Boot Barn Holdings Inc (BOOT) 2016 Q4 法說會逐字稿

Greetings and welcome to the Boot Barn Holdings fourth quarter FY16 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like the conference over to your host, Jim Watkins, Vice President, Investor Relations and External Reporting for Boot Barn. Thank you, Mr. Watkins, you may begin.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's fourth quarter and FY16 earnings results. With me on today's call are Jim Conroy, President and Chief Executive Officer, and Greg Hackman, Chief Financial Officer. A copy of today's press release 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 in 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. And 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 on this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our fourth quarter 2016 earnings release, as well as our filings with the SEC referenced 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 Jim Conroy, Boot Barn's President and Chief Executive Officer. Jim?

Thank you, Jim, and good afternoon. Thanks, everyone, for joining us.

On today's call, I'll be providing a review of our results, followed by a discussion around the key drivers of our business, first for the core Boot Barn business and the then for the Sheplers business. Following that, Greg will review our financial performance in more detail, and provide our outlook for FY17. Finally, we will open the call up for your questions.

During the fourth quarter, we further increased our share of the western and work market, with sales increasing 45% year over year. Our top line growth was driven by the sales contribution of the newly acquired Sheplers business, and 22 new Boot Barn stores opened during FY16.

Consolidated same-store sales declined 1.2%. E-Commerce had positive double-digit growth with strong performance in both brands, which was offset by a decline in the stores business with the rebranded Sheplers stores outperforming the Boot Barn stores. While we had a strong start to the quarter, consolidated same-store sales declined in February, partially due to warmer weather across parts of the country. Similar to the second and third quarters of FY16 in markets such as North Dakota, Wyoming, Colorado and Texas, we faced headwinds associated with the softness of local economies dependent on oil and other commodities. We continue to see solid growth in many core markets without commodity exposure, particularly in the West, but not enough to offset the declines in markets facing these headwinds.

In terms of category performance at our core Boot Barn business, we saw modest improvement in our work business. Earlier in the year, we had introduced an expanded line of work boots and a broader line of work apparel, both of which seemed to be gaining traction. Unfortunately, we saw downward pressure in ladies boots and ladies denim, both comping negative in the quarter. This composition of sales leads us to believe that as disposable income has declined in areas with commodities exposure, customers are avoiding discretionary purchases or focusing their spending on more immediate necessities such as work boots and work apparel.

I'm pleased with our continued efforts to improve merchandise margin by increasing our private-brand penetration in both purchases, which we believe have the potential to increase our merchandise margin rate over time. During FY16, our higher margin private brands represented 13% of store's sales, excluding Sheplers stores, up from 10% for FY15. Our private brands continue to round out our assortment and help to differentiate us from our competitors.

Our initiative to expand sales in our e-Commerce channel is progressing well. During the quarter, we achieved solid growth in BootBarn.com, driven by enhancements in search engine optimization, better site merchandising, and improvements made to pay per click advertising. We've also continued to make progress with integrating the back-office operations of the two e-Commerce businesses, driving further expense reduction.

Turning now to our Sheplers business. In the quarter, we continued to transition the merchandise in the Sheplers stores to the Boot Barn assortment. The major components of that strategy were to increase the sales and penetration for western boots, work boots and work apparel. Each of those businesses experienced growth in the quarter. However, we experienced weakness in western apparel, particularly the denim business, as we continue to cycle the Sheplers price promotion activity in the prior year.

While merchandise margin and full-price sales in the converted Sheplers stores increased sequentially, our overall merchandise margin in these stores declined. This decline was a result of increased freight costs, higher shrink, and outside clearance activity as we continued to exit some of the Sheplers inventory. Having said that, we still feel confident in our ability to achieve the margin rate synergies we've outlined previously and that we began to experience in the third quarter.

We've added our private brands to the Sheplers stores, and achieved a penetration of 8% of sales for the fourth quarter, which is faster than our experience in other acquisitions. As we look forward to FY17, we expect our private-brand penetration, including these stores, to grow by 200 basis points which excludes Sheplers.com. We also expect to see a meaningful increase in full container importing of branded merchandise that should further bolster merchandise margin rate.

Looking now at the Sheplers e-Commerce business, in FY16, we integrated the management of SEO, SEM and email marketing across the online businesses. We also consolidated Boot Barn customer service call center into the Sheplers facility in Wichita, Kansas, providing us with multi-language, 24/7 customer service for the Boot Barn site. We believe that the acquisition of Sheplers has increased our digital expertise, enabled us to grow our share of the e-Commerce market, and has positioned us well for future online sales growth. While we intend to operate both brands online, we are continuing to make progress to a consolidation of the operational aspects of the two e-Commerce businesses.

Overall, while FY16 was not without its challenges, we made progress on a number of our growth initiatives that we believe position us well to continue to take share of the western and work industry. During the year, we opened 22 new Boot Barn stores, expanding our presence nationwide. We increased sales by 41% through our private-brand penetration, and we completed the acquisition and integration of Sheplers.

Looking forward to FY17, remain focused on our near-term goals with an eye on achieving our long-term objectives. We plan to open 15 new stores in FY17, and expect to expand our merchandise margin through increased private-brand penetration and ongoing sourcing efficiency. E-Commerce remains a key area of emphasis for us, and in FY17 we will be upgrading our online platform and continuing to combine components of BootBarn.com and Sheplers.com into a common backend system.

The new platform will enable us to provide our customers with enhanced omni-channel capabilities, which we expect will drive future sales growth. We've also been working to further optimize our online pricing strategy, improve our mobile traffic conversion and enhance our CRM capabilities. Additionally, we have a number of initiatives designed to drive same-store sales growth. Including broadening our assortment of men's western boots, expanding our work boot business, growing our commercial accounts business, and bolstering our shop-in-shop concept, leveraging the success we've had with Carhartt.

Turning to current business, we are now more than seven weeks into the first quarter and to date we have achieved positive same-store sales growth. These results compare to a strong same-store sales performance at Boot Barn in the first quarter of last year, as well as highly promotional activity in the Sheplers stores in that same period. While this is encouraging, we remain guarded about extrapolating this growth as this quarter is the smallest of the year, and visibility into sales continues to be very challenging.

While the current macro environment makes it difficult to predict when the external pressures to our business will subside, we continue to believe we have appropriately positioned our merchandise offering, marketing strategy and inventory levels to manage through the current cycle. We continue to prudently invest in our business for long-term growth and increase value for our shareholders.

Now I'd like to turn the call over to Greg Hackman.

Thank you, Jim. Good afternoon, everyone. I'll begin by reviewing our fourth quarter and full-year results, and then provide you with our outlook for FY17. In my discussion, I will be commenting on both actual and adjusted results excluding any one-time costs to facilitate comparability. Please reference today's press release for all definitions, and for a reconciliation of GAAP numbers to these non-GAAP adjusted numbers.

In the fourth quarter, net sales increased 45% to $149.5 million. As Jim mentioned, this was driven by the sales contributions from Sheplers, and the 22 new Boot Barn stores opened in FY16, partially offset by a 1.2% decline in consolidated same-store sales. The payback of our new stores opened during the past two years is slightly above our target of our three-year payback. We continue to expect sales for the first 12 months of operations at the 22 stores opened in FY16 to average approximately $1.7 million, which is in line with our sales target for new stores.

Adjusted gross profit increased 29.2% to $43.9 million, compared to gross profit of $34 million in the fourth quarter of FY15. At our core Boot Barn business, our pricing strategy was fairly consistent with the prior-year period, with no meaningful increase in promotions. Consolidated merchandise margin rate declined 320 basis points. This decline is primarily the result of a historic merchandise margin rate at Sheplers that is well within the merchandise margin rate at the core Boot Barn. The composition of the businesses this year with Sheplers as compared to last year when the Company did not own Sheplers drove the decline in the consolidated merchandise margin.

In the fourth quarter, we completed our annual fiscal inventory. While our shrink rate is low by retail industry standards at approximately 1% of sales, during the quarter, we recorded a $900,000 charge above our provision which negatively impacted gross profit by 20 basis points for the FY16. We attribute the increased shrink to the disruption in the Sheplers business as a result of the expensive store remodeling efforts, and the relocation of inventory from their Irvine warehouses to our Fontana distribution center. There was a slight decline in merchandise margin at the core Boot Barn business comprised of higher freight costs, higher shrink and some seasonal clearance, partially offset by better markup associated with increased private-brand penetration.

Our adjusted operating expense was $36.2 million, which excludes $300,000 of costs associated with the integration of Sheplers. This compares to $25.6 million in the prior-year period. The increase in adjusted operating expense is attributed to the operating costs related to the Sheplers business and the 22 Boot Barn stores opened in FY16. We've leveraged adjusted operating expenses this quarter, reducing our expense rate by 60 basis points to 24.2% of sales.

While our adjusted EBITDA increased in the fourth quarter of FY16, higher depreciation and amortization expense drove an 8.5% decrease to $7.7 million in our adjusted income from operations. Also contributing to the decrease in adjusted income from operations is higher shrink in the fourth quarter of this year.

Pro forma adjusted net income for the quarter was $2.5 million or $0.09 per diluted share. This compares to $4.6 million or $0.17 per diluted share in the fourth quarter of FY15. Interest expense was $2.4 million or $0.05 per share higher than the pro forma adjusted interest expense last year. The prior-year net income has been adjusted to reflect the impact of the post-IPO interest expense.

On a full-year basis, we increased net sales by 41% to $569 million. Driven by the contribution of the Sheplers business, the opening of the 22 new Boot Barn stores, and we achieved flat same-store sales in a tough retail environment. Adjusted income from operations for FY16 increased 20.4% to $42.7 million. This compares to adjusted income from operations of $35.4 million in the prior fiscal year. Which includes a $1.5 million adjustment to reflect the estimated public company costs, as if the company had been public during the entire year.

Interest expense was $6.7 million or $0.15 per share higher than the pro forma adjusted interest expense last year, and primarily reflects debt associated with the acquisition of Sheplers. Adjusted earnings per share in FY16 was $0.69 compared to $0.72 in FY15.

Turning to the balance sheet. As of March 26, 2016, we had a total of $242 million outstanding on our revolver and term loan. At year end, we had approximately $76 million of availability under our revolving credit facility and $7 million of cash and cash equivalents. Our net debt leverage ratio was 3.8 times, which is in line with the expectations we outlined for you on our most recent earnings call and which we expect will further improve in FY17.

Excluding the converted Sheplers stores, our inventory was up 2% on an average store basis. On a consolidated basis, inventory rose 36% to $176 million compared to a year ago. The increase is primarily driven by a 20% increase from the addition of the Sheplers stores business, a 10% increase from the new stores added in the last 12 months, and a 6% increase in inventory related to the Sheplers distribution center.

Now I would like to turn to our outlook for FY17. Factoring in the continued headwinds we are facing, we expect same-store sales for the consolidated Company to be between slightly negative and slightly positive. We expect earnings per diluted share in the range of $0.63 to $0.73 per share based on an estimated weighted average diluted share count of 26.8 million shares for the full fiscal year. As a reminder, FY17 is a 53-week year, and we expect to earn approximately $0.03 per share in the 53rd week which is included in our guidance range. This represents income from operations of $42.4 million to $46.8 million. We expect our net income for the FY17 to be between $16.9 million and $19.6 million.

Our FY16 results included three quarters of the Sheplers business. We estimate that had we owned Sheplers during all of FY16, our earnings would have been $0.03 lower than we are reporting, or $0.66 per diluted share primarily a result of higher interest expense. We estimate that our FY17 earnings at the high end of their guidance range of $0.73 will represent 11% earnings growth over FY16 earnings per share of $0.66.

We expect capital expenditures to be in the range of $13 million to $15 million, the majority related to investment in stores. We plan to open 15 stores during the year, with 3 expected to open in the first half of the fiscal year and the remainder in the second half. We expect our tax rate to be 39.4%, and interest expense is expected to be in the range of $14 million $15 million. Based on our earnings-per-share projections of $0.63 to $0.73, we expect to generate free cash flow of between $13 million and $20 million.

As we look to the first quarter of FY17, we expect same-store sales to be flat over the prior-year period. While our sales are comping positive quarter to date, sales have proven to be difficult to predict. We estimate our first-quarter earnings per diluted share to be the range of $0.01 to $0.03 per share, based on an estimated weighted average diluted share count of 26.8 million shares for the first quarter. Our earnings guidance in first quarter of FY17 is burdened with $0.06 of additional interest expense that we did not have last year prior to the acquisition of Sheplers.

Now I would like to call back to Jim for some closing remarks.

Thank you, Greg. Clearly, the retail environment remains challenging, and we are managing the business accordingly. We are looking for all opportunities to drive same-store sales growth, we are managing our investment in inventory and stores prudently, and we remain steadfast in our discipline around expense control.

Now I would like to open the call to take your questions. Doug?

(Operator Instructions)

Matthew Boss, JPMorgan.

Thanks.

So apparel inventory out there in the channel is clearly elevated and competition is fierce. I guess any changes you guys think necessary to the 90% full-price model? And then just help best to think about merchandise margins this year, and then how you'd rank the opportunities going forward from a gross margin perspective?

Okay, so on the full price, 90% full-price model, that model has worked for us for years. And we have tried to augment the volume that we shout our underlying values and the offers that are in the store. So we haven't really made fundamental changes to our promotional posture. While I think that might give us a short-term boost in same-store sales, I think it is just a race to the bottom in terms of profitability.

In terms of merchandise margin rate and where the opportunities are, the biggest opportunity is to continue to grow private brand as a percentage of our business. So we're doing that in stores, we're doing that at bootbarn.com, and we will be introducing our private brand into Sheplers.com as well. So each of those should be able to give us about 1,000 basis points of improved merchandise margin over third-party product across each of those businesses.

We are also looking to increase the amount of containers that we import directly from overseas. So we just brought on one of our major vendors where we can buy container loads, bring that product into our new distribution center in Fontana, and break up that product and send it out the stores. So those are some of the areas where we are looking for margin expansion.

Great.

And then just a follow up, more on the expense side. What's the best way to think about the comp leverage point on the SG&A front for this year? And then just a similar question, what will it take to lever buying and occupancy this year within gross margin?

Sure. On the SG&A line, we need to get roughly between 1% and 2%, it's somewhere in that range. And then in terms of occupancy, it is really just a little bit, well it's a little north of 3%, but call it 3%.

Got it. Okay. Best of luck, guys.

Thanks, Matt.

Peter Keith, Piper Jaffray.

Great, thanks a lot guys. This is actually John on for Peter tonight.

Our first question is just around some geographical performance. I think in fiscal Q3, you mentioned California, Arizona, Nevada were in that solid mid-single digit comp range. Just first off, we were curious about how Q4 trended with those geographies? And then also with those geographies relative to some of these oil and commodity impacted geographies, did that comp gap widen at all?

So in the West we still had a nice positive store level comp, so we felt pretty pleased with that part of the business. In terms of the oil markets, the states -- the four states that we call out are North Dakota, Colorado, Wyoming and Texas. The first three have continued to be very difficult for us in Q3, and now into Q4.

And the business hasn't gotten -- it's gotten a tiny bit worse but it started out at a pretty bad number. So those three states comprise about 30 stores, and a double-digit negative decline there, which is something we have been saddled with for a couple of quarters now.

Texas, on the other hand, Texas is still negative but has been improving sequentially since the third quarter. We obviously hope that continues, but it's still a negative drag on same-store sales, and we have 47 stores in Texas so it is a bigger anchor to some degree than the first three states, which are only 30 stores. But Texas isn't down nearly as much as the first three.

And what we think about it is, I think there's a little bit more diversification in the Texas economy and we are trying to look for opportunities there to take advantage of that diversification. In some of the other markets, as we've discussed in the past, some of them are specifically focused on oil and gas and some are specifically focused on fracking. And while the price of oil has come back a bit, it has not really created a lot more investment yet in the fracking industry in states like North Dakota.

Okay, great. Thanks for that.

Then I guess as our follow up, I know you guys said you are in the first seven or eight weeks of the quarter here, you are running positive, you guided Q1 to flat. So clearly you are still cautious.

But I guess a lot of retail had still been pretty tough out there in April and May from what we've been seeing. What do you think is driving the sequential performance in your comps versus maybe what's going on out there in the rest of retail?

It is a very good question. What we've seen is, just to give everybody the sequential view, as we have reported on our last call, January was pretty solid, February was pretty darn difficult. And then business got sequentially better in March, slightly negative and then positive in April and into May.

Part of that I think is where we've got a number of initiatives that we've covered in the past with you all that we think are gaining traction. So I would like to think that some of that is as a result of a lot of hard effort from folks across the field organization.

We have not yet started to cycle very difficult business, so I don't think it is the year-over-year comparison and we will start to cycle more negative or more weaker comps as we go forward. But that really hasn't happened yet, in fact in our core Boot Barn business, we won't see a negative comp month of any material nature until November. So I can only really attribute it to some of things that we're doing from a merchandising perspective, really focusing on boots and denim, and within boots, looking at work boots and western boots and trying to diversify those two businesses.

Then within the work apparel business, we've gotten some nice growth with brands and with classes of merchandise in the overall work apparel department that have extended us beyond the oil industry. So that has helped a bit.

Then finally, we've really been working with the stores' organization to try to improve conversion. We believe that the traffic is down, we know that transactions in our average store are down. So now it is how do we ensure that we convert more of those shoppers to buyers, and how do we build the basket.

But in answer to your question, while we think some of those things might be having an impact, the visibility, as we've said, and I know a number of other retailers are reporting, is very blurry as we look into sales going forward. And as we try to do comparisons year over year and do two-year stacks, the traditional analytics seem to have broken down. So there just seems to be a lot of volatility in how we're looking at the business.

Okay, thanks a lot guys. Good luck this year.

Thank you.

Mitch Kummetz, B. Riley.

Thanks.

Maybe first question just to follow up on a comment that you made, Jim, where you said that the core Boot Barn comp, you didn't see a negative there until November of last year. I'm curious if you could say when the comps started to run negative in those four oil and gas states. I would imagine that those turned negative sooner than November of last year.

They did. We were positive in nearly all of them, up until about May or June last year. Then they started to turn negative, and then quickly went strongly negative. So we have not yet hit a negative number in North Dakota, Colorado or Wyoming, really. And then Texas didn't go negative until sometime in the second quarter.

Got it.

Then when I think about your Q1 to date comp as well as your comp guidance, as you're going up against I think a 5.6% last year, you mentioned you're positive through seven weeks. I would imagine as you think about the next six weeks, the compares are probably quite a bit easier than the compares that you've been running up against through the first seven weeks. Is that accurate?

We still had a pretty solid June last year. So May was our best month of the quarter, but June was still a pretty solid mid single-digit comp.

Okay. Then just -- maybe just the last question, more housekeeping I guess. I don't think you guys broke out your comp in terms of the Boot Barn business versus the Sheplers business and then maybe Sheplers you [conversed] the store, and I think you've done that in the past. So I was hoping you might be able to do that for us on this call?

The way we think about it is, both online businesses are growing nicely, both are double-digit comps. The stores' business was negative, unfortunately.

The Sheplers stores' business was I would say slightly negative, and the Boot Barn business was a little bit more negative than that. We are starting to manage the overall business in a consolidated way, which is why we are starting to consolidate how we report about it, and just give a little bit of color on what's creating swings up or down.

Got it, all right. Thanks, guys. Good luck.

Thanks, Mitch.

Paul Lejuez, Citigroup.

Hey, thanks, guys. It is Tracy filling in for Paul. I had two questions.

The first is, I was wondering, in some of these pressured oil and gas markets, what you we were seeing from a traffic versus ticket perspective? Is it really just a traffic thing or are the tickets also pressured? And then I also have a follow-up.

Sure. It is a massive traffic problem. The ticket -- I'll come back to ticket in a second. But we just have people moving out of towns like Minot, so it is not whether they are going to a competitor or buying less, they are just no longer living there. So the biggest portion of it, from what we can ascertain -- and the one caveat is, we don't have traffic counters per se, but we can see transactions. And if we can assume any consistency in our conversion rate, we can compute traffic.

From a ticket standpoint, I honestly can't comment specifically on the basket size in different states. We don't track it that closely or we don't look at it every week. I can tell you that one of the unfortunate consequences of the oil pressure is some of the more high-end areas of our business, most notably exotic boots, have really been under a lot of pressure.

So historically, the traditional oil worker who is making a fair amount of money and being pursued to move up to North Dakota, was spending not only on merchandise to go out in the fields to work, but had enough disposable income to spend $500 or $600 on boots. And we've seen a notable decline in that portion of our business, so that's undoubtedly pushing down at least AUR and presumably basket size as well.

Got it, thanks.

And my second question is about your loyalty program. And I was wondering how many of the Sheplers customers you've enrolled in your loyalty program? And what you've seen from those customers in terms of their frequency of spending and how much they spend per visit versus what a typical Boot Barn loyalty customer spends?

That's a great question, it's an unbelievably complicated question. So we appreciate you asking me on a public call.

Sorry.

No, the quick answer is we've seen a nice take up to the be rewarded loyalty program within the Sheplers stores. So on average, we have about 10,000 customers in a Sheplers store that have already voluntarily signed up for the program.

Anecdotally, I would tell you that the Sheplers shopper tended to shop more frequently, because they had a higher degree of apparel purchases than boots. I'm not certain that we can claim that just yet, because a lot of these customers are just being introduced to Boot Barn.

So as we think about the loyalty, I think it is a little bit early to really segment the gold customers in those stores versus the more traditional be rewarded customers to give you a split for how much of the business is being driven by the heavy purchasers. But that's something we can come back to on future calls.

Yes, we will make sure to ask you again in a couple quarters.

Thanks, Tracy. I will count on it.

Randy Konik, Jefferies.

Hello, this is [Sachin] on for Randy. I wanted to get some color on the workwear business. It sounds like that was a relative bright spot for you during the quarter. Is there anything that you're doing there that you think could driving that?

I think you had mentioned offering some apparel or price points, maybe moving away from flame resistant apparel. So any color you could give on that business, that would be really helpful. Thanks.

Sure, yes, and you've nailed it. In the work business overall, we have evolved both boots and apparel. So, within the boot side, we've really emphasized performance boots. So think of brands like Keen and Timberland, to some degree, are more hiking or hunting boots and really extended our definition of, quote unquote, work boots a bit.

Then on the work apparel side, Carhartt is the preeminent brand and [fundamentally] the highest priced brand, although it really offers great value for what you get and great quality. But we've brought in a couple of brands that are a little bit lower priced, most notably a company called Rigs. And we've seen a nice pickup in that piece of the business, which we feel good about. So we are still servicing the worker.

The downside of that is we are trading customers down to a lower price point. But if that's what they can afford, we are there to provide their needs. So that's been a nice bright spot.

And then from the Sheplers stores, we've really increased the presence of both work boots with dedicated fixtures and work apparel with the Carhartt shops, and we've seen very nice growth in both of those departments within the Sheplers stores.

And has there been any variation in performance between the oil related states and the non-oil related states in that category?

Yes. The oil related states are having difficult business across the board. We are trying to blunt some of those declines with some of these initiatives. But if we looked at a department level view of sales in a North Dakota or a Wyoming, we would see softness from top to bottom.

We have seen maybe paradoxically some more softness in non-work categories that are more discretionary, and we called out ladies boots. But part of the hypothesis that we've vetted a bit with the field and the store managers specifically is guys have either lost their job or they're making less money so less money to spend on family, lives, et cetera. So they still need to go to work, so they are buying either some of the Rigs work apparel or some version of a work boot but they are not spending on pure discretionary spend.

Great, thank you.

Thank you.

Tom Nikic, Wells Fargo.

Hello, guys, thanks for taking my question.

I was wondering, I know that you guys don't have a crystal ball. But with the recovery in oil prices over the last month or so, do you have any educated guesses as to maybe when the economy in those oil dependent regions starts to stabilize and maybe that the headwind to your business tails off?

You are right about the crystal ball piece. The oil piece of it, if we think about our experience as oil started to fall in November of 2014, I guess, we didn't start to feel it in our business for 18 months or 6 months -- (multiple speakers).

Call it eight months or nine months or something.

So there was a pretty significant lag between the decline in oil prices. and what we understand is as oil started to come down, the oil companies held on to the workforces, expecting it to potentially go back and certainly not wanting to close up shop on the hope that it would reverse itself and they could start drilling again or start expanding their drilling facilities.

I think on the way back up, I think we will probably see a similar lag. I can't really see into how the exploration companies think about it. But my hypothesis would be that they will expect to see oil up in the $70s plus before they start to expand and introduce more capital to continue to take more oil out of the ground.

But we are watching it. We track as best we can rig counts, unemployment, et cetera. Obviously we would presumably benefit if they start to invest again, but I don't think it is going to happen as quickly as the oil price moves from $30 to $40 or $45.

Okay, great, that's helpful.

I also wanted to follow up on the store plans. I believe you said 15 stores this year, did you mention if you plan to close any doors? That 15 stores applies 7% to 8% growth, which is below the double-digit number that you've talked about in the past. Should we think of 15 stores a year as the medium-term run rate? And any help there would be great, thanks.

The 15 stores this year is a result of two things. One, we've just expanded 40 stores organically in the two years and added 19 stores of Sheplers. So we've added 60 stores to the base over the last 24 months or so. The second is just to be a little bit cautious in a time where visibility is challenging in terms of capital preservation.

So I think when we think about FY18's growth, it will depend completely on how this year evolves. I would think that, long term, 10% is still a good number to model, but this year we very purposefully pulled that down a little bit. But again, if we see things starting to rebound and we start getting back to a positive same-store sales growth, we will probably ramp right back up to 10%, so call it 22 to 25 stores.

In terms of the second part of your question around closings, we have no planned closings right now. One of the nice facts about the Boot Barn business is the store model is pretty resilient, so nearly every store in the comp base still makes money. So there's not a burning desire of ours to start closing down stores because they are losing lots of money.

All right, great. Thanks very much and best of luck this year.

Thank you.

Corinna Freedman, BB&T Capital Markets.

Just a follow up on that last question. Does that imply that all of your leases for next year are locked and loaded and ready to go, or is it possible that some of that second half weighted openings could push into 2018? Thank you.

Not all the leases are locked and loaded. I would say that the pipeline for this year is pretty robust. I'm not concerned that we couldn't get to 15 stores.

If any of those stores pushed to the next year, it would push off 30 days or so. We probably have a few stores left to fully solidify. So we feel pretty good about the 15 stores there. We have letters of intent or leases on a number of them already of course.

Okay, great. Thanks. Best of luck.

Thank you.

There are no further questions in queue. I'd like to turn the call back over to management for closing comments.

Thank you, everyone, for joining the call. We look forward to speaking with you on our first-quarter earnings call this summer. Take care.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.