Boot Barn Holdings Inc (BOOT) 2022 Q1 法說會逐字稿

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

First Quarter 2022 Earnings Call.

As a reminder, this call is being recorded.

I would now like to turn the conference over to your host, Mr. Jim Watkins, Senior Vice President of Finance and Investor Relations.

Mr. Watkins, please go ahead.

Thank you.

Good afternoon, everyone.

Thank you for joining us today to discuss Boot Barn's first quarter fiscal 2022 earnings results.

With me on today's call are Jim Conroy, President and Chief Executive Officer; and Greg Hackman, Chief Operating Officer and 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 2022 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.

Thank you, everyone, for joining us.

On today's call, I'll review our first quarter of fiscal 2022 results, highlight each of our key strategic initiatives and provide an update on current business.

Following my remarks, Greg will review our financial performance in more detail, and then we will open the call up for questions.

Given the impact COVID had on our performance in early fiscal 2021, we believe that a comparison of our first quarter results to the same period 2 years ago provides the most helpful view into the underlying strength of the business.

During the first quarter, our business performed very well across the board.

We generated strong total sales growth on a 2-year basis of 65%, with retail stores up 66% and e-commerce up 56%.

While we believe there are macro tailwinds at play, the superb execution by the entire team in securing merchandise, expanding our customer base and staffing the stores to meet the additional demand has resulted in another exceptional quarter.

Compared with 2 years ago, merchandise margin increased 220 basis points fueled primarily by better full-price selling, growth in exclusive brand penetration and a less promotional stance online.

I am very pleased with the continued momentum in our business.

The overall strength in our top line and margin rate drove record earnings of $1.35 per diluted share compared to $0.33 in the same period 2 years ago.

When adjusting for the tax benefit in both years, we grew earnings per diluted share approximately 300% to $1.26 compared to $0.32 in the same period 2 years ago.

Before I provide an update on each of our 4 strategic initiatives, I would like to take a minute and reflect back on the broader strategy for Boot Barn over the past few years.

With so much recent focus on the impact of COVID, we felt it was time to remind everyone of the broader growth strategy for Boot Barn and our positioning.

Historically, Boot Barn had focused heavily on the Western customer and led with our signature category of boots.

We were then and continue to be the leading player, serving this quite sizable market.

Approximately 4 years ago, we embarked on a three-pronged strategy to expand our addressable market, which included the following components.

First, we sought to expand the brand's reach.

We focused intently on growing the work segment as well as adding new segments, including the more fashion-forward Wonderwest category and, more recently, Just Country, which encapsulates a much larger share of the U.S. population.

This expansion strategy has introduced new customers for market segments that are not too far removed from Boot Barn's core Western customer.

We also shifted our media mix to marketing channels intended to broadcast to a larger population, such as television, radio and digital, to drive awareness of Boot Barn.

We believe this work contributed to expanding the customer reach of Boot Barn as evidenced by our continuous growth in customers on a comp store basis over this period of time.

The second piece of the strategy was to contemporize the Boot Barn brand.

We made transformative changes to the creative aesthetic of our brand and our marketing communications.

We shifted the focus away from product and price promotion and focused exclusively on building the strength of the Boot Barn brand so it would resonate with both its legacy Western customers as well as the broader cross-section of the population that we were seeking to add that may have some affinity for our merchandise but don't identify as purely a Western lifestyle customer.

We broadened our merchandise assortment, remodeled many stores and upgraded in-store merchandising significantly.

Today, we have successfully transformed from what many thought was simply a footwear retailer to a true lifestyle brand.

Upgrading and modernizing the brand has played a critical role in enabling us to become more relevant to more customers that are immediately adjacent to our original core customer that may have been unlikely to shop in a pure Western retail store.

As for the final piece of the strategy, in order to ensure that we would be relevant to all of our customers, both existing and new, we created an extremely well-defined customer segmentation strategy.

We speak to our more than 4 million active customers with e-mail, direct mail and digital communications that are tailored to them based on their demographics and purchase history.

This enables us to speak to each customer group in their language and with relevant merchandise offerings.

This was a critical piece of the puzzle as we needed to ensure we were not at risk of alienating our core Western customer in our desire to expand the addressable market.

Fortunately, we have successfully achieved both objectives, adding new customers while remaining highly relevant to our original Western customer.

As we analyze and evaluate our recent business, we recognize there are some external macro factors providing a tailwind to growth.

That said, we believe that the successful execution of this three-pronged growth strategy has enabled us to generate outsized growth in same-store sales and to enter markets with new stores that are not traditionally Western.

Further, as concerts, rodeos and events begin to take hold, we are confident that our strategy will position us well to capture more share from an even larger and broader addressable market.

With this recap of our growth strategy serving as context, I will now provide an update on each of our 4 strategic initiatives, beginning with driving same-store sales growth.

During the first quarter, we saw very healthy sales growth across our stores' business.

As discussed on our last earnings call, total sales in our retail stores during April and the first half of May were very strong, growing 65% when compared to the same period 2 years ago.

Total sales in our stores maintained this strong growth throughout the remainder of the quarter and finished the quarter up 66% when compared to the same period 2 years ago.

From a geographic standpoint, the growth was broad-based, with every store district posting solid double-digit same-store sales growth as compared to the first quarter 2 years ago.

While each of our 3 regions were extremely strong, the growth in our West region outpaced the growth in the North and the South.

From a merchandise perspective, on a 2-year basis, we saw a broad-based growth across our major merchandise categories with double-digit growth in work boots, men's and ladies' Western apparel, men's and ladies' Western boots, hats, and nonflame-resistant work apparel.

FR work apparel was the only category that declined when compared to the same period 2 years ago.

Our customers are increasingly outside working, participating in recreational activities and returning to outdoor events and are looking to Boot Barn to get appropriately outfitted.

From a marketing perspective, our creative team continues to enhance our brand aesthetic across all media and communication channels.

Our marketing strategy is proving to be successful in drawing in new customers, and we believe the addition of these customers will help us continue to drive sales growth and increased traffic while furthering our brand awareness across the country.

From an operational perspective, our store associates, along with our field leadership team, were able to ensure that our stores were adequately staffed in order to handle the increased number of transactions during the quarter.

The fact that Boot Barn has relatively low turnover at the store manager level has enabled us to rise to the challenge of the surge in sales and maintain our standard for customer service.

I am proud of the store operations team for providing the necessary training and support to our store associates to both meet the growing demand in stores and efficiently fulfill omnichannel orders, such as buy online, pick up in store and in-store fulfillment.

Our field team has continued to provide excellent service to our customers, and I'm grateful for their ongoing commitment to growing the Boot Barn brand.

There's been a great deal of dialogue surrounding supply chain challenges across the retail landscape, resulting in difficulty in securing merchandise and increased freight cost.

While we have seen some of these issues as well, we have managed to mitigate the impact on the business significantly.

We've now improved our inventory position to flat on a comp store basis relative to last year, which was the result of a tremendous amount of hard work by the merchandising and supply chain teams, particularly in light of the extremely strong sales we have been experiencing.

And while freight costs continue to increase, our ability to leverage our store base for e-commerce orders has dampened the impact of increasing inbound freight costs.

Moving to our second initiative, strengthening our omnichannel leadership.

Compared with the first quarter 2 years ago, total e-commerce sales grew 56%, and our efforts to increase the profitability of this channel continued to be effective, with EBIT showing significant growth on a 2-year basis.

The bootbarn.com business continues to be our best-performing site with total sales growth of more than 100% compared to the same period 2 years ago.

While not as strong as the bootbarn.com business, the balance of our e-commerce sales also exhibited strong double-digit growth compared to the same period 2 years ago.

Underpinning our recent performance are the omnichannel initiatives we have implemented over the past 2 years, including buy online, pick up in store; buy online, curbside pickup; same-day delivery; and buy online, return in store.

During the first quarter, we invested further in our in-store fulfillment initiative and have seen strong customer reception to this offering.

Making the stores inventory available to our e-commerce customers has had a meaningful impact on our e-commerce growth.

This new ability to ship online orders from our stores has had an added benefit of increasing the exclusive brand penetration online, adding further to our ability to expand merchandise margin.

We believe our omnichannel initiatives are driving increased traffic to our stores, helping to reduce shipping costs and improving loyalty with our customers as we encourage them to shop at Boot Barn both in-store and online.

Now to our third strategic initiative, exclusive brands.

Our exclusive brands performed incredibly well during the first quarter, increasing to 26.3% of net sales, a gain of approximately 650 basis points compared to the same period 2 years ago.

We're very pleased with the accelerated growth in this portion of the business and the performance of each of our exclusive product lines.

Cody James, Shyanne, Hawx and Idyllwind fueled by Miranda Lambert continue to be in our top 10 selling brands in the store.

We are proud of this achievement and the brand recognition we have built over the years with our exclusive merchandise.

Given the supply chain issues across retail today, we are also fortunate that we've been able to rely on our exclusive brand supply chain to meet the surge in demand.

Finally, our fourth initiative, expanding our store base.

During the first quarter, we opened 3 new stores, bringing our total store count to 276 stores across 36 states.

Our new store openings continue to perform very well and are expected to pay back within our targeted 3-year period or better.

We expect to open 27 stores in the current fiscal year, as originally planned.

I'm really pleased with the work our real estate team is doing, and I'm very encouraged about the new store pipeline for the balance of the year as well as for the beginning of next fiscal year.

Based on our current momentum, we expect to be well positioned to grow 10% new units or more in our next fiscal year.

And now I'd like to provide an update on our current business.

Our second quarter has continued the strength that we have seen during the last several months, with stores and e-commerce generating strong sales.

When compared to the same period 2 years ago, total sales in the first 5 weeks of our second quarter increased approximately 65%.

Consolidated same-store sales through the first 5 weeks of our second quarter increased 52.4% when compared to the same period 2 years ago.

To recap the tone of the business, we have seen consistent strength in demand, with nearly every week, over the past 20 weeks, exceeding 60% growth in sales versus 2 years ago, coupled with solid growth in merchandise margin.

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

Thank you, Jim.

Good afternoon, everyone.

In the first quarter, net sales increased 64.9% to $306 million compared to the 2-year ago period.

Consolidated same-store sales increased 52.3% with retail store sales up 51.7% and e-commerce same-store sales up 55.8%.

The increase in net sales was primarily a result of the increase in same-store sales and the incremental sales from new stores opened over the past 24 months.

Gross profit increased 87.3% to $116.4 million or 38% of sales compared to gross profit of $62.2 million or 33.5% of sales in the 2-year-ago period.

The 450 basis point increase in gross profit rate resulted from a 220 basis point increase in merchandise margin rate and 230 basis points of leverage in buying and occupancy costs.

The merchandise margin rate increase was primarily a result of better full-price selling and growth in exclusive brand penetration.

Operating expense for the quarter was $62.8 million or 20.5% of sales compared to $46.1 million or 24.8% of sales in the 2-year-ago period.

Operating expense increased primarily as a result of higher store payroll and overhead in addition to an increase in incentive-based compensation.

Operating expense as a percentage of sales decreased 430 basis points, primarily as a result of expense leverage on higher sales.

Income from operations was $53.6 million or 17.5% of sales in the quarter compared to $16.1 million or 8.6% of sales in the 2-year-ago period.

Net income was $40.6 million or $1.35 per diluted share compared to $9.7 million or $0.33 per diluted share in the 2-year-ago period.

Excluding the $0.09 tax benefit in the current year period and the $0.01 tax benefit in the 2-year-ago period, net income per diluted share in the current year period was $1.26 compared to $0.32 in the 2-year-ago period.

Turning to the balance sheet.

Inventory was flat on a comp store basis compared to last year and down 2% compared to the same period 2 years ago.

On a consolidated basis, inventory increased 13.5% over the prior year period to $297 million.

This increase was primarily driven by inventory held at both our Wichita and Fontana distribution centers and inventory for new stores added in the past 12 months.

During the first quarter, we prepaid $61.5 million on our term loan, resulting in a total of $50 million of debt outstanding with 0 drawn on our $165 million line of credit.

We had $49.6 million of cash on hand at the end of the quarter.

Subsequent to the end of the quarter, we expanded our revolving line of credit to $180 million.

While we are pleased with the underlying strength in the business, given the limited visibility into the macroeconomic environment, we will continue to only provide select full year fiscal 2022 guidance at this time.

We reiterate our previously provided guidance to grow new units 10%, continue to expect capital expenditures to be in the range of $33 million to $36 million and estimate our full year effective tax rate to be 26%.

Additionally, we now expect exclusive brand penetration growth of 350 basis points in fiscal 2022, which represents an increase from our prior outlook of 250 basis points.

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

Thanks, Greg.

I'm very pleased with the strong start to fiscal 2022, and it is exciting to see the organization continue to deliver on our 4 strategic priorities.

I'm truly honored to work with such an incredible team.

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

Holly?

(Operator Instructions) And our first question today will come from Matthew Boss with JPMorgan.

Congrats on a really nice quarter, again, guys.

Thanks, Matt.

So Jim, on the consistency of the top line momentum that you walked through, July holding 65% above fiscal '20, are you seeing return trips from new customers that you acquired during the pandemic?

And I guess I'm trying to think, on the other side of this crisis, where do you see the largest sustainable market share opportunity, if we think maybe by category in terms of where you're benefiting?

But what's sustainable?

Where is the model substantially better on the other side?

I think where we have seen a step-function change has been in the expansion of our addressable market.

And we have taken share, we believe, from the industry, from the mom-and-pop Western retailers.

And I think we've also increased just the sheer number of people that now view Boot Barn as an alternative for shopping for their merchandise, their apparel and their footwear, et cetera.

And I think that is going to be with us going forward.

We've seen such an influx of new customers with no drop-off in our legacy customers that I think we are now just operating in a bigger customer market.

And I think that's kind of here to stay.

I think one of the things we'll be focusing on going forward is how do we now -- with even more customers, how do we also focus on improving frequency.

So if we can have additional customers and all customers shopping more frequently, can those two work together to drive even more sales growth going forward.

Great.

And then maybe a follow-up on the margin front.

As you think about gross margin, first quarter comes in 450 basis points above your pre-pandemic base.

I guess how best to think about the progression of gross margin, maybe just puts and takes, as we think about the second quarter back half and just overall gross margin opportunity.

Do you think the model is over earning today, anything we have to give back or how best to just think about long-term gross margin based on what you're seeing today.

Sure.

Matt, it's Greg.

From a puts-and-takes perspective, we've seen nice merchandise margin improvement, what I would describe as on a pure markup basis, right?

So we've continued to be less promotional.

Our inventories are much cleaner so we have less clearance.

And so I expect that to continue for the foreseeable future.

We saw some freight pressure in Q1, and I expect that to continue.

And it might even be a bigger drag or headwind to gross profit.

Having said that, I do have confidence that we'll be able to offset that.

But we won't go backwards in terms of merchandise margin.

The IMU and the other things we're doing will continue to offset that freight headwind.

In terms of kind of buying occupancy and DC cost leverage, we're seeing some leverage in the distribution center and in the buying line.

And in occupancy, we're seeing nice leverage at the growth that we're having.

Obviously, if that growth slows, I think we'll get less leverage out of the occupancy line, and that's especially true as we continue to progress with adding new stores throughout the year.

Having said that, we still would expect to see some nice leverage.

So those are kind of puts and takes as I think about gross profit.

Great.

Congrats again.

Best of luck.

Thanks, Matt.

Thanks, Matt.

And next, we'll hear from Max Rakhlenko with Cowen and Company.

Congrats on a really nice quarter.

So when we think about the massive quarter-to-date trends, what do you attribute that to, as your momentum is significantly above many industry peers?

Obviously, the consumer is in a really strong shape and there's a lot of pent-up demand.

But it looks as though the market share that you're taking is really outsized compared to others out there.

Well, we appreciate the commentary, Max.

Thank you.

I think there's a few things going on, and we always start with the macro.

There certainly is pent-up demand, and there's a lot of money flowing through the economy.

That said, I think we have just been able to pull a number of things together.

We've expanded the view of Boot Barn to include additional customer segments.

We've gone after them aggressively.

At the same time, the consumer trend was helping us, right?

People are getting outside more often.

They are looking for products that we carry to go hiking in or go camping in or just to go to some of the concerts and rodeos that are now just starting back up.

So I think it's been the overused expression perhaps of the virtuous cycle of we've upgraded our branding, we've expanded the merchandise assortment.

We took market share, we believe, last year because we were able to keep our stores open as an essential retailer.

And we just have kind of been able to hold on to those new customers and not relinquish them back.

So I think it's all those things working well in concert, right, merchandising, marketing, store operations.

We're sending more customers to our stores through our e-commerce channel.

And as those things work together, we're seeing sort of a synergistic effect.

Got it.

That's very helpful.

And you previously commented on improving the exclusive brand penetration online.

How big of an opportunity do you think that is?

And is there a world where that mix gets pretty close to what you have in stores?

Or will it always trail the in-store exclusive brand mix?

Sure.

So I think we're on record in the past of saying that, historically, exclusive brands have penetrated roughly 30% in stores and roughly 10% online.

As soon as we opened up in-store fulfillment, the exclusive brand penetration online nearly doubled.

So it's meaningful.

Now if you think about e-commerce as a percentage of our business and exclusive brands growing by 8 or 10 points of penetration online, and then you multiply it by the margin rate, when you put it all together, it's not a massive grower of merchandise margin percent or dollars, but it does add a bit to the rate that we can achieve.

On the second part of your question, I don't think we'll get online penetration to the point where the stores are simply because we offer a lot more product, a broader assortment and, in some cases, more brands online than we do in the stores and nor do we have the ability to as easily sort of showcase the features and functions of the exclusive brands as we do in the stores using fixturing or special merchandising or the store associates as brand ambassadors, et cetera.

But that said, it's nice that, that gap has closed considerably on what amounted to be a relatively simple change.

Technically, it took some time, but we didn't have to move mountains or invest millions of dollars in capital to make that happen.

And our next question will come from Jonathan Komp with Baird.

Yes.

First, maybe, Jim, one clarification, if I could.

I think you said you have more than 4 million customers in your active file.

Can you maybe just comment what that's looked like in the past and how that's grown over time?

I can.

We've seen really nice growth over the last few years.

The best way to think about it, in our view, is to look at the growth in customers on a same-store basis.

And if you exclude the period of time that was impacted by COVID, we've had really significant or a really nice, consistent track record of adding, call it, mid-single-digit growth in customers on a comp store basis for probably 4 years or so.

I think if you're trying to anchor into that 4 million number.

I think I have these numbers right.

In fiscal '20, I think we had about 4.2 million total customers.

In fiscal '21, we had 4.7 million total customers.

But for me, and the way I try to view it, I always anchor back to how many customers do we have on a same-store comp store basis and how much of our increase in same-store sales is due to the influx of new people into the building.

Okay.

Great.

And then maybe a broader question on the demand you're seeing.

I think if we go back to April or May, there was a view that a lot of the strength at the time was driven by the macro picture.

And I'm curious what you make now to see the consistency in the weekly performance, what your sense is that's driving that.

Are you seeing -- as we move further beyond the stimulus in March, are you seeing fashion trends pick up stronger?

Are you seeing things like the Cheyenne Frontier Days or other events start to impact your business?

Or any more color on your thoughts there.

Sure.

Well, you're right.

I mean we weren't exactly sure what to expect, and there was certainly a thesis that was logical that the business couldn't have maintained the same 65%, and we've been very pleasantly surprised that it's continued to grow as it has.

Underlying it, there are a couple of things that make us feel pretty positive about the outlook going forward.

Number one, it's not being helped by oil markets, right?

In fact, in places like West Texas, there's still a lag or a drag on our same-store sales.

So we've been able to post these numbers despite a softness in some of those markets or at least a relative softness and despite the fact that FR work apparel was negative.

On a more positive note, we started to see emerging, over the last few weeks, an even stronger ladies' apparel business and the over-indexed growth in ladies' Western boots.

And if you went back to the last few years of our earnings calls, we had been talking about softness and a down-trending of ladies' cowboy boots business for quite some time.

And now everything is growing essentially.

But ladies' boots is growing at a higher rate than the rest of the company, which does lead us to believe that as concerts and rodeos start to come back online, we are extremely well positioned in those categories to maximize growth.

You mentioned Cheyenne Frontier Days.

It's a relatively big event.

It's not nearly the same driver of demand as the Texas rodeos that hit our fourth quarter, but we do view the event as a bellwether for sort of the health of our customer.

In our sort of pop-up store that we put up during the event, we hit record sales this year versus any other year, up 50-plus percent versus 2 years ago.

And that -- again, it's not very meaningful in our total sales for the quarter or for the month.

But if it is a view into the underlying consumer trend, it was an extremely strong read.

So that, coupled with the fact that Garth Brooks and George Strait are touring again, there's a lot of reasons to feel bullish about the business going forward.

Yes.

Great.

And just lastly, if I could.

Greg, if I look back in your model of EBIT margin percent, typically, first and second quarter have been pretty similar and then you see a step-up in the seasonally higher third quarter.

Any thoughts or factors we should consider thinking about this year?

And that's it for me.

Yes.

Good question, Jon.

Q2 typically does look like Q1 in terms of volume.

So part of what will drive operating margin in Q2 is what happens to the sales.

As we've just described, it's been incredibly consistent.

If I think about unique things to Q2, the things I'd call out is we're trying to add more hours back into the stores.

Jim touched on it in his prepared remarks that the stores team is doing a really great job of providing great customer service and the sales line is very healthy.

So I think we're not losing sales.

Having said that, we have a sales flex model that we use to try to add back hours, and we haven't been able to use all those hours.

So we're trying very hard to continue to hire up so that we can provide outstanding customer service to our customers.

That's one thing.

The second thing is we've gotten really nice leverage in marketing especially in Q1 as the sales continued at a high level.

We're trying to return to our 3% of sales historic spend in stores.

I don't think we'll get that done in Q2, but we're working toward investing some marketing dollars with smaller things.

We've got a physical inventory in Q2.

We have some other things going on.

But on balance, I would say, given the sales line, you could see a somewhat similar profile.

That said, we're not targeting a 17.5% EBIT rate in Q2.

And next, we'll hear from Steven Zaccone with Citigroup.

Congrats on the momentum of the business, guys.

Thank you.

A question about installation trends more broadly in retail.

You referenced higher freight costs that you're seeing in the business.

Presumably, you're taking price up on products.

Have you seen any pushback from the consumer in response to price increases?

And I guess more broadly, what have you noticed in the competitive environment in terms of pricing?

Steve, it's Greg.

We have seen a handful of our vendors raise price in the first quarter.

And as you just described, we passed that price increase along to the customer with our normal markup, right?

So we maintained our IMU and increased the price, the retail price, to the consumer.

And as we've looked at the demand for that product in terms of units coming into and coming out of the price change, we don't really see a change in the demand.

So it reinforces our belief that our consumer can tolerate a price increase.

They typically need the product or want the product and will accept the price increase.

So as we look further out, we've heard from other vendors that there might be price increases this fall or the beginning of next year.

And again, I think that what we've seen in the first quarter gives us confidence that we can continue to pass along the price increase to the consumer and not feel a hurt on the demand line, if you will, or in sales.

As it relates to exclusive brands, the teams have done a really nice job of mitigating most of those price pressures.

We do see some increased freight on our EV product and will selectively increase pricing probably on some of that product, again, given the backdrop of what we saw in Q1.

And then I just wanted to follow up on -- could you speak a little bit more to trends you're seeing in oil and gas regions?

I know you cited FR comp negative in the first quarter.

Have you seen any improvement there thus far in the second quarter, just given the price of oil?

I assume rig activity is probably up.

We've seen a little bit of a sequential improvement in FR in the second quarter, but it's still a little bit of a drag on our top line sales growth.

Maybe this is too rosy of you, but we just view that as future possibilities for ongoing growth because we expect that the oil patch will continue to strengthen, to your point about rig count, is growing each month slightly, and that business will likely be more of a driver going forward than a drag.

Despite the fact that we've seen a little bit of softness in those markets now for several months, our sales line has been extremely strong.

But perhaps this will finally unhitch us from the reputation that our business ebbs and falls on the strength of the oil markets, but we'll see.

And next, we'll take a question from Janine Stichter with Jefferies.

Congrats on the incredible momentum.

I wanted to ask about your store count potential.

I think you've spoken to the 500-plus stores in the past.

Now that you're getting these new customers who are kind of outside of your core Western customer, how do you think about the potential for maybe a greater number of stores?

And then maybe speak to what you're seeing in some of your new markets.

Sure.

I think when we get to the end of the year and we lay out guidance for the next fiscal year, we'll try to quantify that and do some of the analysis that we had done several years ago to come up with the size of the addressable market and the number of stores that we think we can build.

With that said, qualitatively, I'd say we're feeling pretty bullish on both the size of the TAM as well as the total number of stores that we could build across the country.

And now roping in the second part of your question, we've seen very good results in our new stores opening.

We've seen great openings for brand-new stores and brand-new Boot Barn markets.

Even those that opened in the height of the pandemic, we've also seen brand-new stores opening in what we would have considered pretty mature markets doing extremely well as well.

So we've opened a store in Weatherford, Texas and Visalia, California.

We've opened a couple of stores in Phoenix, which we probably would have thought was mature a few years ago, and we continue to develop that market with additional stores.

And I think when you kind of cobble all of that together, it leads you to the conclusion that we will, again, try to defend through analytics that our 500 store count is going to prove to be conservative.

And I think as we've expanded our target customer outside of a pure Western customer to include a really vibrant work business, the Wonderwest customer, the Just Country customer -- and we've often talked about the market being $20 billion of total addressable market, I think that number is also understated.

So we're sitting here with a very strong business and great momentum and feel just extremely positive about the future prospects, given what we've -- some of the changes we've made, how they're taking hold and the momentum that we're starting to see.

Great.

And then just a follow-up on the inventory, flat versus on a per store basis.

Understanding that there's constraints on how much you can get optimally, how do you plan your inventory?

I know it's challenging with the business tracking up 60%.

But if you had your way, how would you be planning your inventory levels?

And maybe speak to any of the constraints you're seeing, any particular categories that are more challenging than others.

So I think if we look at our current inventory levels, we're -- on a total basis, we're in pretty decent shape.

Frankly, we probably like to have a little bit more inventory.

I mean our business has just been so strong.

And in certain pockets of a store, you'll see certain areas that are a little bit light.

Ladies' apparel is one of them.

Ladies' cowboy boots is another.

And both of those businesses are really growing quite nicely.

So given the current trend, we'd love to have our inventory levels be up a little bit more, not just flat.

One thing that's helped us a little, if I'm honest, is we call out flat inventory on a comp basis year-over-year.

We have much less clearance merchandise than we did last year.

So our full-priced inventory is actually up slightly year-over-year on a comp basis.

That said, we'd still love to add some product in some key categories, probably more on the ladies' side than on the men's side.

And we're continuing to hustle to bring that product in.

We've had mixed results from our vendors.

Some vendors, we made some kind of bulk purchases.

And we talked about this on the last call and inventoried it ourselves.

Others are flowing goods nicely.

And candidly, the best supplier that we have right now is our exclusive brand.

So while we want all of our vendor partners to participate in the growth, when there is a void or sort of, euphemistically, an open slot on a boot shelf, we're able to get our own product or our exclusive brands product in the stores.

And fortunately, that supply chain has continued to work extremely well, all things considered, during the pandemic and during all the other supply chain challenges.

So hats off to the team with managing exclusive brands for continuing to flow goods.

We're fortunate that as a company structurally, we only turn roughly twice a year.

So we're not at a big risk of running out of product any time soon.

But on balance, we'd love to have some more merchandise.

And next, we'll hear from Dylan Carden with William Blair.

Awesome.

I'm just curious -- just a handful of ones here.

I guess, first, maybe starting with the frequency you mentioned and that the ultimate goal here is to not only grow the customer base but grow frequency.

I mean are you seeing that already at some of these sort of new customers -- new-to-brand customers?

And I guess maybe sort of an embedded question there is, of the customers you acquired in the last year, how many are kind of coming back to the brand or even shopping sort of across different categories?

So there, we do believe we're capturing and retaining and seeing them again.

I can't give you a great statistic to defend that.

We also are seeing them shop across the different pieces of the business, for sure.

So we're seeing some of our legacy customers now looking at Boot Barn to buy -- maybe they only looked at us as a Western cowboy boot store, but now they're looking to buy hiking boots when they're coming into the store.

They're looking to buy jeans and a T-shirt and a baseball hat.

And we're able to meet those needs.

We're starting to bring in merchandise statements a little bit more frequently, and we're tweaking some of our marketing to try to get the people that would only shop with us twice a year to come a bit more frequently.

So we'll be able to recap that for everybody with some more statistics once we see somewhat of a more normalized view of the business over a few quarters and not the sort of gyration of a COVID time period followed by a very, very strong sales growth period.

But our belief is we've undoubtedly increased customer count, and we think frequency is starting to tick up.

And that's sort of the new focus, is to really see if we can be getting that customer in the store more frequently and expanding the share of wallet for all of our customers.

Great.

And I'm curious, the new store format you're kind of trialing out in California, is it too early days to kind of speak to that of what the strategy might be there, if there's maybe some markets that get unlocked to you that you otherwise thought were inaccessible with your legacy offering?

And kind of as a follow-on question would be your confidence level in hitting that kind of 10% store growth this year.

You even, I think, mentioned that it could be above that.

Going back to 2017, that's been a target but not necessarily a reality.

I'm just kind of curious what you're seeing in the real estate market or the acquisition market that might sort of drive some of that commentary.

Yes.

So on the second part, I think our level of confidence for this year is pretty strong.

95% confident.

Greg said 95% confident.

So we've laid out, I think, the cadence, I think you said 3...

3, 5 and 7, and then the balance in Q4.

There's a Fibonacci sequence in there somehow, but I think the level of confidence there is pretty high.

On the first part of your question relative to the store that we built near our office out here, we're stopping short of calling that a new prototype and a vast departure from what we've been doing in the past.

It is aesthetically more pleasing.

It doesn't scream Western quite as much as the store that was opened 5 or 10 years ago.

But I would tell you that if you went to some of the stores that we've been opening on the East Coast, and actually any of the new stores, they are a little bit more elevated in their look and feel and a little bit less pure Western.

And that is just part of the overall strategy of kind of opening the aperture slightly.

This is not a massive strategic change.

This is not getting away from what's made Boot Barn so successful for so many years now but can we maintain the loyalty from our core Western customer, which I think we've been able to demonstrate we can, and yet still make the store inviting and comfortable for people that may not be working on a ranch and wearing a cowboy hat every day.

And it seems that we've been able to do that.

And the store that you're alluding to, the one that's out here near the corporate office, at the store support center, is just a little bit more elevated than some of the other new stores.

And we'll take elements of that and continue to kind of migrate what a new store looks like.

But I wouldn't -- we don't want to signal that this is a completely different look and feel and something that is a massive change in strategy, because it's not.

No, that's interesting.

And so I guess as you're going into these new markets and you're seeing these sort of better-than-historic performance in these even during the pandemic, do you kind of -- is some of that related to these efforts to kind of -- I guess, are these new markets different than your legacy markets and that, that has been a benefit as you sort of pick and choose which elements of that to put in these stores?

Well, I would say -- so if we look at, I'll just give you real examples.

We opened a store in Weatherford, in Visalia -- so Weatherford, Texas; Visalia, California; Erie, Pennsylvania.

Those 3 stores look roughly similar to each other, slightly more elevated and different than a store that was opened 10 years ago but still not quite the store that you're alluding to here in Orange County.

So we haven't tried to come up with something that's massively different for the East Coast.

But by downplaying a little bit the pure Western customer, we've made it a little bit more accessible to a broader group of customers.

Now by the way, that said, one thing we've referenced on past calls is those new markets, Pennsylvania, Ohio, et cetera, are still heavily skewed in their sales towards Western, every bit as much as Colorado or Arizona.

So it's not like we're selling a whole different set of products.

We're still selling cowboy boots and cowboy hats.

But it looks like we're also getting perhaps a broader sort of swath of the population or the market in those surrounding areas.

And our next question will come from Sam Poser with Williams Trading.

I have a question for you guys.

Do you want the easy one or the hard one first?

And the hard one is not about inventory levels.

I figured they were both going to be about inventory.

Neither one is about inventory actually.

Okay.

We'll take the hard one first.

All right.

So your comp that -- what -- how many stores were -- what is your new store productivity?

How many stores were closed last year?

And like, what stores are comping against what stores?

Because I think The Street numbers for your comp just were not -- this isn't an apples-to-apples number that The Street had nor myself, for that matter.

So what's the new store productivity?

And if you just looked at, if all stores were opened last year, how would -- just including the 0 stores, what would the comp be, if that makes sense?

Sam, it's Greg.

We haven't quoted a 1-year number really anywhere.

There will be a 1-year number that's shown in our 10-K when we put it on file because that's how the SEC requires us to report.

But everything we've described to you, whether it's the plus 65% total sales or the plus 52% same-store sales, that's on a 2-year basis.

So that's compared to 2 years ago, and it excludes all the noise around store closings during the COVID period.

And I apologize, we do say -- and on Page 2 of the press release, we do talk about a 1-year comparison.

But frankly, none of our comments really talk to that 1-year comparison because it's a bit of a fooler because of COVID closures, et cetera.

So we thought...

I get it.

But the question is, what's that 78% number if it was all apples-to-apples?

That's the question.

What's the real -- what's that number?

Because when The Street was at a 90-whatever-percent comp, and you came out at a 78%, all this being correct, they're comparing it, I'm comparing it, you can't match the numbers to the 78%.

All we're trying to do is match the numbers.

We completely understand how strong the business is and all that.

It's just the number, we just want to know what it is.

I guess you'd have to look at our Q1 filing from last year.

And then you'd look at total sales, and then you'd use the stores penetration to come up with a total sales number in Q1 for stores.

And you've got the total sales for Q1 this year.

That's not necessarily on a comp basis, but we opened 15 stores over the past year, and you could back into a number.

In terms of new store productivity, we modeled it [$1.7 million], and it's probably 10% higher than that or maybe 20% higher than that.

It's not 50% higher than that.

So an existing store did 100 in Q1.

A new store does, what, 50, 80, 300?

Call it 80% or 85%, probably.

Okay.

All right.

I'll drop that now.

See, no inventory.

Now the other question is about sort of a follow-up and a whole bunch of other questions.

You talked about the women's Western and women's apparel being very good.

Are you -- is this more of the fashion women coming in now to buy Western both boots and other?

And is she bringing people with her, coming back to buy stuff for others in the family?

What are you learning about her given that it's one part of your business?

It sounds like your inventory is pretty low because of high demand.

Yes.

I think -- on the first part, I think pent-up demand -- concerts and events are finally, restarting, right?

Our business over the last 20 weeks or so has been very strong, but it really hasn't yet been driven by concerts and rodeos.

So I think that's all ahead of us, mostly ahead of us.

I think when they get dressed up for concerts, they want a new pair of cowboy boots and they want a new outfit.

I can't tell you if they're -- yes, I wouldn't have great data on are they buying for others, bringing more people in, et cetera.

We're seeing -- I mean we're hearing from fashion brands that Western is having a little moment.

And most of these fashion brands could care less about a rodeo.

So the question, are you -- and it sounds like you're seeing the same thing without the rodeo spurring it on, so to speak.

Yes, a very clever point there.

I think so.

I mean look, I think it is topical.

I would not want to leave the impression that our business is so strong because of some sort of trend that we're seeing in some of these other brands, including some couture brands.

I mean our business is strong from work boots to men's Western to cowboy boots, men's and ladies', cowboy hats, just about everything is very solid, strong double-digit growth.

And what we're calling out is, particularly on the ladies' boots side, that is one that is over-indexed in the last few weeks, not in the quarter, and has been one that, for the last several quarters or a few years even, ladies' boots has never been that remarkable for us from a growth perspective.

Our next question will come from Peter Keith with Piper Sandler.

This is Bobby Friedner on for Peter.

It looks like there's a pretty large infrastructure bill getting close to being passed in Congress.

I'm wondering if you could discuss how previous infrastructure programs have impacted demand trends and what you might expect this time around?

Clearly, any increase in employment -- blue collar employment and infrastructure, is a good or a great thing for us.

I can't quantify for you what that would look like.

But we're not banking on that as part of our future growth, but it would just be a potential -- another tailwind to top line growth.

It does tend to drive the work boot business, work apparel business, denim, both work and Western.

So it would just be another great add to the business that's been experiencing some really strong growth anyway.

All right.

Great.

And just one quick other one.

So with the Delta variant becoming more pronounced in some parts of the country, has this had any impact on store traffic in any of your markets?

I'm sorry.

There's something weird with the audio when you asked that question.

Could you repeat it for us, please?

Just with the Delta variant becoming more pronounced in some parts of the country, has this had any impact on store traffic in any of your markets?

It's, of course, unfortunate to see some of this recent surge.

Our business has just been unbelievably consistent across the country, regardless of market, regardless of Delta variant.

Yes, we, like everybody, hope that this goes away pretty fast or at least gets mitigated.

But it hasn't had an impact on the business.

The business has just been phenomenal.

And next, we'll hear from Mitch Kummetz with Pivotal Research.

So I'm curious, on the product side, you guys have made a lot of comments there.

I think you said 2 years, everything is up, but FR.

You've talked about ladies' boots.

When you think it's sort of big picture work versus Western, can you say which currently is growing faster on a 2-year basis?

Yes, we can.

Western now is growing a little bit faster.

As you well know, you've followed us for a long time and know the company extremely well.

Over the last few years, work has been growing more.

So the pendulum has swung back a little bit.

If we were to look at sort of a pie chart, and the segment of the pie is growing or shrinking, it's going to be indistinguishable.

I mean they're growing -- these are illustrative numbers.

One is growing 70%, one is growing 55%, right?

It's not going to make a meaningful difference on the percentage of the business bringing.

But now Western is a bit stronger than work.

Okay.

And then, Jim, you talked about new customers in your prepared remarks.

And you talked about, I think, one of the ways you're bringing in new customers is with product.

So I just went back and glanced at the 10-K.

And so the split there, I think it was 2/3 Western and then the other 1/3 is work/other.

I'm curious -- I got maybe a few other questions here.

I'm curious how big is the other piece, is it as much as maybe 5% now?

Or is it still smaller than that?

And when I think about other, are the main categories in other like outerwear, hiking boots, ball caps?

Or are there other pieces?

And then when you think about growing this other category, in particular, to attract new customers, are you -- is it really just driving more sales through those existing categories?

Or are there other things that you think you can still add to the mix?

So I would say "other" and the statistics that you're alluding to, of course, is a pretty broad-based brushstroke, if you will, view of the business, I would say other could be 10% or maybe 12% of the business, and it includes everything from baseball hats to hiking boots, some of the product that we're bringing on the ladies side, we're going to categorize it as Western, but it might be almost mainstream in terms of its fashion aesthetic.

I think the other thing that we're doing is we're trying to refresh the sales floor more frequently in certain key categories.

We're bringing in a merchandise statement in ladies' apparel to make a statement.

That may only last for 3 or 4 months, and then it goes away.

We're also just starting to bring in some more exciting merchandise to some stores that may otherwise have not had it in the past because the store might be an average store volume and focused more on basics.

But when we talked about in-store fulfillment, we can now bring some more sizzle product further into the store base because even if that store can't turn it quickly enough to sort of command that product, we're able to move it ultimately with our e-commerce channel.

So all of those things, we believe, will help add to the in-store experience, add more excitement to the store and perhaps not only increase customer count but increase frequency because there's a reason to come back more quickly than you otherwise would have.

And our next question comes from Jay Sole with UBS.

I just want to go back to one of the questions from a few moments ago.

Total revenue was up 107% and same-store sales growth was up 79%.

It's got a 2,800 basis point difference.

Can you just maybe just walk us through, to get to 79% to 107%, what the different components of the business that drove the sales growth to 107% where, obviously, new stores is a piece, probably not all 2,800 basis points of the difference between same-store sales and total revenue.

So if you can just give us an idea, that would be helpful.

Sure, Jay.

It's Greg.

From a definitional perspective, if a store is closed for 5 days or more, it falls out of our comp calculation for the entire month.

And so last year, in the height of COVID, we had a number of stores that were closed throughout the first quarter.

And so they would be -- they would have had 0 sales or fewer sales last year in Q1 or in that month that they fell out of the comp base and they'd have 30 days or -- sorry, 28 days' worth of sales this year, for example, in the month of May.

So they could have been closed for 14 days last year in May, and they were open for 28 days this year in May.

Those don't count as comp sales in the first quarter for that month that they fell out of the calculation.

Got it.

And it sounds like that piece is the biggest part of the difference between the total revenue and the same-store sales growth.

So maybe the new stores accounted for 700 bps of the growth but probably there's pulling some stores out of the comp base because of the closures and what not because COVID, like, really accounts for the majority of the difference.

That's correct.

Got it.

And then my other question is just on -- it sounds like, obviously, shipping costs are going up.

Jim, you talked a lot about your omnichannel initiatives.

Are you passing on some of that shipping to the consumer when they order something online?

And is that increase driving people into the store?

So in other words, are you seeing a correlation between the impact of rising shipping costs across the landscape and the traffic that comes into the store?

The honest answer is we haven't passed along freight costs, particularly online, to the customer, right?

First of all, a huge portion of our online purchases ship for free.

What we have done is that if you buy online and you ship it to our store, even if that shipment didn't meet the threshold for free shipping, because we do still charge for shipping under certain thresholds, and if it's not boots, if you're willing to ship it to a local store and go and pick it up, then you'll get it for free.

So we've actually sort of encouraged our customer to -- if they want to avoid the shipping cost, which hasn't changed, to ship it to a local store and go in and pick up the product.

And perhaps the objective of that is self-evident.

But the goal, of course, is now they're walking into the store to pick something up and they're surrounded by product, and it's probably the least expensive new customer acquisition that a store could have.

Most of the freight increase cost that we've been experiencing, and I think probably most people have been experiencing, is really inbound.

And it's containers coming from China, et cetera.

You're right, in my remarks, I coupled them together and said, yes, we're seeing a little bit of inbound freight cost increase.

But a lot of the other things that we're doing has helped dampen that a bit, including some of the things they're doing from an omnichannel standpoint.

So it's a little bit of an apple-and-orange, but it's -- one of the underlying goals is to look for an offset to the inbound freight cost.

And our last question today will come from Jeremy Hamblin with Craig-Hallum.

Congrats.

I wanted to just see, because I think the response was a bit muffled on the store cadence openings, if we could clarify that again.

I heard the 27 new stores planned for the year.

But it looks like you're tracking pretty nicely already on those openings, and it sounds like you're very confident on the total.

Could you just clarify, Greg, the cadence of those openings?

Jeremy, we think that the store opening cadence is roughly -- the 3 stores happened in Q1.

We think we'll get 6 or 7 stores opened in Q2, 7 stores opened in Q3.

And the balance, either 10 or 11 stores, will happen in Q4.

Got it.

And then I wanted to come back to the exclusive brands, which you guys have had so much success with.

It's been a couple of years since the last time you really launched a new exclusive brand.

I wanted to just get a sense if -- given the success that you're seeing, given potential partnership opportunities like you had, obviously, with Idyllwind success, is that something that's potentially a fiscal year '22 initiative?

Jim, are you going down that path of looking at maybe expanding the number of exclusive brands you have?

So it's a great question.

The answer is yes.

I wouldn't call it a current fiscal year initiative.

There will be some of the new product and the new brands coming out before the end of the year.

But any meaningful impact on the business will roll into next year.

This is going to be Q3 or Q4 before the product starts to come in.

And just to give sort of some sense of what our sort of positioning will be, it harkens directly back to our segmentation.

We've added an explicit segment around a more country customer that's not hardcore Western, so we'll have a brand for that customer in both men's and ladies'.

And then on the Western side where we're looking to kind of further segment that a little bit, so we'll probably add probably 2 brands actually on Western.

And I think when we're all done, we'll outline, maybe on a future call, sort of the portfolio of brands and how they're positioned.

But the goal here is to continue to map back the brands that we offer in the store, either third-party brands or our own brands, but map that back to how we're segmenting our customer base, attracting new customers and trying to take care of demand of current customers.

So a long-winded answer to, yes, you should expect some new brands coming.

Once they're more fully developed, we'll shine a light on them and kind of walk you guys all through them.

And it should help us continue to grow that part of our business as we look to our fiscal '23 business.

Great.

Last one quick hitter.

On the debt, is that something that you're looking to pay off here in the next 12 months?

Is that -- and then potentially, do we start looking at other uses for capital allocation besides store openings and M&A?

Jeremy, good question.

What we've said is we want to first use our free cash flow to open stores and then to pay down our debt.

So consistent with that, we're opportunistically paying down some of that term loan, added a little bit of capacity under the ABL.

And I think we'll continue to chip away at that.

Great job, guys.

Thank you.

Thank you very much.

And that concludes today's question-and-answer session.

Mr. Conroy, at this time, I'll turn the conference back over to you for any additional or closing remarks.

Great.

Holly, thank you.

And thank you, everyone, for joining the call today.

We look forward to speaking with you on our second quarter earnings call.

Take care.

Thank you.

And that does conclude our conference for today.

We thank you for your participation.