I'd like to now turn the call over to Jim. Speaker 300:11:10Thank you, Jim. In the 3rd quarter, net sales increased 1.1% $520,000,000 Our sales performance benefited from new stores opened during the past 12 months, partially offset by a same store sales decline of 9 7% comprised of a decrease in retail store same store sales of 9.4% and a decrease in e commerce same store sales of 11.5 Gross profit increased 6% to $199,000,000 or 38.3 percent of sales compared to gross profit of $188,000,000 or 36.5 percent of sales in the prior year period. The 180 basis point increase in gross profit rate resulted from a 300 basis point increase in merchandise margin rate, partially offset by 120 basis points of deleverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was driven by a 2 50 basis point improvement in freight expense as a percentage of sales and 50 basis points of product margin expansion. Selling, general and administrative expenses for the quarter were $124,000,000 or 23.8 percent of sales compared to $115,000,000 or 22.4 percent of sales in the prior year period. Speaker 300:12:28The increase in SG and A expenses compared to the prior year period was primarily a result of higher overhead costs and store payroll associated with operating an additional 49 stores when compared to the prior year period. Income from operations was $75,000,000 or 14.4 percent of sales in the quarter, compared to $72,000,000 or 14.1 percent of sales in the prior year period. Net income was $56,000,000 or $1.81 per diluted share compared to $53,000,000 or $1.74 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory decreased 5% over the prior year period to $563,000,000 and decreased 1% on a same store basis. Speaker 300:13:16We finished the quarter with $107,000,000 in cash and 0 drawn on our $250,000,000 revolving line of credit. I would now like to provide an update on our 4th quarter guidance, which is outlined in our supplemental financial presentation. As the presentation lays out the low and high end of our guidance range, I will only speak to the high end of the range in my following remarks. As we look to the Q4, we expect total sales to be $386,000,000 We expect the Same store sales declined of 6.3% with retail store same store sales declining 5.5% and e commerce same store sales declining 13%. We expect to open 15 new stores with all openings scheduled for the second half of the quarter. Speaker 300:14:06As a reminder, this year's 4th quarter includes 13 weeks of sales compared to 14 weeks of sales in the Q4 last year. We expect 4th quarter gross profit to be $136,000,000 or approximately 35.2 percent of sales. Gross profit reflects an estimated 160 basis point increase in merchandise margin rate including a 140 basis point improvement in freight expense year over year and a 20 basis point improvement in product margin. Included in the product margin growth, we expect 4th quarter exclusive brand penetration to be to down 100 basis points when compared to last year. As a reminder, exclusive brand penetration grew 7 70 basis points in the Q4 last year. Speaker 300:14:54The driver of the slowdown besides wrapping remarkable growth the past few years is primarily due to the softer ladies business which penetrates at a higher rate of exclusive brand sales. We anticipate 3 10 basis points of deleverage in buying occupancy and distribution center cost as we cycle a 15 week quarter in the 4th quarter last year 14 week quarter in the 4th quarter last year. Our income from operations is expected to be $38,000,000 or 9.8 percent of sales. We expect earnings per diluted share to be $0.92 As a result of our year to date performance and our updated estimates for the rest of the year, We're updating our full year guidance. For the full fiscal year, we now expect total sales to be $1,660,000,000 representing growth of 0.4% over fiscal 2023, which as a reminder was a 53 week year. Speaker 300:15:52This compares to our previous guidance of $1,701,000,000 We expect same store sales to decline 6.3% with the retail store same store sales decline of 5.5% an e commerce same store sales decline of 11.7%. This update compares to our previous guidance of a consolidated same store sales decline of 5%. We now expect gross profit to be $611,000,000 or approximately 36.7 percent of sales. Gross profit reflects an estimated 170 basis point increase in merchandise margin, including a 130 basis point improvement from freight expense and a 40 basis point improvement from product margin. We anticipate 180 basis points of deleverage distribution center costs. Speaker 300:16:44We now project 3 70 basis points of growth in exclusive brand penetration for the full year, bringing our total penetration to 37.7%. Our income from operations is expected to be $198,000,000 or 11.9 percent of sales. We expect net income for fiscal 2024 to be $146,000,000 and earnings per diluted share to be $4.75 I'd now like to talk about our fiscal year 2025 that begins on March 31. While it is premature to fully outline our guidance for next year, We thought it would be helpful to share our thoughts on select components of the P and L as we get ready to begin our annual budget planning process. During fiscal year 2025, we again plan to open 15% new units and these new stores are expected to generate at least $3,000,000 of during the 1st 12 months of business. Speaker 300:17:43We expect to achieve approximately 25 basis points of product margin expansion through exclusive brand penetration growth and better economies of scale with our vendor partners. Additionally, We expect to see a reduction in our overall supply chain costs that will benefit our merchandise margin beyond the 25 basis points of product margin expansion I just mentioned. These improvements are part of our larger efforts to manage expenses and drive efficiency in the business. As we look to SG and A expenses, we have outgrown our corporate office building in Irvine, California, which we first moved into in 2016. We've signed a lease for a building nearby and will move during the 3rd or Q4 of fiscal 2025. Speaker 300:18:30The increased lease costs and associated depreciation will put some pressure on the SG and A line. We will provide more detailed financial projections on our May earnings call. Now, I would like to turn the call back to Jim for some closing remarks. Speaker 200:18:44Thank you, Jim. We are pleased with our ability to execute during the Q3. We were able to grow sales and earnings despite a negative same store sales result. Further, it is encouraging to see that there has been only a modest decline in our average store sales volume since the outsized increase that began in March of 2021. I'm very proud of the team across the country. Speaker 200:19:08I want to thank you all for your dedication to Boot Barn. Now, I would like to open the call to take your questions. Camilla? Operator00:19:17Thank you. We will now be conducting a question and answer session. Our first question will come from the line of Matthew Boss with JPMorgan. Please proceed with your question. Speaker 400:19:53Great, thanks. So maybe first question, Jim, near term, could you elaborate on the regional improvement that you cited in January sales relative to November, December outside of weather, maybe at a category level. And then just to follow-up on your on the total company average unit volume. So multi year, You've seen average unit volumes move from, I think it was 2,600,000 pre pandemic, to a peak of a bit over 4 I think we're just under 4 today. Speaker 500:20:30I guess what do you Speaker 400:20:31see as the sustainable AUV for the company going forward? And what supports Speaker 200:20:40Sure. On the first one, your first question was around sales by week in January and actually it was sales by week in January by category. Essentially what happened was weeks 14 had temperate weather, weeks 23 we had The winter storm that went across most of the country, the two regions for us, the West, which is Arizona and California and Nevada and a couple of others. And the South, which is Texas and few other states, didn't feel the weather quite as much as the other regions. So their business actually improved by about 5 points sequentially from the holiday quarter. Speaker 200:21:32The other two regions we had just and as you know, Matt, we almost Never call out weather. In this case, we had stores closing early or not opening at all and we had a lot of customers that couldn't get out and drive to stores. So those two regions, our North region and our East region, their business decelerated by 4 points of comp from the 3rd quarter. So We as I said in my prepared remarks, we believe that the overall tone of the business is improved from the holiday quarter. In terms of your second question around average unit volume, I think your before number is in the ballpark. Speaker 200:22:18We used to be 2.6. Actually, if you go back just 5 years We used to be 2.6. Actually, if you go back just 5 years or something, we're 2,200,000. And then we've You've grown to much more than that. One of the ways to think about it is We looked at a base of stores that were open in Q3 of fiscal 2020 or had been we looked at a comp base if you will of 2 34 stores And those stores were at 2,900,000 average unit volume. Speaker 200:22:58Those same stores are now at $4,400,000 average unit volume. So that $2,900,000 went to $4,400,000 for that base of stores. And I think that's greater than a 50% increase, right? 1.5% on Q9. I like doing math live with 200 people listening. Speaker 200:23:18If we want to think of the whole chain and what our average unit volume is going forward, it's still north of 4. And Embedded in your question is what's driven that. The single biggest thing that's driven that is we've added customers Tremendously over the last 4 or 5 years in total, of course part of that driven by new stores, But also on a comp store basis, our customer count on a comp store basis is up approximately 50% also. When you put all those facts together, we look at the business over an extended period of time and see nothing but tremendous growth. And on a year to date basis, we're down roughly 6% in our retail stores. Speaker 200:24:11When we cycle plus 2 and a +57, we actually feel pretty good about that number. Speaker 400:24:18Got it. And then maybe for Jim Watkins, just on flow through in the model. Could you elaborate On the magnitude of buying an occupancy and SG and A deleverage in the Q4, and just how best to size up as we think multi year, the magnitude of the supply chain efficiencies you cited and how that may impact fixed cost leverage hurdles in the model moving forward? Speaker 300:24:45Sure. Yes. So as we look to the 4th quarter, you're right, given that 10 week period, we do have higher deleverage. And so if I look to the high end of the guide, and again, I'd point To the slide on Page 20, where we kind of go through the different components of that, but it was 310 basis points of buying occupancy in DC deleverage during that Q4. And then as we look to SG and A For the same period, the OpEx, it's 3.40 basis points. Speaker 300:25:22And the one thing I would remind you on particularly around the SG and A deleverage, it's a little more outsized and part of that is because of some unique factors that are working against us. Besides the negative same store sales for the quarter and the 14 week period, you'll remember last year in 4th when we gave our report on that, as our sales turned negative as we got out of January and went into February and they deteriorated a little bit more as we got into March. We pulled back on several expenses such as marketing and then we reverse incentive based compensation. And so those are things that create a little bit more deleverage as we get into the Q4 around SG As far as the magnitude of the supply chain improvements that we're expecting to see as we get into next year, We'll give you more color on that and how they impact the leverage points. But the way I would model those out right now is around $6,000,000 of an annual run rate in next year. Speaker 300:26:32And again, we'll give you more color on that as we look beyond, but that should be something that continues with us as we get into the years beyond fiscal 2025. Speaker 400:26:46Great. That's great color. Thanks again. Best of luck. Speaker 200:26:49Thanks, Matt. Speaker 600:26:50Thanks, Matt. Operator00:26:53Thank you. Your next question comes from the line of Steven Zaccone with Citi. Please proceed with your question. Speaker 700:27:00Great. Good afternoon. Thanks for taking my question. I wanted to follow-up on Matt's question and maybe drill down on the preliminary commentary you gave about fiscal 2025. So you gave some details there, but I was curious for how you think about the potential recovery in same store sales. Speaker 700:27:19Do you see that being transaction driven? How do you think about that happening by category? Do you need business to get a bit better. Any sort of commentary you gave would be appreciated. Speaker 300:27:36Sure. Yes, as we look to on the same store sales guide for the year, again, It's a little early for us to guide that, so we're not providing a lot of commentary around that. As far as the recovery goes, if we look at the components The average unit retail, I think a lot of the big price increases are behind us. Low single digit increase in AUR is probably the way I think about that. And so any recovery that we see as we get into next year, We would expect to be transaction based in nature. Speaker 700:28:16And from a category perspective, does it I guess from a discretionary standpoint, that's your most challenged category, do you think that needs to stabilize or could we start to see that improve at some point? How do you think about that? Speaker 200:28:32I think it's a good question. I think the ladies businesses, which In an abbreviated way, we call all discretionary, which isn't completely true. But that business has been a drag on recent same store sales. And we'd like that to get back to even just flat, so it's less of a drag. We do think that business has unique challenges simply in the sense that we're cycling Just giant numbers, 100% comp in the ladies business a couple of years ago. Speaker 200:29:12So that if that can get back to low single digit declines or flat that would help the overall math of course. What we'd really like to see though is when we look at our Q3, the declines were were broad based. So ladies was worse, but most of the other businesses also were down on a comp basis. So Going forward, I do think there's some optimism that our core customer is relatively healthy and is Mostly employed. I think they are feeling the impacts of inflation still. Speaker 200:29:59And I think there is an overall concern around the economy, maybe geopolitical factors, etcetera. So I think there is a tendency to push off spending, but I don't think there's any Endemic challenges with the health of our customer. So as I as we look into fiscal 2025, I think there is a possibility that we'll get back to positive comps over the next few quarters. Speaker 700:30:31Okay. Thanks for the detail. Operator00:30:36Thank you. Our next question comes from the line of Max with TD Cowen. Please proceed with your question. Speaker 500:30:44Great. Thanks a lot. Jim, just curious if you could actually elaborate on that last Just any color on when you think comps could flip positive as the underlying trends do appear to be improving? And then compares will ease pretty meaningfully sequentially over the next couple of months. Speaker 200:31:03Max, I wish I could give you A day, a month, a quarter, it's very difficult to predict comps going forward. And I recognize that's very important to the folks on this call. What we can predict With a fairly high degree of certainty is we're going to open 50 or 60 stores next year. They're going to do $3,000,000 or more. We think we still have the opportunity to grow merchandise margin. Speaker 200:31:36We still are by far the biggest company in the industry. So, I can't give you a specific day or timing for reversion to positive same store sales growth, nearly everything else in the business is just operating extraordinarily well. So we'll manage our inventory levels based on the same store sales trend that we're currently facing. We are able to continue to grow merchandise margin even in a negative same store sales environment. We haven't built up a tremendous amount of clearance markdowns. Speaker 200:32:19So we're managing through the current sales trend, I think, extremely well. For the folks that work for the company, we all recognize that we've had sort of a once in a lifetime uptick in sales a couple of years ago. And to give back just small portion of it really hasn't bothered the company. And again, I recognize that the folks on the call were that buy and sell the stock based on The most recent quarter same store sales that may not give you a lot of comfort, but overall the company is still pretty darn healthy. Speaker 500:32:50Got it. That's helpful. And then just on the new store economics, is it fair to assume that you now view 3,000,000 as potentially trough level. And then just any color on dispersion between maybe some of the faster and slower ramping stores? And then just within that, if we are closer to the bottom, how are you thinking that the new store waterfall could look like ahead? Speaker 200:33:14So there's a few things embedded in that question. The new stores and the new store volumes Just every bit of it is a home run success, right? So Historically, we would think a new store would open at 1 point in 3 years and that was a great growth vehicle for us and we were happy about it. Wall Street was happy about it. To some degree, we've been a victim of our success because we spiked that number up to $3,500,000 and now it's at 3.3. Speaker 200:33:52I don't view that as a bottom. It could go down. It could go up from there. What I do know is it's a 60% cash on cash return, which is double what we had promised when we first went public and we'll continue to open stores in a very accelerated way. In terms of the new store waterfall, if the stores were opening at 1.7%, we would Really want them to start growing into an average store volume over time and get up to $3,000,000 someday, but they're not. Speaker 200:34:27They're opening a double bet. And while we'd love the waterfall to start right away, I'd circle back to my comment a minute ago, to some degree, we're a victim of our own success where they're opening up at extremely strong volumes. And In their 1st year, the ones that just turned comp are comping kind of in line with the company's trend. One of the reasons for that, if you want to think about it category by category is oftentimes our new stores have outsized success on the ladies side of the business when they open. And because the ladies business is under pressure from a bit of a fashion cycle, we think that's one of the reasons why we're not seeing the waterfall. Speaker 200:35:23Once again, recognizing that Wall Street does tend to be extremely focused on same store sales, We're actually not that worried about that. We're getting more volume faster and a higher return on capital than we ever expected we could. If we give a little bit of that back in the 2nd year, that's fine. I mean, I suppose we could do something to constrain the 1st year sales, so we get back to the waterfall, but I don't think we have plans to do that. Speaker 500:35:52I appreciate that color. Thanks a lot guys. Speaker 200:35:55Of course. Thanks, Max. Operator00:35:59Thank you. Our next question comes from the line of Jason Haas with Bank of America. Please proceed with your question. Speaker 800:36:07Hey, good afternoon and thanks for taking my questions. I was curious if you could provide some color on how you thought through the comp guidance fiscal 4Q, since it does seem to imply a deceleration Speaker 700:36:18through the quarter on Speaker 800:36:19a 2 year stack basis. And I'm especially curious about it because you talked about January being impacted by weather. Speaker 300:36:31Yes. Jason, so in guiding the Q4, we followed the same approach we've been using all year, which is to apply the historical seasonality of the business to the most recent sales. And while it hasn't been perfect, this has been a much better predictor of the business than looking at a 2 or 3 year stack. And in this case, we use the recent non holiday sales, so really October, November in January and applied the historical seasonality of the business. And when we talk about using the historical seasonality, In this case, we tried to exclude the COVID noise and looked at last year, the year before and then 2 of the pre COVID years and kind of blended out how the flow of those sales rolled out from the month of January. Speaker 300:37:23And that's what we used to project out the rest of the quarter. Interestingly enough, when you use just the January's business and exclude October November and roll that forward to February, March, you get to almost an identical answer in the guide. So we've continued to look at it Based off kind of the recent business and historical seasonality and it kicks out a number And oftentimes, it's not what you would expect when looking at a multiyear trend, but it's been a little bit more reliable. Speaker 800:38:00Got it. That's helpful. And then as a follow-up, I was curious if you could give us your sourcing exposure to China since there's some talk about potential for more tariffs coming in. And so I'm curious how that would impact you and the industry overall? Speaker 300:38:14Yes. Generally speaking, rough numbers, about half of what we sell comes from China, about 25% from Mexico and the balance coming from the U. S. And other countries. Speaker 800:38:30Got it. That's helpful. Thank you. Speaker 200:38:33Yes. I would add to Jim's comment. We've lived through a tariff environment before and didn't really impact us and we certainly would prefer that that doesn't come back to us. That said, It certainly doesn't make us uniquely less competitive in the industry. We could actually construct an argument that it makes us more competitive because we're the biggest player. Speaker 200:39:00We have exclusive brands that are margin drivers, etcetera. So it's something we're watching and being cognizant of. But I don't think it's really keeping us awake at night either. Speaker 800:39:12Got it. Thank you. That makes sense. Speaker 300:39:15Thanks, Jason. Operator00:39:18Thank you. Our next question comes from the line of Dylan Carden with William Blair. Please proceed with your question. Speaker 600:39:25Thanks a lot. Just anticipation that those comments on private label penetration flat to down in the 4th quarter might raise some eyebrows. Any more color You can add there. It sounds like you're anticipating back to growth next year. But Anthony, that would be helpful. Speaker 200:39:44Sure. I wouldn't worry really at all about the exclusive brands. It's not weaker brands or bad product. It's The result of arithmetic essentially. So our Businesses are penetrated at different levels and our ladies businesses are penetrated the highest with brands. Speaker 200:40:08And because those are a smaller portion of our sales in this quarter because they're comping down more, It's taking the exclusive brand penetration down with it. We're facing 300 basis points of headwind and penetration simply due to the composition of the business. So if we were If said differently, if the composition of sales didn't change in the quarter, we would have seen we'd be projecting growth for this particular quarter, Exclusive Brands. So I hope that answers the question. I mean, of course, we prefer to have growth. Speaker 200:40:49We get more margin that way it helps build our merchandise margin, but it's truly just a result of the math of the business. And I think we also have other abilities to grow our merchandise margin in addition to exclusive brands. Speaker 300:41:08And Dylan, as we look into fiscal 2025, we are planning on returning to growth and exclusive brand penetration, right? So This is a 1 quarter drag on the business. Speaker 600:41:25Great. And it kind of bleeds into another question around one way to think about the unit volume question perhaps is what business you're losing. And as you kind of look through some of the categories where you've been weaker, obviously women's, Do you feel like you're reaching a point where the discretionary nature of some of the what's remaining or just the behavior of newer customers or anything to kind of give you some comfort in and around how much more in theory you could lose. Does that make sense? Speaker 200:41:58It does. I think we continue to have a very solid base functional business. So all of Work business, both men's and ladies, most of men's Western business is functional and a portion of our ladies business is functional. So the bit that is more cyclical perhaps caught up in a fashion cycle a couple of years ago, There's it could still decline further and we still have fashion ladies business in the store and still are doing some Relatively significant sales there, but it's tempered to a large extent by the overall business that does tend to be much more functional. So I don't think we're necessarily out of the woods in the ladies business yet. Speaker 200:42:54I do think at some point we'll probably in the next few quarters start to see that trend improve and hopefully get to flatten, perhaps positive after that. But I don't think that's going to happen in the next 1 or 2 quarters. Speaker 600:43:09Understood. Thanks a lot, guys. Operator00:43:14Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed with your question. Speaker 900:43:22Hi, everyone. Yes, I wanted to ask about the e commerce business. It seems like it's still kind of hovering down in that negative low double digit range. To know how you think about the piece of the business that are not the bootbarn.com business. Remind us of the strategic importance of having Sheplers Country Outfitter, the Amazon business? Speaker 900:43:39And then I'd love to hear just how you're thinking about driving that business into next year. We're hearing of ad rates continuing to push higher. So how do you think about how that business evolves just in light of maybe higher cost on ad spend into next year? Thank you. Speaker 200:43:53Sure. Very good question. So the 4 pieces, boobarn.com, of course, is an extension of the store. And we do really pride ourselves on that channel experience and I think those two channels have been stitched together quite well and they also share the same retail prices. Sheplers.com, true to its heritage, is a very price conscious customer and oftentimes, frankly, has a lower price than boobarn.com. Speaker 200:44:27And we like that brand because it enables us to compete against other online players that are playing a price game. So that's kind of the Sheplers strategic importance. Country Outfitters was an acquisition Several years ago, it tends to be focused on ladies fashion, which is one of the reasons why it's having so much difficulty right now. We do think there is some long term possibility for that business to get back to growth. It also gives us a testing ground trying new things without impacting the 2 bigger business. Speaker 200:45:09The Amazon business is, I think, a necessary evil. We Sell some product on there, so do a lot of other people. It tends to be a low margin business for us, but it's still profitable. So we participate in sort of the behemoth of Amazon And that business is Speaker 1000:45:34gives us Speaker 200:45:35a read on sort of the general public demand that might be more casual purchasers of our product. In terms of the future of the online business and the growth, The online spend and the inefficiency of that is real. We could quite easily get more sales and spend more money and those sales would be EBIT eroding, so we just don't do it. So we manage it somewhat algorithmically. I do think that will normalize at some point. Speaker 200:46:10There'll be sort of new equilibrium. That is another business though when we look at a historical perspective. It's grown extremely strongly over a few years. And While we'd like it to get back to positive sales, the fact that it's giving a portion of the business back after such outsized growth It might be kind of expected, but we do think it can get back to positive sometime in fiscal 2025. Speaker 900:46:37Perfect. Thank you. And then just want to follow-up on the tariff question. Do you have an estimate of what you directly import from understand that I think you said half of your products are from China, but only a portion of that is from the exclusive brands. Speaker 300:46:50Yes, it's similar with the exclusive brands. Between exclusive brands and third party, it's still about 50%. Speaker 900:47:00Perfect. Thanks. Speaker 200:47:03The direct import would be half of 37% roughly. Speaker 900:47:09Got it. Thank you very much. Operator00:47:14Thank you. Our next question comes from the line of Jonathan Komp with Baird. Please proceed with your question. Speaker 1100:47:21Yes. Hi. Thank you. Maybe just a follow-up once more. When you run through the exercise and look at the sales volumes that you called out for projecting the 4th quarter sales and comps. Speaker 1100:47:32Can you just share a little more insight when you do that same exercise? What does that inform you to when the comps of the business could turn back positive and how should we think about any swing factors one way or another? Speaker 800:47:49Sure. Speaker 300:47:52It's encouraging as we look to this current quarter and Well, it's a deceleration on a 2 year stack and maybe a couple of other stacks if we go back far enough. In the February and March period, we're guiding that business in the stores to be minus 4 or minus 5, right? And so that's an improvement off of what we've seen more recently. And so that's encouraging. I would also say, I think if you go back a couple of quarters, we talked about this time period where February, March, April over the last several years has had a lot of macro noise in it between COVID and Omicron and tax stimulus and tax refund payments and different things in there. Speaker 300:48:42So it is a little bit harder to read kind of where that business is going. But what I would say is February March of Last year, so just a year ago, we did see a slowing in the trend of the business that was abnormal for the seasonality of that. So as We're planning this year and at least getting through February March, if there's any kind of Reversion back to what's been normal, there's some upside to February, March and that would be As well as we look to fiscal 2025. It's a long way to not answer your question, John, but the As we look to fiscal 2025, I think we really just have to get through the next 3 months or so to give you a better read on when that turns positive. Speaker 1100:49:34Yes, that's helpful color. Maybe just a couple of follow ups quickly. The Q4, Jim, could you just confirm, it looks like Maybe the implied product margin is a little lower today than it was previously even after you account for the Exclusive brand update you gave. So I just want to confirm if that's the case, if anything is changing on the product margin side. And then just clarify that SG and A comments for fiscal 2025, are you implying you still need more than a 4% comp to leverage that's Similar to how the setup was in 2024. Speaker 1100:50:08Just trying to read kind of the reason for giving that commentary today on the SG and A. Speaker 300:50:12Sure. Thanks, Ken. Sure. So, yes, no problem, John. So, on the product margin for Q4, we're guiding that plus 20 basis points year over year on the product margin and the freight would be 140 basis points. Speaker 300:50:26And so despite flat to maybe a little bit negative exclusive brand penetration, we still expect that to grow from better economies of scale. And then as we look to fiscal 25% on the SG and A side of things. I guess I'll talk to both the buying and occupancy and SG and A. On buying and occupancy, we had talked about kind of that 4% comp needed to leverage buying and occupancy. We'll update you to see or to let you know if there are any changes to that as we get to next year. Speaker 300:50:58Assuming that there are not changes to that, then the benefits we called out on supply chain would help lower that leverage point, but it's too early to kind of say before we've done our full buildup of next year's budget, Whether that is 4% precisely for next year or not. And then on SG and A, that the leverage point there, Same store sales required to get leverage at SG and A has historically been at 2.5%, called out the new corporate building will put some pressure on that. That's going to be again, it's still a little early to tell, but similarly, Probably a $5,000,000 or $6,000,000 hurt on SG and A next year. But again, we're working on things that will help offset some of that hopefully. And we'll give you an update on kind of what that leverage point looks like as we get into next year on our May call. Speaker 1100:52:01Understood. Thanks again. Speaker 200:52:03Thanks, John. Thanks, John. Operator00:52:07Thank you. Our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question. Speaker 1000:52:15Thanks for taking the questions. And just wanted to start with the new store openings. I think I caught in the script that you were expecting for fq4 that all of the openings for the March quarter were going to be in the back half of the quarter? And then just if you could provide a little bit color on that. And then related, as we look ahead To your commentary on FY 2025 unit growth, is there anything notable that you would point out on the expected cadence of those openings? Speaker 200:52:51I think you recounted the script comments. We are back loaded into this quarter. In terms of our fiscal 2025, at the risk of laying out guidance that we're certainly not prepared to do today, we'll do it on the next call, There's nothing unique to call out that they're all going to be in the Q1, all going to be we're going to try to make them relatively spread out throughout the year. So nothing specific to call out. Speaker 300:53:21And I would just add, Jeremy, the pipeline is healthy. We've got a lot of leases that we've signed and so we're headed into next year with a very healthy pipeline. Speaker 1000:53:34Got it. And then if I could just dig in a little bit here on the new headquarter, which I guess the move is expected at Q3 or Q4 of fiscal 2025. What is the annual lease cost higher than what you currently are paying? And then what is the expected depreciation on an annualized basis? Yes. Speaker 1000:54:05So it's Speaker 300:54:07still a little early to give you all of those costs because we haven't build out the property add and the space, but the number I just threw out there $5,000,000 to $6,000,000 would be the P and L expense for next year and that includes the increased lease cost and it's important to point out that when we moved into this building that we're currently in several years ago, we're a much smaller organization where we just don't fit anymore. And so it will be It's a bigger building. The lease costs are higher just given that it's a new lease as well. Included in that $6,000,000 though is a period of some double rent, some depreciation that starts later in the year. And my expectation is we get into the following year, As we get into the following year, the $5,000,000 to $6,000,000 will likely be a little bit lower than that kind of run rate basis as we will incur some costs that are more one time in nature this year and moving. Speaker 300:55:11So again, the purpose of calling that out was that We'll have some benefits and benefit in some of our supply chain costs to the tune of $1,000,000 and a little bit of a drag due to the corporate office building and the SG and A line. It's kind of a neutral between the two, but may create a little geography work for you and your models and wanted to just make sure you're aware of that. Speaker 1000:55:41Got it. That's helpful. Best of luck. Speaker 200:55:44Thank you. Thank you. Thank Operator00:55:49you. Our next question comes from the line of Jeff Licht with B. Riley Securities. Please proceed with your question. Speaker 1200:56:00Jim Conroy, I was wondering if by my math, it seems like You've taken your Q4 guidance down by about $23,000,000 I'm just curious relative to when you previously gave kind of the implied guidance. If you could just elaborate on what's changed in terms of your thoughts Over that time period. And then another quick question would be, could you give us as it relates to the new store openings in kind of non traditional markets. I was wondering, usually you have a couple of good anecdotes like you did with Scottsdale. If there's anything that just kind of shows how the concept is resonating in places like Connecticut or New Hampshire? Speaker 200:56:42Well, I'll take the one on New stores and Jim Watkins can take the one on the guidance for Q4. New stores are working pretty much everywhere in new markets and in legacy markets. I think the PhoenixScottsdale example that you might be alluding to is we used to have 4 stores there. Now we have 8 stores there And with more development opportunities in our view Speaker 300:57:13are still there. Speaker 200:57:13And those Four stores used to their volume has gone up. We've comped up while we're adding stores there. So we've kind of learned that we continue to build out legacy markets and have it be net new business and not erode our comp. We've also been able to open up in Northeast and have had some real nice successes in markets that wouldn't traditionally be considered Western. Speaker 300:57:42Yes. On the first part of your question, the change in the Q4 sales, the $23,000,000 is really a function of when we guided November 2 on the we had the October business done and we guided based off of kind of late September, October business. And unfortunately, things softened a little bit more in the sales trend as we got particularly into December more than what we had anticipated. And so we've and January was softer than what we had anticipated also. So we've just rolled that forward based off of what we've seen in the recent business. Speaker 1200:58:20And I'm assuming I guess what I was looking for is it that's primarily the ladies business or what you call the discretionary fashion business? Speaker 300:58:30Yes, I mean, it's kind of a broad based, just lower than what we had thought. It's not That one business got significantly worse and everything else kind of stayed the same, but it's more broad based than that. Speaker 1200:58:45Great. Thanks for taking my question and best of luck. Look forward to chatting with you soon. Speaker 300:58:49All right. Thanks, Jeff. Operator00:58:53Thank you. As we are coming up on the 1 hour limit, our final question will come from the line of Mitch Kummetz with Seaport Global Securities. Please proceed with your question. Speaker 1300:59:04Yes. Thanks for taking my questions. A few things. One, I was hoping to get a little bit more clarity on the January comp. I do appreciate the regional break Given the weather, but Jim Condra, I think you said that like weeks 14 were pretty normal weather wise across the country. Speaker 1300:59:23When you sort of isolate those weeks, was your store comp kind of in that low to mid single digit range? Or is there anything more you can say about Those sort of non weather impacted weeks? Speaker 200:59:36Yes. So January in total was minus 8 ish and the non weather impacted businesses were low single digit negative. And then, of course, the others were double digit negative with some markets just getting really, really hurt with the weather. So that's the color I'd provide. Speaker 1301:00:05Okay. Could you say what your ladies' comp was for January or for the 1st 4 weeks of the quarter? Speaker 201:00:14In line with Q3, Maybe a little bit worse, not the least functional of our businesses, Certainly, somebody making a special trip during difficult weather to go by. So in seeing a slight erosion or deterioration sequentially from our Q3 business. Speaker 1301:00:40And then I guess lastly, just given your comments Around exclusive brands penetration in the Q4 and how that business skews to the ladies. The fact that you expect the penetration to be down, does that suggest that there's going to be a bigger delta in your performance between kind of ladies and non ladies of Q4 than what you've seen sort of year to date. Is that the right kind of takeaway from those comments? Speaker 601:01:16I feel Speaker 201:01:16like I'm doing a math problem with my son. It's a fair hypothesis. I think the reason we called it out this time is because it pushed the penetration from positive to negative, right? If you work back to the most recent quarter, we had the same dynamic, But because exclusive brands still grew 3 points, we I suppose we could have called out that it would have grown, I'm making this number up, but 500 basis points rather than 300 basis points. But for composition, we just didn't because we didn't think it was going to raise any eyebrows. Speaker 201:01:57We had a feeling that when we called out that exclusive brands could be could decline from a penetration standpoint in this particular quarter, we worked up the math. So I wouldn't read anything further into that other than the fact that because it pushed it to a Decline rather than an improvement in penetration, we thought it was important to call out. Speaker 1301:02:21Okay, fair enough. All right, thanks and good luck. Speaker 201:02:26Thanks, Mitch. Operator01:02:27Thank you. We have reached the end of our question and answer session. And I would like to turn the floor back over to Mr. Jim Conroy for closing comments. Speaker 201:02:36Thank you everyone for joining the call today. We look forward to speaking with you on our 4th quarter earnings call. Take care. Operator01:02:45This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by