Boot Barn Holdings Inc (BOOT) 2018 Q2 法說會逐字稿

Greetings, and welcome to the Boot Barn Holdings Second Quarter Fiscal Year 2018 Earnings Conference Call.

As a reminder, this conference is being recorded.

Now I would like to turn the conference over to your host, Mr. Jim Watkins, Vice President, Investor Relations and External Reporting for Boot Barn.

Mr. Watkins, you may begin.

Thank you.

Good afternoon, everyone.

Thank you for joining us today to discuss Boot Barn's Second Quarter Fiscal 2018 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 of the 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 second quarter fiscal 2018 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?

Thanks, Jim.

Our second quarter financial results exceeded our expectations.

Starting with our top line, we're very pleased that sales trends accelerated following a solid first quarter, especially in light of some temporary disruptions from hurricanes Harvey and Irma.

In-store sales increased 1.8%, driven by a low single-digit gain in our stores, partially offset by a low single-digit decline in e-commerce same-store sales.

Importantly, we were able to expand our merchandise margin 140 basis points compared to the prior year.

This improvement was a result of a reduction in promotions, continued growth in exclusive brand penetration, an increase in full container purchases and our commitment to full price selling.

A combination of sales growth and higher merchandise margins allowed us to double our earnings per share year-over-year to $0.04 per share, which was ahead of our guidance range at breakeven to $0.02.

Our performance has been fueled by our steadfast commitment to our 4 strategic growth initiatives that we believe will drive increased profitability and greater shareholder value over the long term.

I'll review our recent progress for each initiative beginning with driving same-store sales growth.

During the second quarter, we continued to drive positive same-store sales growth in our stores despite the disruption we witnessed from hurricanes Harvey and Irma.

Collectively, the impact of these 2 hurricanes resulted in the closure of 25 stores in Texas, Florida and Georgia.

In most cases for less than a week.

On top of this, 2 Houston area stores sustained major flooding and were closed for approximately 10 weeks.

Fortunately, one of those stores reopened earlier this week, and we are planning to reopen the second store next week after a significant restoration at both locations.

We estimate that the store closures and lost e-commerce sales due to the hurricanes negatively impacted our second quarter sales by approximately $1 million and eroded same-store sales by 30 basis points.

Post hurricane, we have seen an uptick in sales in certain stores following their reopenings as customers have replaced damaged boots and clothing, and construction workers are coming in to get outfitted for the cleanup and rebuilding efforts.

Meanwhile, we continue to see stabilization in our stores located in oil and commodities markets.

Same-store sales were slightly positive in the group of states, including North Dakota, Wyoming and Colorado, while same-store sales in the state of Texas increased mid-single digits, a sequential improvement from Q1.

From a merchandising standpoint, we, again, saw strong sales of work boots and work apparel, including flame-resistant clothing.

We continue to benefit from a broad assortment of workwear, strong growth in our commercial accounts business and further expansion of the work department in several stores.

We also saw a modest sales increase in men's western boots as well as men's and ladies denim.

As we head into the holiday shopping season, we continue to focus our efforts on serving our customers by hosting experiential events in our stores while ensuring that we have the appropriate level of staffing during busy shopping times.

We've recently completed the rollout of a new store labor scheduling system, which has been well received across the stores organization.

This new system should help us continue to optimize our store labor expense and continue to drive same-store sales growth by improving our labor scheduling to better capitalize on peak shopping periods.

From a marketing perspective, we now have enough scale across the country where we can purchase a portion of our radio and television advertising on a national basis.

Doing so enables us to spend our marketing dollar more efficiently, continues to build our brand nationally and helps drive sales in our online business.

Finally, we are pleased to report the customer response to the Boot Barn branded credit card that we introduced in the second quarter has been positive.

Over time, we expect this initiative to drive higher customer loyalty, larger transaction size, lower credit card processing fees and better customer data capture, which will further augment our customer analytic capabilities.

Moving to our second initiative, strengthening our omnichannel leadership.

During the first half of calendar year 2017, we began migrating our digital businesses to a new e-commerce platform in order to capitalize on the operational benefits of having all 3 sites, plus our in-store sales portal, or WHIP, leverage the same e-commerce team, one customer service call center, a consolidated inventory and a common performance center.

To recap the initial phase, the migration of countryoutfitter.com and WHIP went very smoothly and business was solid on both platforms.

However, when we transitioned the sheplers.com site to the new platform, we experienced a disruption in sales post migration due to a decline in traffic generated from organic search, coupled with lower conversion on our mobile site.

We have spent the last few months working on improvements to that site and have seen sequential improvement in the sheplers.com business.

During September, we successfully executed the fourth and final phase of our site migration with the transition of bootbarn.com onto our new e-commerce platform.

The migration of bootbarn.com went extremely well, highlighted by more than doubling of the sales trend, accelerating from an already healthy double-digit growth at the baseline.

Combining the improvement in sheplers.com with the outsized continued growth in bootbarn.com, we were able to mitigate the decline in e-commerce same-store sales to low single digits in the quarter, which was a nice improvement from Q1.

When we included the incremental sales from the new Country Outfitters site, which continues to perform well, our total e-commerce sales increased to high single digits for the quarter.

Now that our digital sites are all on the new e-commerce system, our customers can access our standard inventory selection, held in our Wichita, Kansas distribution center from each of the 4 digital platforms.

To further support these sites, we recently completed the implementation of enhanced automation in our Wichita distribution center, by installing material handling conveyors and product carousels as well as a new warehouse management system.

These capital improvements are expected to drive picking efficiencies, reduced labor costs and improved order accuracy and turnaround time.

The completion of this project will also enable us to remain in our existing distribution center without the need to spend significant capital in the foreseeable future.

Finally, this new system will serve as the foundation for future enhancements to our omnichannel capabilities going forward.

Given that our e-commerce business is now on one common platform with one shared inventory, we will no longer provide an update on each of the different e-commerce brands as we're managing them to maximize the total growth, and we may actively migrate customers between the sites.

Now to our third strategic initiative, increasing the penetration of our exclusive brand portfolio and expanding our merchandise margin.

In the second quarter, our exclusive brand penetration increased by more than 200 basis points year-over-year and represented approximately 13% of our total sales.

We continue to focus on expanding our exclusive brand offering by developing high-quality product to complement our third-party assortment.

Our strong merchandise margin improvement -- our strong merchandise margin performance in the second quarter was driven in part by continued improvement in our exclusive brands.

As we look to the third quarter, we're building momentum with the rollout of new styles of Cody James boots, a line of El Dorado Exotic Boots and the launch of a new boot platform called [Zero Gravity], which brings state-of-the-art technology to our exclusive brands.

Our existing relationship with Brad Paisley continues to be strong and is resonating well with our core customers.

We've also begun the product development process for the full line of our new ladies brand that we are creating in partnership with Miranda Lambert and that we'll be launching chain-wide in the second half of calendar 2018.

In addition to exclusive brands, we're continuing to achieve margin expansion both by purchasing more of our best-selling boots in container loads at a deeper discount and receiving higher discounts from our vendors due to our increased purchasing power.

Finally, our fourth initiative, expanding our store base.

During the quarter, we completed the acquisition of the 4-store operations at Wood's Boots located in Midland and Odessa, Texas.

We purchased the inventory, entered into new leases with the former owner and offered employment to the Wood's Boots team at all four store locations.

We plan to convert these stores to the Boot Barn banner after the holiday season.

These locations help us bridge our Texas stores to those in New Mexico as we continue to build our presence in this important region of the U.S. This acquisition is expected to pay back in less than 2 years and can serve as a model as we evaluate potential tuck-in acquisitions to complement our new store opening plan going forward.

We continue to believe that store expansion, both organic and through acquisition, is a great opportunity for us to grow sales and profitability.

We plan to add 7 stores in the second half of fiscal 2018, bringing our store opening count for the year to 12, consisting of both new stores and acquired stores.

Now turning to current business.

The in-store sales growth has accelerated into the current quarter, driven by an improving sales trend in our retail stores.

While there is still a great deal of sales to be generated in the current holiday quarter, we are excited about momentum in the business.

The growth opportunity is ahead of us and our ability to achieve our updated full year top and bottom line targets.

And now I would like to turn the call over to Greg Hackman.

Thank you, Jim.

Good afternoon, everyone.

In the second quarter, net sales increased 6.8% to $143 million.

Sales growth was driven by the sales contributions from new stores opened over the past 13 months and the 4 stores acquired from Wood’s Boots.

A 1.8% increase in same-store sales and sales from the Country Outfitters site.

Gross profit increased 14.4% to $41.7 million or 29.1% of net sales compared to gross profit of $36.4 million or 27.2% of net sales in the prior year period.

The 190 basis point increase in gross profit resulted from a 140 basis point improvement in merchandise margin and a 50 basis-point decrease in buying and occupancy costs.

As we discussed on the last call, there were some timing differences that impacted buying and occupancy costs and operating expense between Q1 and Q2 last year.

As a result, the year-over-year comparison was unfavorable for buying and occupancy in Q1, but was favorable in Q2.

Year-to-date, our buying and occupancy rate is 10 basis points higher than last year.

Looking ahead, we continue to expect to drive merchandise margin improvement in fiscal 2018 by increasing our exclusive brand penetration and volume purchases from our third-party vendors.

Operating expense for the quarter was $36.1 million or 25.2% of net sales, which was in line with our expectation.

This compares to $32 million or 23.9% of net sales in the prior year period.

The $4.1 million increase was driven by the increases in sales and the additional costs associated with the stores we've opened or acquired over the past 13 months.

Year-over-year, Q2 operating expense as a percentage of sales were in line when excluding the benefit in the prior year from lower bonus expense, a gain from a legal and contract settlement, a benefit from employee compensation costs and the timing differences that I mentioned above.

Our income from operations was $5.6 million or 3.9% of net sales in the second quarter of fiscal 2018 compared to $4.4 million or 3.3% in the prior year period.

Interest expense in the second quarter was $3.8 million compared to $3.7 million in the prior year period.

Net income for the quarter was $1.1 million or $0.04 per diluted share compared to net income of $0.5 million or $0.02 per diluted share in the prior year period and compared to our guidance of breakeven to $0.02.

Turning to the balance sheet.

Our inventory decreased approximately 1% on an average store basis compared to last year.

On a consolidated basis, inventory rose 11% to $212 million compared to a year ago.

We have increased the amount of inventory that we are purchasing and warehousing in order to better support our full container purchase program, drive sales of our exclusive brands and to broaden product selection available to be shipped from our warehouses to reduce dropship fees, all of these in an effort to improve margin.

Our inventory entering the third quarter is current and at appropriate levels and positions us well for the holiday season.

As of September 30, 2017, we had a total of $240 million of debt outstanding, including $57 million drawn on our $135 million revolving credit facility.

We had $9.4 million of cash, and our net debt leverage ratio was 3.9x.

Now I'd like to turn to our outlook for fiscal 2018.

Based on our second quarter results and our expectations for the third quarter, we are raising our full year outlook.

We now expect full year fiscal 2018 same-store sales to increase low single digits compared with our previous guidance of flat to slightly positive.

We expect income from operations for the year to be between $40 million and $42 million, which is $2.5 million higher than the high end of our previous guidance.

Net income is now expected to range from $15.4 million to $16.6 million.

This represents earnings per share in the range of $0.57 to $0.61 based on estimated weighted average diluted share count of 27.2 million shares for the full fiscal year.

With respect to the third quarter of fiscal 2018, we expect same-store sales to grow 2% to 4% and net income per diluted share to be in the range of $0.40 to $0.43 per share.

Now I'd like to turn the call back to Jim for some closing remarks.

Thanks, Greg.

We are pleased with our second quarter results and the positive momentum we are experiencing across the business.

Looking forward, we will remain focused on driving shareholder value by growing same-store sales, enhancing our omnichannel capabilities, improving our merchandise margin and expanding our store base.

As I wrap up, I would like to take a minute to thank the entire Boot Barn organization across the country for not only overcoming the adversity that we faced in the quarter due to some very unfortunate external factors, but really coming together as a team to continue the solid performance and accelerate our sales growth.

Now I'd like to open up the call to take your questions.

Kevin?

(Operator Instructions) We'll go first to Peter Keith with Piper Jaffray.

Digging into the e-commerce dynamics, it sounds like Sheplers is getting a little bit better.

I was curious on Q3 in the go-forward trend.

Do you -- at this point, do you still think Sheplers will be positive in the December quarter thereby taking your total e-com business positive for the quarter?

It's a good question.

As you look into Q3, we are expecting that e-commerce same-store sales will be positive.

One thing that happened that's been a pleasant surprise is when we brought bootbarn.com to the new platform, the sales have grown in a much more outsized way than what we had even modeled in kind of a best-case scenario.

So I think bootbarn.com plus sheplers.com -- and those 2 brands comprise e-com same-store sales for us until we wrap the acquisition of Country Outfitter.

Those 2 brands, we believe, will be positive in the third quarter.

I can't swear that I know the split right now.

I think Boot Barn's overperformance may actually be taking a little bit of business from sheplers.com.

But at this point, I am pleased with where we stand.

I'm pleased that we expect same-store sales to be positive.

And frankly, if the customer wants to shop one brand versus another brand, we'll let them make that decision.

But coming to the root of your question, I think the sheplers.com issues that we are working on, the two that we had called out were traffics -- traffic declining from organic search and conversion on our mobile site, both of those issues have gotten sequentially better since we started working on it a few months ago.

And I feel good about that progress and good about the trajectory that we're in.

Okay.

That's good feedback.

And maybe to follow on.

It's encouraging to hear about the acceleration that you've seen quarter-to-date.

Maybe just to provide some context, is that because of ongoing improvement in e-com or the Texas and energy markets?

Or is it simply just kind of broad-based improvement across the chain and websites?

So we've seen a lot of things get better.

The overarching business has improved basically across the each of the 3 regions.

Texas is certainly improved and part of that is the improvement as Houston kind of continues to recover.

But even if you were to strip that out, the underlying business without that has improved.

So we're pleased with where we stand now.

Just part of the conservatism in our voice, I suppose, is while we're 4.5 weeks into a 13-week quarter, we are not 1/3 of the way through the sales of that quarter, of course, given the importance of December.

But right now, we feel like we're in a pretty good position.

We'll go next to Jonathan Komp with Baird.

I want to follow up on the last line of questioning.

And just broader question really I know when some of that oil and commodity markets had the downturn, at least starting with the commodity prices when they were in decline.

I know you back then had talked about your businesses possibly lagging the downturn in some of the commodity prices?

I'm just curious to get your thoughts, do you think there's any signs now that your -- the benefit of some of the rebound in prices and activity you're actually lagging and just starting to see the benefit from now?

Or just curious to get your thoughts there.

I do think there is a lag and in some cases, like with the price of oil, while it's improved a bit, it's certainly not where it was in November of 2014.

I think the fact that it's stable...

And stable in the 50s, right?

Right, stable and hovering in the 50s is certainly better for us and for some of our high-volume states than when oil was down in the 30s.

So that feels good.

And I think if you were to distill all the things that have changed in the business over time, while we see a number of different components of the business improve, it is the single-digit driver of the improvement is the change in the trend in our largest state, which is Texas, of course, from -- we had quoted this last year, especially minus 5% for, I think, 4 consecutive quarters.

And then in the first quarter of this year, it turned slightly positive and then it's improved into the second quarter of this year.

So with 52 stores in Texas, that's sort of the single biggest change in the trajectory of the business, but we've also seen a lot of improvement in a lot of other areas.

Great.

And maybe to follow on kind of more of a forward-looking question, but how long would you need to see that trend line to hold to get more confidence to reaccelerate the pace of unit additions, either through openings or acquisitions?

John, it's Greg.

I mean, we're certainly pleased with Q2 building on top of Q1.

I think we'd like to see this continue through Q3 with specific strength in stores business, the brick-and-mortar stores, before we are able to make a comment.

That side, as we've always talked about, we can sign a lease and open a store pretty quickly.

So we do think that we'll be able to flip that switch pretty quickly into growth mode once we feel confident through holiday.

We'll go next to Paul Lejuez with Citigroup.

Just curious -- Paul Lejuez, by the way.

Just curious about your comment on to your promotions.

Was that part of the strategic decision that you guys made to be less promotional?

Or was it more a function of the environment around you becoming less promotional, so you didn't have to discount as much as you thought?

I guess, if the latter, what do you think -- why do you think that is?

It was a strategic decision that had a few different factors involved.

One was, we've gotten to the point after we entered Texas in a big way, where our big August sale, which we call Stinky Boot, was right on top of Back-To-School, which is a -- it's a decent business for us nationally, but it's a very big business for us in Texas.

So we decided to move Stinky Boot into July and shortened it and led the Back-To-School sale, which is a relatively modest promotional price division for us, stand-alone in August.

The second piece of it is, we have just seen a strengthening of the business and decided that there is really no reason to kind of discount sales that otherwise could be full price.

And we wanted to maximize the value of each sale and each customer that was coming in, and it was a little bit of a gamble, but it paid off.

Sales continued to be strong, actually accelerated a bit, and we saw a very nice pickup in merchandise margin improvement.

So it's -- I suppose it's a bit of a paradox in today's retail environment, but for us, it seemed to work to our favor.

And I think it really underscores the continued strength of the Boot Barn brand and how we can deliver full price selling, product at a good fair value price in-store and online, and we don't have to discount it to try to drive traffic.

So that's the current thinking.

As you well know, we are not a heavily promotional business anywhere, right?

85-plus percent of our business is full price.

This was just a bit of a gamble to see if we can make that even higher, and it paid off.

Great.

And can you talk about the comp drivers both in the second quarter and just how you're thinking about the third quarter just in terms of traffic versus ticket perspective?

Sure.

In the second quarter, I will answer that a few different ways.

In the second quarter, when you think about, the comp driver was arithmetically traffic, which we measure as average transactions per store, was essentially flat.

And our comp increase came from a higher basket, which was driven by higher AUR, which ties right back to the lower promotional stands.

If I think about the drivers more from a kind of merchandising standpoint, we continue to see nice performance in our work business, we continue to see -- and that's both work boots, which is a very large department for us as well as work clothing, which is a growing department and it's probably the highest growth department we have.

The buyer there has really done a fantastic job.

The other nice thing that we saw in the quarter was both men's and ladies denim were slightly positive, which was a change.

And one other thing that has impacted the business over the last few years, particularly on the ladies side, is the trend towards athletic leisure, Athleisure and with some, albeit modest growth in ladies denim, that was kind of a thing that kind of further helped enhance the comp.

And If I just look at one other direction, which I don't think was specific to your question, and I think of the comp drivers by panel within the company, the stores business in the second quarter was kind of in line with what it was in the first quarter, but has certainly accelerated into the current quarter.

E-com's drag, which is the paradox that -- the headwind of e-commerce is new to us and hopefully that will turn to be either in line or tailwind like it had been historically.

But that's improved from the first quarter into the second quarter, and we expect that -- again that e-commerce same-store sales in this current quarter will be positive.

And just as a reminder, that doesn't include Country Outfitter, right?

If -- with the inclusion of Country Outfitter, e-commerce sales in total for Q2 were high single-digit growth.

And it's a meaningful impact on the overall business.

We can't count Country Outfitters as part of our same-store sales, the way the definition works.

But if we were, our consolidated comp would have been about a plus 4%.

And in our view, a Country Outfitter sale is the exact same revenue and profitability as a bootbarn.com or sheplers.com sale.

So our business from an internal perspective is actually a bit stronger than even it might appear from external same-store sales perspective.

So I think that hopefully answered your question plus some more.

Very helpful.

Just one more.

The private label credit card, what percent of the business did that represent this quarter?

Yes, we just launched it during the quarter.

And if I looked at September's business, about 3% of our business was done on the credit card.

So it's early days still for us to measure, but we're pleased with the rollout so far.

We'll go next to Matthew Boss with JP Morgan.

This is Steven Zaccone on for Matt.

Just following up on the merchandise margin, we're curious, do you think the level of expansion you saw in the second quarter can continue through the balance of the year.

And then just thinking about the mix shift of the business, as e-commerce grows here in the second half, will that hurt you a little bit on the gross margin line?

Good question, Steven.

Thanks.

The merchandise margin expansion we saw in Q2, I would call more onetime in nature in the quarter because we did shorten the promotion that we had -- our deepest promotion that we run, we shortened the time frame in half and so that provided outside -- outsized growth in expanding margin.

What we've said is we expect to grow merchandise margin roughly 30 basis points on the year.

We -- when we started the year, we didn't anticipate reducing the Stinky Boot promotion.

So we'll probably be more than 30 basis points for the year.

But the main drivers are the exclusive brands and that increased penetration, and Jim talked about the fact that, that improved over 200 basis points in the quarter and then, obviously, the container purchases, where we get better pricing from our third-party branded vendors.

As it relates to e-commerce, to the extent we grow the e-commerce penetration and that's outsized in Q3, that will put some pressure on merchandise margin, specifically, because the merchandise margin in holiday is -- tends to run lower in e-commerce than it typically does.

And so there will be some pressure on that.

However, we think we've got initiatives to offset some of that pressure.

So I -- just to reiterate, I think, 30 or 40 basis points of expansion on merchandise margin is how we're thinking about the growth on an ongoing basis.

Okay, great.

That's helpful.

And then just one quick modeling question.

Did you quantify how much -- how many sales from Country Outfitters you saw in the second quarter?

And whether it was accretive at all to EPS?

Well, we didn't comment about that.

I could answer more broadly that we're pleased with the Country Outfitter addition to the overall business.

It's net new sales for the most part.

There might be some customers that are trading between the brands.

And it's leveraging the exact same assortment and performance center and team as the other brands.

So $1 through Country Outfitter is the equivalent of a comp $1 through Boot Barn or sheplers.com.

So that's kind of all we commented on it.

I think we're quite pleased with that acquisition.

That added a third brand online for us that was targeting a completely different customer.

Just as a reminder, the Boot Barn brand online is our omnichannel brand.

It's connected to the stores.

It's kind of a nice balanced brand between men's and ladies' work and western boots and apparel.

Sheplers is more of our mega brand.

It's got sort of the broadest assortment and the lowest prices in the industry, and that's how it sort of competes.

And Country Outfitters is a site that targets customers that are slightly outside the bull's eye of our core western customer and opens up our assortment in a much more curated way to customers that are not necessarily living the western lifestyle, but may view it more as a kind of fashion-type wardrobe or merchandise.

So it has a distinct purpose in the portfolio of our online brands, and we're quite pleased with the addition of it into the portfolio that we have.

Just one clarification.

I may have misspoke in my prepared remarks.

We expect full year income from operations for the year to be between $40.0 million and $42.5 million, which is $2.5 million higher than our previous guidance.

So I'm not sure if we got that before, but wanted to make sure that was clear.

(Operator Instructions) We'll go next to Tom Nikic with Wells Fargo.

I had a question about the acquisition of Wood’s Boots and sort of the overall M&A strategy.

I know you mentioned that you would sort of look at that as a way of assessing potential future tuck-in acquisitions?

I was just sort of wondering like what made that little chain appealing to you, why did it make sense to acquire them rather than just open a couple of stores from scratch in the region?

And I also know that -- I know it's not a perfect comparison, but when you bought Sheplers and converted some of the stores over, there was a little bit of disruption to those stores after the rebranding.

And do you expect like any sort of potential disruption as you make potentially other tuck-in acquisitions and convert them to the Boot Barn banner?

Sure.

No, I think it's a great question.

The way -- if you go back 5 years and look at the industry 5 years ago, you would have seen 5 chains of any significant size: Boot Barn, Baskins, RCC, Sheplers and Cavender's.

4 of those are combined now in Boot Barn.

And frankly, I would do every one of those acquisitions again.

We saw immediate and significant increases in sales and profitability after we acquired Baskins.

We had a great performance at RCC.

Sheplers, as a reminder, moved us strategically into Texas, which 1 year ago was done and today looks genius.

But really Sheplers was an acquisition that helped us tremendously step forward from an e-commerce perspective.

So now when we look at the landscape, we have a very formidable and, frankly, a terrific competitor still based in Texas called Cavender's.

Beyond that, most of the people that remain in the industry have one -- most actually have one store, and some small handful have 2, 3 or 4 stores.

So those acquisitions we're looking at really as real estate acquisitions.

And it's a simple equation of where we think the payback will be better for the associated risk of a new store versus an existing store.

For Woods, we obviously knew the purchase price, we knew the EBIT levels.

We were estimating what we thought would happen with sales based on what we could do with it, and they were a fantastic operator in their own right.

And it was a very attractive payback, with a very low risk of sales erosion.

Notably, and notably different in the Sheplers business, they were not a highly, highly promotional business that we had to pull that promotional posture away and hurt traffic.

And since we bought Woods, that business has experienced very, very healthy comps.

So when we look at the next market, and as we build out -- continue to build out the country, we will look at whether we want to open new stores, acquire 1, 2, or 3 stores in a particular market or more than likely a combination of both based on who's available, where they are located, what their strategic positioning is and what the availability of real estate is.

But the benchmark now is, how does it measure up to building a new store.

And with Woods, it was more attractive for us to just acquire the business and just to be super-clear, we acquired the assets of the business rather than build new stores.

Does that answer your question?

Ladies and gentlemen, that does conclude our question-and-answer session.

I'd now like to turn the call back over to Jim Conroy for any additional or closing remarks.

Just wanted to thank everyone for joining the call today.

Look forward to speaking with you all on our third quarter earnings call after the New Year.

Take care.

Ladies and gentlemen, once again, that does conclude today's call.

We do appreciate everyone's participation.