Boot Barn Holdings, Inc. 2027 Q2 Earnings Call

Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's second quarter fiscal 2027 earnings results. With me on today's call are John Hazen, Chief Executive Officer, and Jim Watkins, Chief Financial Officer. A copy of today's press release, along with a supplemental financial presentation, is available on the investor relations section of Boot Barn's website at bootbarn.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days on the investor relations section of the company's website. I would like to remind you that certain statements we will make during this call 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 to be made during this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our second quarter fiscal 2027 earnings release, as well as our filings with the SEC reference in that disclaimer. We 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 John Hazen, Boot Barn's Chief Executive Officer.

John? Thank you, Mark, and good afternoon.

Thank you everyone for joining us. On this call, I will review our second quarter fiscal 2027 results, provide an update on current business, and discuss the progress we have made across each of our four strategic initiatives. Following my remarks, Jim Watkins will review our financial performance in more detail, and then we will open the call for questions. I am pleased with our second quarter results, highlighted by a 15% increase in revenue, supported by continued new store expansion and positive same-store sales growth. Consolidated same-store sales increased 1.4% on top of 8.4% in the prior year period, while merchandise margin expanded 190 basis points. Our top-line performance, combined with strong merchandise margin expansion and disciplined expense management, drove a 26% increase in second-quarter earnings per diluted share to $1.73, exceeding the high end of our guidance range by $0.08.

At the midpoint of our fiscal year, revenue has increased 16% to date, and earnings per diluted share have increased 15%, excluding the impact of tariff refunds. These results reflect the strength of the Boot Barn brand, the broad appeal of our merchandise assortment, and our ability to resonate with customers across multiple segments. I would now like to provide an update on current business. Through the first four weeks of our fiscal third quarter, consolidated same-store sales were slightly positive. While I am not satisfied with October's comp sales performance, we were lapping strong same-store sales growth of 9% last year, including 7% in stores and 24% online, while also navigating unseasonably warm weather across several key markets this year. Looking ahead, we have several initiatives underway to drive traffic and improve sales trends during the third quarter, with fiscal December representing over half of the quarter's sales.

These include a refresh of our ladies' boot assortment, an expanded national marketing campaign to reach more customers in more markets, and the relaunch of our B2B offering, Boot Barn Workforce. These initiatives, combined with the continued strength of our work boot and apparel businesses and the performance of our new stores, give us confidence in our outlook for the holiday season and the balance of the fiscal year. Now let me turn to our four strategic initiatives, beginning with new store growth. During the second quarter, we opened 19 new stores, bringing our total store count to 584 locations across 49 states. Year to date, we have opened 46 stores, and over the past 18 months, we have added 126 new locations, representing approximately 20% of our current store base.

Our new stores have consistently delivered strong results over the past several years, and we are particularly pleased with the performance of our most recent group of 126 stores. These locations are on track to generate approximately $3.4 million in first-year sales on average, or roughly $200,000 above our original projections. This performance reflects the growing national recognition of the Boot Barn brand, our connection with the country western lifestyle and blue-collar customers, and the breadth and depth of our merchandise assortment. Our new stores continue to perform well across both new and established markets, demonstrating our ability to expand our national footprint and increase total market sales. Given the strength of our real estate pipeline, we are increasing our fiscal 2027 new store opening plans from 70 stores to a range of 75 to 80 stores.

While recent results demonstrate the opportunity to outperform our projections, we continue to underwrite new locations to approximately $3.2 million in first-year sales, consistent with our historical approach. With a long-term opportunity to expand to 1,200 locations nationwide, we remain confident in our ability to sustain new store growth for years to come. Moving to our second initiative, same-store sales. Second quarter consolidated same-store sales increased 1.4%, including a 1% increase in brick-and-mortar comp sales. Store comp growth was driven by a 2% increase in average unit retail, partially offset by a decline in transactions. From a merchandising perspective, we saw healthy demand across most of our major merchandise categories, reflecting the broad appeal of our assortment across multiple customer segments. Our men's and ladies' apparel business continued to perform well with denim remaining a standout category.

Despite cycling high teen comps in the prior year period, denim continues to deliver positive comp sales with our assortment remaining heavily weighted towards traditional boot cut styles. Our men's western boot comp sales were slightly negative in the second quarter as we cycled high single-digit growth in the prior year period, and our cowboy hat and ball cap businesses delivered strong growth. Our ladies' western boot business was a modest drag on second quarter comp sales as we lapped mid-teen growth in the prior year period. While the category will continue to cycle high single-digit growth in the third quarter, we are optimistic about the upcoming holiday season. We are refreshing our assortment with a broader selection of styles and colors, and have selectively promoted slower-moving merchandise to make room for substantial new product arrivals.

We believe these changes will resonate with our customers and help improve sales trends while maintaining overall markdown levels below the prior year. As part of our efforts to drive sales, we have made several changes to how we present merchandise in our stores. In denim, we have moved our premium assortment to the front of the store to provide a more elevated shopping experience and create opportunities to increase average unit retail, while repositioning our value offerings on the denim wall toward the back of the store. We are taking a similar approach in cowboy hats, refreshing our visuals and signage to make the category easier to shop. I have visited many stores recently, and the feedback from our teams has been extremely positive. We are also well-prepared from an inventory perspective.

Building on improvements made last year, we have further refined how we flow merchandise to stores with product arriving earlier and more consistently. Our in-stock positions are strong, including ladies' boots, where we are introducing a substantial amount of new merchandise. From a store operations perspective, we are preparing for the holiday season by adding seasonal associates and focusing on converting customer traffic into sales. Our strong customer satisfaction scores reflect the dedication of our store teams and their commitment to providing a great shopping experience. On the work side of the business, we continue to see exceptional momentum in work boots and work apparel with sales trends improving for the sixth consecutive quarter. This performance reflects our strong connection with the hardworking blue-collar customer. During the second quarter, we began the relaunch of our B2B program, now branded Boot Barn Workforce.

This initiative began over a year ago and represents a complete rebuild of our existing platform. Boot Barn Workforce generated approximately $100 million in sales last fiscal year, and we see a meaningful opportunity to expand from this base. We have transformed what was previously a largely manual process into a fully integrated platform featuring a sales dashboard, lead tracking, a portal for our customers' safety managers, digital vouchers, and a mobile app planned for the future. We have also expanded our national sales team to better serve existing customers and pursue new business opportunities. With significant investment underway in data centers, infrastructure, and other large-scale construction projects across the country, we believe Boot Barn Workforce is well-positioned to attract new customers and expand our share of the workwear market.

I would also like to recognize our IT and omnichannel teams for their exceptional work developing the Boot Barn Workforce platform internally. Their dedication, creativity, and ability to deliver such a comprehensive platform with minimal capital investment are a testament to the talent we have across this organization. From a marketing perspective, we are particularly excited about our holiday campaign, which celebrates family, tradition, and the special moments that bring people together during the Christmas season. This year, we have expanded our reach by shifting from regional television advertising to a nationwide campaign. We expect to generate approximately 1 billion television impressions during the holiday season compared to 175 million last year, representing six times the exposure. Our holiday TV and radio campaigns will feature the voice of Riley Green, a Stagecoach music festival headliner and judge on NBC's The Voice.