Boot Barn Holdings Inc (BOOT) 2019 Q1 法說會逐字稿

Good day, everyone, and welcome to the Boot Barn Holdings, Inc.

First Quarter Fiscal Year 2019 Earnings Call.

As a reminder, this call 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, please go ahead.

Thank you.

Good afternoon, everyone.

Thank you for joining us today to discuss Boot Barn's First 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 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 to be made during this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter fiscal 2019 earnings release as well as our filings with the SEC referenced in that disclaimer.

We do not undertake any obligations 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 and an update of our key strategic initiatives.

Greg will then review our financial performance in more detail.

Following Greg, we will open up the call up to your questions.

We're very pleased with our start to fiscal 2019, as first quarter results were up significantly on a year-over-year basis and exceeded our expectations.

Our recent performance reflects the successful execution of the strategies we have put in place over the past several quarters and a more favorable macro environment.

Consistent with the fourth quarter of fiscal 2018, same-store sales in our retail stores grew almost 10% and our e-commerce sales grew double digits, contributing to a same-store sales increase of 11.6% on a consolidated basis.

Strong sales, combined with a 140-basis point improvement in merchandise margin and $0.09 of tax benefit from stock option exercises, drove earnings per share of $0.24 in the quarter.

During the quarter, we continued to make further progress across each of our 4 growth initiatives, which I would like to highlight for you now.

Let's begin with driving same-store sales growth.

The first quarter marked the fifth consecutive quarter of positive same-store sales in our retail stores.

The stores business continued the strength that we saw in the fourth quarter, with broad-based growth across the country and outsized sales growth at our stores in Texas.

Once again, every major product category posted positive results for the quarter, with particular strength in work boots and work apparel, followed by men's and ladies' Western apparel and modest growth in Western boots.

From a marketing perspective, the upgrade of our creative aesthetic, coupled with changes in our media mix, is producing great results.

We continue to develop a curated product assortment and tailored marketing message to target each of the customer segments of Core Western, Work and Wonderwest, which is our fashion customer.

Driven by our CRM analytics, this segmentation allows us to be more efficient in our marketing spend by more effectively connecting our brand's message with each of our customers.

We've extended this segmentation across all marketing media, both traditional and digital.

We've also been evolving our merchandising to align with this new strategy.

Our merchants are now developing assortments consistent with this segmentation strategy and bringing that to life in our stores.

For example, while we historically would merchandise the apparel in our stores primarily by brand, you will now see many in-store displays that integrate merchandise for multiple brands, which are intended to target either our core western customer or a more fashion-oriented customer.

Additionally, over the next few weeks, we will be launching Wonderwest online to enable our fashion-oriented customer to shop a more additive assortment of merchandise as well.

From a store operations perspective, we continue to see the benefits of our store associate training platform.

Our field leadership team is using this platform to deploy training to our store associates in order to improve customer service and drive key performance metrics.

We are also in the process of improving the consistency of our branding by streamlining our in-store signage and upgrading our visual merchandising.

Moving to our second initiative, strengthening our omnichannel leadership.

Sales in our e-commerce business increased double digits in the quarter.

In addition to this positive sales trend, one of our objectives this year is to improve the financial contribution of our e-commerce sites by increasing the penetration of private brands online, improving marketing return on investment, eliminating unprofitable and low-margin items, reducing dropship fees from our vendors and driving efficiencies by reducing unnecessary or duplicative overhead costs.

We made good progress on this during the quarter and expect it to help drive a healthier e-commerce business going forward.

Organizationally, we've now centralized our e-commerce team into a store support center in Irvine, California, which we expect will allow us to work more effectively and efficiently.

As a reminder, all of our e-commerce sites now have access to a common inventory that is managed by one integrated team.

During the past several months, we have made progress in improving our e-commerce fulfillment operations by installing a new warehouse management system, material handling conveyors and product carousels.

We expect to finalize these improvements in the coming weeks, which should enable us to be fully prepared for the upcoming holiday sales surge.

Now to our third strategic initiative, increasing the penetration of our private brand portfolio.

We remain focused on continuing to improve our private brand offering by developing high-quality product to complement the great assortment offered by our third-party branded vendors.

For the first quarter, our private brand penetration increased by more than 250 basis points year-over-year and represented 15% of our total sales.

Cody James and Shyanne remained strong, with our customers responding very positively to our recent deliveries in both boots and apparel.

Cody James continues to hold its place as our #3 highest-volume brand, and Shyanne has now moved up to #4 in the company.

In early September, we will launch Idyllwind, fueled by Miranda Lambert, a new line that has been developed in conjunction with the country music artist.

Miranda and her team have been tremendous partners over the past several months and have worked design and develop an outstanding product line of boots, apparel and accessories.

We view Miranda as the #1 female country music star in the world and feel that her brand, coupled with her personal authenticity, is a natural fit with Boot Barn and our customer base.

We will be supporting Idyllwind with a comprehensive launch plan that includes a broad-reaching marketing campaign, new in-store fixtures and signage and the -- an employee ambassador program.

Our marketing plan is intended to attract new customers to the Boot Barn experience while also offering something new and exciting to our current customer base.

We're also very excited about our newest exclusive work brand that we'll introduce this fall.

Subsequent to the fall launch, we will roll out additional styles throughout the balance of the fiscal year as part of the growing assortment of premium work boots, apparel and accessories.

Finally, our fourth initiative, expanding our store base.

We continue to see attractive returns on new store openings and remain confident in our ability to double our store count over the next several years.

As we've talked about on prior calls, we are augmenting our new store opening process by adding tuck-in acquisitions that we execute opportunistically.

We have now completed the acquisition of Wood's Boots, Lone Star and, more recently, Drysdales.

The payback on these stores is tracking in line or better than our expectations.

While still early, these tuck-ins have helped us develop a successful blueprint for future acquisitions.

We have learned that a combination of new-store openings and the acquisition of stores from local operators can drive meaningful sales growth and allow us to quickly get a foothold in new markets.

We plan on utilizing this approach as we look to grow new units by 10% annually.

We continue to believe that new-store development and acquisition of existing stores present great opportunities for us to grow both sales and profitability.

Turning our attention to current business.

Through the first 5 weeks of our second fiscal quarter, our consolidated same-store sales are tracking slightly above 10%, with sales in our retail stores and online both performing well.

We feel good about the underlying strength of the business and are well positioned to achieve our top and bottom line targets.

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

Thank you, Jim.

Good afternoon, everyone.

In the first quarter, net sales increased 16% to $162 million.

As Jim mentioned, sales growth was driven by an 11.6% increase in same-store sales and the sales contributions from the addition of 14 stores over the past 12 months.

During the first quarter, we added 6 stores, including 3 acquired Lone Star stores in Texas, bringing our store count at the end of the quarter to 230 stores in 31 states.

Gross profit increased 24.3% to $51.4 million or 31.8% of net sales compared to gross profit of $41.4 million or 29.7% of net sales in the prior year period.

The 200-basis-point increase in gross profit resulted from a 140-basis-point increase in merchandise margin and 70 basis points of leverage in buying and occupancy costs.

Operating expense for the quarter was $41.6 million or 25.7% of net sales compared to $36.5 million or 26.2% of net sales in the prior year period.

Our income from operations was $9.8 million or 6.1% of net sales in the quarter compared to $4.9 million or 3.5% in the prior year period.

Net income for the quarter was $6.8 million or $0.24 per diluted share, which includes $0.09 per share of tax benefit related to stock option exercises.

This compares to net income of $800,000 or $0.03 per diluted share in the prior year period and compared to our guidance of $0.10 to $0.12.

Turning to the balance sheet.

Our inventory decreased approximately 2% on an average comp store basis compared to last year.

On a consolidated basis, inventory rose 6% to $204 million compared to a year ago.

The increase was primarily driven by an increase in our warehouse inventory used to support our merchandise purchased at a volume discount, our exclusive brand initiatives as well as inventory for stores added over the last 12 months.

As of June 30, 2018, we had a total of $204 million of debt outstanding, including $31 million drawn on our $135 million revolving credit facility.

We have $7 million of cash and our net debt leverage ratio is 2.8x.

Now I would like to turn to our outlook for fiscal 2019.

We continue to expect same-store sales to grow mid-single digits and have raised our EPS outlook from a range of $0.92 to $1.02 per share to a range of $1.04 to $1.14 per share based on an estimated weighted average diluted share count of 28.8 million shares for the full fiscal year.

This represents income from operations of $54.0 million to $57.9 million.

We now expect net income for fiscal 2019 to be between $29.9 million and $32.8 million.

As we look to the second quarter of fiscal 2019, we expect same-store sales to increase high single digits.

We estimate second quarter net income per diluted share to be in the range of $0.07 to $0.09 per share as compared to $0.04 last year.

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

Thanks, Greg.

We're very pleased with our first quarter results and the positive momentum that has continued into our current quarter.

We continue to be confident in our ability to execute on our 4 strategic initiatives to drive growth in the current fiscal year and over the long term.

Before we wrap up, I would like to extend my personal gratitude to the thousands of associates in the stores, distribution centers, call center and Irvine office for their hard work and continued dedication to the company.

Our recent performance is certainly a result of your efforts.

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

Christie?

(Operator Instructions) First, we'll go to Matthew Boss from JPMorgan.

So on -- I guess, first question.

On the gross margin front, can you just break down the 140 basis points of merchandise margin expansion maybe between full-price selling and private brand expansion, and just the best way to extrapolate the first quarter margin drivers through the remainder of the year?

Matt, it's Greg.

The, call it, roughly 100 basis points of the 140 is from more full-price selling and roughly 40 basis points was private brand.

We talked about this on our Q4 call, that we were looking at our promotions and making sure that those promotions were delivering the sales lift that we wanted, and if they weren't, we will be a little less deep in promoting.

And we saw 100 basis points of expansion last year in Q4, and, again, we've been doing some work throughout last year.

We started that initiative in Q2 of last year.

So that 100 basis points of good news, if you will, becomes much tougher to lap this year.

For example, last year, in Q2, our margin was higher by 140 basis points compared to fiscal '17 Q2.

So that's going to be difficult.

So we continue to think that margin can expand roughly 40 basis points on the year, and that'll be driven by the work we're doing with increased penetration in private brands as well as the work we're doing in e-com, where we're raising prices a bit to make more money.

We also have some pressure from things like freight.

We purchased 2 new companies this year, Drysdales and Lone Star.

Those 2 store chains -- or, those chains have lower historic margins to Boot Barn, and so it will take us a bit of time to get our private brands in there and get the prices up.

So there're some headwinds there but we continue to see margin expansion for the year.

Great.

And then just a follow-up.

I guess, can you speak to trends that you're seeing in oil and gas regions maybe versus some of your more mature markets?

And, Jim, larger picture, do you still see 10% as a fair multiyear operating margin target for the business over time?

Sure.

I'll take the first piece and Greg can circle back to the margin rate.

The business has been strong now for 2 consecutive quarters across the country.

Every region, virtually every district had posted positive same-store sales.

The Texas business has been a bit better than the remainder of the business, and I would ascribe some of that to a healthier oil and gas environment.

And in terms of product categories, if you want to triangulate that growth, we have seen a nice pickup in work boots, specifically work boots used in the oilfield, as well as FR apparel, which is also often used in the oilfield as well.

So I think that's been a nice tailwind for us.

But even if we were strip that out, the rest of the business has performed very nicely for 2 consecutive quarters.

In terms of the EBIT margin rate, Greg could take that.

So, Matt, last year, we grew our operating margin 60 basis points to 6.8% of sales.

And if you look at our guidance range, I think, you can back into a number that would get you to roughly in the mid-7s, so call it another 70 basis points.

And there's nothing structurally that prevents us from continuing to expand that operating margin rate toward 10% or get to 10%.

And we'll go next to Jonathan Komp from Baird.

First question I want to ask, just digging in on the same-store sales trends a little bit more, given the strength so far in the quarter, Q2-to-date.

How are you thinking about projecting the business?

I know you mentioned still running up north of 10%.

You're guiding to high single digits for the quarter and only mid-single digits for the year.

So any updated thoughts on the thinking behind that?

Sure.

Yes, we feel really great about 2 consecutive quarters plus the month of July being really solid, both online and in the stores.

And our same-store sales trend just continues to be very, very strong with -- in many cases, fewer promotions and improvement in merchandise margin rate that Greg had alluded to earlier.

As we look forward, we do want to be a bit prudent with how we project the business from a sales perspective.

I think everybody recognizes that as we get into Q3 and Q4, the year-over-year comparison gets more difficult in Q3 and much more difficult in Q4.

We are continuing to pull promotions off the calendar, so even if our sales trend softens a little bit, in many cases, it's a more profitable business that we're getting.

[We've done] that in our e-commerce business.

We're seeing really nice pick-up in the profitability of that piece of our business as we raised some prices and eliminated some promotions.

So I think it's -- if I were to summarize it, we're being a little bit conservative and prudent with our same-store sales guidance, acknowledging that we have a steeper incline as we go through the third quarter and the fourth quarter.

If you took a more bullish view, we did get hurt in the second quarter last year a little bit by the hurricanes in Houston, so we'll be cycling that.

We also had some difficult business as we got into Christmastime in e-commerce, so we'll be cycling that.

And we're very excited about the launch of Idyllwind and the upcoming private brand for Work, as all of those things, I think, are additional kind of ammunition for us to drive more same-store sales, right?

As we look at the business going forward, we just want to kind of put out a number that we feel good about, and we know we're lapping more difficult comps for the back half of the year.

Got it.

Understood.

And then maybe as a follow-up.

When I look at the updated operating profit targets for the year, it looks like you essentially kind of roughly flowed through the Q1 upside and maybe didn't change the remainder of the year in terms of the outlook.

I just want to clarify if we're thinking about that correctly and if there's any moving parts to call out from a profitability standpoint.

John, it's Greg.

And you're absolutely right.

We rolled through the Q1 beat.

We thought Q2, when we developed our original guidance, would be high single digits, and that's why we got it planned.

And so nothing has really changed from when we did guidance other than the beat in Q1 at this point.

Great, okay.

And maybe last one for me, just sticking on the full year outlook.

If you were to show upside for the year versus your comps guidance, it'd be any kind of guard rails in terms of how you'd think about the incremental flow-through on any sales upside as you look to the balance of the year?

We tend to look at a flow-through of roughly 30% on incremental sales, given the margin structure and the expense structure.

And so that's how we target flow-through.

Does that help?

Great, that's helpful.

All right.

And next, we'll go to Peter Keith from Piper Jaffray.

Greg, I had a cash flow question for you.

You guys really had spectacular cash flow in Q1.

It was a $20 million year-on-year increase.

I was wondering if there's anything in there we could think about rolling forward or if it was just purely a function of timing.

We did get pretty good leverage on our inventory growth, meaning we had pretty good leverage with payables.

We did benefit from stock option exercises in Q1 to the tune of about $5 million.

But aside from that, I think it's normal operating performance.

And on that inventory leverage, is there anything we should think about that continuing going forward?

Or could it be hindered a little bit as you're trying to drive more of the direct business through your own fulfillment center?

Yes, I'd say that we'll continue to get leverage on our inventory purchases.

We probably had a little bit of upsized leverage this quarter, just given robust sales, right?

So I think you can model some of this in, but not all of it.

And, Peter, to your second point about inventorying more goods in a fulfillment center to eliminate drop shipping from the vendors, that is certainly an objective for this year.

Having said that, in the grand scheme of our overall inventory levels, that incremental piece is virtually immaterial.

It's a very small number on our entire inventory balance.

Okay, very helpful.

And then -- and lastly, and maybe more strategically for Jim, with the customer segmentation analysis that you're running now with the core Western, the work, and then the Wonderwest, is there a feeling now that maybe one of those, you're seeing a little bit better leverage?

Or one of those is getting a little bit faster traction than the others?

I'm curious of where you're maybe seeing some upside surprise.

Yes.

I think there is.

So if we -- if you'd looked at the business historically, we'd always thought about Western and Work being different.

And we started to see across the merchandising hierarchy and our CRM analytics.

We started to see this more fashionable, slightly younger, more female-oriented customer emerge.

So we've split off Wonderwest.

And if we were to look at those 3 businesses today, the Work business is a pretty large business and growing extremely nicely, which we call that now a couple of consecutive quarters, I think the Core Western business has decent growth, but the Wonderwest business has really been a nice upside surprise.

If you went back through our calls, you'd see that ladies' Western apparel had been a drag in past quarters, had a bit of margin impact in past quarters.

And if I look at that business now, our ladies' Western apparel business is comping extremely strongly, much higher than company average.

The margin rate has greatly improved.

And all of that is thanks to the segmentation of Wonderwest.

We have a great buyer -- a couple of different buyers in that particular part of the business that have put some fantastic assortments together.

Our marketing in that area, I feel really strong about.

And I think the analytics with our database has been able to really go after that customer with a very specific and curated assortment, a tailored marketing message.

We're much more active on social than we'd ever been with that particular customer group.

So I think that has been a really nice upside surprise.

And we're excited to see the launch of Wonderwest online over the next couple of weeks, both at its own separate URL as well as part of the bootbarn.com business.

So that's been a really nice emerging piece to our business, and we're excited to see how much that could grow going forward.

And next, we'll go to Janine Stichter from Jefferies.

You mentioned tuck-in acquisitions being a part of the square-footage growth strategy going forward.

Is there any percentage you can give us on just the potential number of units you could potentially grow by consolidating the local players, how we should think about the mix of these stores versus acquired stores?

And then, along the same lines, anything you've learned from some of the more sizable acquisitions you've done, just in terms of getting these stores ramping more quickly and getting margins more aligned with the company average?

Sure.

On the first piece, we really don't have a specific plan of organic versus tuck-in.

If I were to guess, and we've said that we're going to grow 10% new units, I would expect that 2/3 or more of those will be new stores, and the balance will be tuck-in acquisitions.

So far this year, the balance is skewed the other way or more evenly.

We're really looking at our real estate road map and saying, if we want to go to a particular market, what's the best entry vehicle?

And if that is to open up 3 or 4 stores in that market or to open up 2 or 3 and acquire 1 or 2, so it's a market-by-market decision.

But again, if I were to estimate, my guess would be 2/3 or a little bit more would be new stores and the balance would be tuck-ins.

In terms of what we learned from the larger acquisitions, it's a very good question.

The integration of these stores is a bit easier because we're looking at them essentially as new real estate, not brand-new companies that have to be integrated.

So virtually, on the first day, we manage them as a Boot Barn, we take over the business from a buying and marketing standpoint, right out of the gate.

Having said that, there still is a technical integration that has to happen becoming our POS and have to get their sales performance information, et cetera, and having acquired RCC and Baskins and Sheplers and, frankly, even acquisitions prior to those, has made the company pretty agile in terms of being able to integrate these businesses from a technical and operational perspective very quickly.

So we feel great about the tuck-ins.

We have a sort of guaranteed sales performance when we look at a new store that already has some history in it.

We have customers already in their database that we could market to and enables us to accelerate in a particular market, typically with a store that has a higher average unit volume than a brand-new store would, if we were to put it organically.

So we feel great about it.

And we'll go next to Oliver Chen from Cowen and Company.

This is Max on for Oliver.

We were just wondering, as you build out your private label brands and penetration continues to grow, can you provide some guardrails around minimizing markdown risk?

And then separately, as you continue to enhance and build out your websites, can you update us on your strategies towards the Amazon channel?

Sure.

On the first piece, I think when we think about private brands or even Wonderwest, we -- the overarching view of our merchandise in this category relative to virtually all of the other retailers out there is pretty basic, more replenishment-type goods.

And yes, while we're pushing a little bit more to private brands and a little bit more into this Wonderwest more fashionable customer, as you look at the overarching fashion curve within retail, we're still on the -- on a pretty safe side.

From a private brand perspective, specifically to your question, we tend to keep those brands pretty basic.

They are almost all replenishment-type items.

They are extremely high quality.

Some of the best products that we carry in the stores are in our own brand.

We tend not to take major risks from a design standpoint.

On the second piece relative to Amazon, our online strategy continues to evolve.

We still think that we are the biggest player in our category online, including Amazon.

And while we respect what they do quite a bit, we feel very good about the underlying brand strength of Boot Barn from an omnichannel standpoint.

And with Sheplers, with decades of history as a direct-to-consumer brand, and with the more fashionable Country Outfitter site, each of those brands has a home online that can compete right alongside Amazon.

From an internal perspective, we've actually been looking at that business -- it's always an important piece of our online sales, but we're really focusing now on the profitability of that piece of the business.

And we've taken some things out off of Amazon Marketplace, we've raised the prices on some other things at Amazon Marketplace, and while that's actually hurt our top line, but we're making more money on that piece of the business, and we feel great about that in terms of our ability to drive EPS and still get some sales growth.

And next, we'll go to Paul Lejuez with Citigroup.

Just curious, if you look at the stores in the energy-impacted markets' performance over the last several years, can you talk about what percent of those stores have gained back all of the volume that was lost during the weaker period versus how many have not yet gotten back to their previous peaks?

It's a good question.

I think Texas has -- which is the biggest state of all of them by a lot, and it's roughly 25% of our stores business, has gotten most of it back.

I think we have some -- few more quarters, at least this quarter, to go up against some relatively soft numbers last year and the prior year.

The other state, I think, were -- North Dakota was really strong for a couple of quarters when the Bakken formation was taking off.

It probably hasn't fully recovered, but it's still -- we're seeing some kind of growth now, and probably have some room to continue to close the gap from where we are today to where its high watermark was.

The other thing that you'd have to throw into the mix there is the kind of constant movement of where we're drilling for oil around the country.

So it's -- the question is easier to respond to conceptually than on a store-by-store basis, because some of these -- the drilling activity has migrated, particularly in North Dakota.

So we might put a new store in a place where the oil activity is now more vibrant and the former store may never, ever get back to its high watermark again.

But that's okay.

It's still a very profitable store for us.

So perhaps a long-winded answer to your question, but that's kind of the way thinking about it.

Got you.

And then curious, you mentioned sales to date.

Curious if you can make any comments about the margin performance that you're seeing.

And also curious about your credit card penetration this quarter versus previous quarters.

Paul, it's Greg.

We're not going to talk about merchandise margin in July, for example.

We're 5 weeks into the quarter, so it'd be premature to comment on that.

I'm sorry, the other I forgot.

(inaudible) Credit card is a small piece of our business, continues to be a small piece.

It's important from a loyalty tie-in perspective, and we have offerings for those customers.

Gives them a little bit of open-to-buy that they might not otherwise have, but it's pretty small.

The one thing I'd add, Greg -- the one thing I'd just add to that is, from a promotional calendar standpoint, we really don't have any major changes year-over-year versus last year.

If anything, we've maybe eliminated a couple of days of promotions versus the prior year.

So it's probably premature to comment specifically about merchandise margin rate in the quarter.

But by and large, our marketing calendar looks very similar to what it looked like last year.

And next, we'll go to Tom Nikic from Wells Fargo.

I wanted to ask about the e-com business.

I know you said that it was up double digits.

I was wondering if you could give any sort of additional quantification beyond that, or what the e-com penetration was in the quarter.

And I was also wondering if there were any meaningful differences in performance between bootbarn.com or Sheplers or even Country Outfitters.

So as a percent of business, on an annual basis, our e-commerce business is 16%, 17% of our sales.

This particular quarter was roughly in line with that.

In terms of the relative performance, it's crazy to try to look at the 3 brands separately anymore, because we're seeing lots of different movement of customers between brands.

So the Boot Barn brand is doing extremely well, Sheplers is doing less well, Country Outfitters is still kind of a nice small -- much smaller business for us.

But we have to look at those 3 brands on a consolidated basis because we have seen customers mostly migrating from Sheplers to Boot Barn, which we do prefer.

We have a slightly higher margin rate on bootbarn.com, and we feel -- maybe more importantly, we feel better about the long-term value of a Boot Barn customer, given the fact that we have 230-plus stores around the country and that's the brand that we're really investing more kind of time and effort and marketing behind.

So the e-com business, if you think about -- we posted an 11.6%.

We said our stores were almost 10%.

You know roughly the penetration of our e-commerce business.

So you can get to the fact that we were roughly a plus 20%, a little bit better than that from an e-commerce perspective.

That's helpful.

And then, just a quick follow-up.

We know you're sort of talking about the different categories.

I know you said only modest growth in Western Boots.

I don't want to be too nitpicky here, but I was just wondering why maybe that category wasn't quite as robust as some of your other categories.

No, it's a great question.

One of the factors is we've been buying into businesses, particularly on the ladies' boot side, where the trend there or the piece of that ladies' boot business that's not basic brown, equine-oriented boots, the more fashion-oriented piece of it, has migrated to short-shafted boots, or booties.

And we have a fantastic assortment of that product in the store.

It's where some of our customers have migrated, but it happens to be a lower AUR.

So part of that is just a degradation of selling price.

Still selling at full price most of the time, but it's a lower retail product.

Candidly, as I think about that ladies' boot business and that portion of it that tends to have a little bit of a cycle, that is probably an opportunity for us going forward to get additional sales growth, because that business has been softer than the rest of the store for a few quarters now.

And I don't expect that, that will continue forever.

So as I look forward, paradoxically, I view that as an opportunity for us to get additional sales growth in future quarters.

And if you look at kind of what's happening in broader retail, I think the boots trend and the sort of influence of Western-oriented fashion, you can see it out there in a lot of more mainstream brands.

And I think that just bodes well for Boot Barn.

And next we'll go to Mitch Kummetz from Pivotal Research.

Yes, Jim, in your prepared remarks, you talked about a more favorable macro.

I don't know; was that comment specific to oil and gas?

Or are there other macro drivers that you'd like to call out, maybe trends in whether construction, manufacturing, agriculture?

I don't know; you tell me.

Well, I think oil and gas is, for us, probably the biggest one.

But I just think, more broadly, the level of employment across the country is, of course, one that's been growing and has kept -- our traditional blue-collar worker is employed now.

And that's been a big part of, I think, some of the growth that we've seen in our work apparel business.

And then, on the private label, you said 15% penetration in the quarter.

You mentioned that one of your initiatives is to drive better penetration on the e-com piece.

Is there any way you could break out like the private label penetration, e-com versus stores?

I would guess, even though your e-com, you're not breaking it out across the different concepts there, but I would guess that Sheplers traditionally was lower private label.

How difficult is it to kind of grow that at Sheplers?

Sure.

So all of the e-commerce businesses are lower from a private-brand penetration perspective.

And part of the reason for that, honestly, is the denominators here.

We have a much broader assortment online because we can consolidate the inventory in one location, and we also vendor dropship a lot of product.

So we've been growing that business and probably at the same 150 to 250 basis points a year from a penetration standpoint from an -- online.

I don't think it will ever really get to the same level as the stores just by virtue of the fact that the assortment is so much broader online.

And having said that, we've been giving the private brands their own landing pages and trying to merchandise them on our respective e-commerce site as if they were in the store and they had their own section as well.

So I think that team has done a really nice job of getting some increase there.

But we also want to make sure that we have a broad assortment, that we are representing all of our vendor partners online, and that our customers can come to us as a house of brands, and the online channel is the broadest piece of that.

Got it.

And then lastly, Greg, in the guidance, it's probably based on 23 new stores.

Is there any way to give kind of a net store number for the year?

I know you'd closed a couple in the quarter.

And any help on the cadence of the store additions?

Mitch, the -- I guess, I would say we've kind of guided the new-store adds as being relatively equal throughout the year.

This quarter, in Q2, we're going to add a few less.

They slipped into Q3, but pretty balanced in terms of additions.

And on the closings?

Yes.

So -- I mean, we have stores come up for renewal every year, and we look at the profitability of those stores and opportunities to move them.

The stores that we've closed, one was in the Midland-Odessa market.

It was a mile from the former Sheplers.

It was a Sheplers store.

And it was a planned closure.

We had planned to close it after year-end.

And then, the other one was a natural lease expiration in North Dakota.

So we look at those as leases come due.

So I would expect us to be roughly plus-20 new stores, but it depends on our ability to renegotiate leases, et cetera.

And next, we'll go to John Lawrence from Coker & Palmer.

Would you discuss a little bit -- as far as the analytics and the CRM, Jim, would you just talk a little bit -- take a little deeper dive there as far as strategically, I know that's only in that game, can you talk a little bit about the leverage and the productivity curve as that continues and you learn more about, I guess, the e-commerce shopper?

Just give us a sense of where you expect that to be, say, in another year or 2?

Sure.

Happy to do that.

Just to be clear, the CRM is really for the entire customer database, with e-com being a portion of it.

As we've started to get better in terms of tailoring our message, sending direct-mail pieces that are specific to particular customer groups, segmenting our e-mail list, so if you're a work-only customer, you're not getting ladies' fashion e-mails sent to you, and we put all of that together, and we represent that online, we present that in e-mail, we represent that in our catalogs, in direct mail, and our assortments are built that way.

We've seen sort of every -- virtually every performance metric improve.

So we've seen better open rates, we've seen less abandoned rates.

More people are getting our e-mails and engaging with them.

We've seen really nice engagement on our social media platforms because each of those segments of customers now has their own following.

So I think, when you put all that together, we've been able to be more efficient with our marketing spend.

We have a slightly different media mix for each different consumer segment.

So while Wonderwest is more visual and probably more fashionable, it has a heavier penetration with television.

Our work customer, which has a much easier product line to understand, and we just want to be top of mind in that customer's mind, has a heavier penetration of radio advertising.

So it's a very kind of deliberate and thought-out strategy that started with looking at our several million customers and identifying which group or groups they belong to, and then kind of mounting our sales offense, both marketing and merchandising in stores, to go after each of those.

And we feel great about how we've been able to evolve the business.

But to your point, I think we're still learning in that area.

I think it's still early, and I think there's still some opportunity for us to improve and get better and hopefully continue to drive more sales.

Great.

A follow-up: When you talk about the second half of the year and the holiday quarter, the disruptions of e-com, can you -- is there any way, Greg, you could quantify top line and bottom line impact of what we're saying the hurdle was last year as far as that impact?

Well, last year, in our Christmas quarter, while total e-commerce sales grew a little bit, we actually had negative same-store sales, which were called out on that call.

We also had nearly $1 million of additional expense, Greg, is that, right, between call center labor, additional DC labor and trying to take care of orders.

And because we were having some difficulty on the operational side of that business and picking orders was taking longer, we were then spending more money on freight.

So between call centers and DC labor and additional freight, I think we had called out on the February call, looking back at the third quarter, about $1 million of additional expense.

So from a top line perspective, we'll be cycling what amounts to a negative same-store sales in our Christmas quarter.

From an extent standpoint, we're cycling about $1 million of unplanned expense in that quarter.

So far if I were to keep my bullish hat on, both of those are easier comparisons as we look forward.

Great.

That's very helpful.

And lastly, does the difference in the dime in the guidance, top end and low end and high end, I assume, is that primarily all sales related?

Or is there some margin assumption in their as well?

That's all within the range of sales.

Well, thank you, everyone, for joining the call today, and we look forward to speaking with you on our second quarter earnings call.

Take care.

That concludes our call for today.

Thank you for your participation.

You may now disconnect.