Good day, everyone, and welcome to the Boot Barn Holdings Incorporated First Quarter 2020 Earnings Call. As a reminder, this call is being recorded. Now I’d like to turn the conference over to your host, Jim Watkins, Vice President, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn’s first quarter fiscal 2020 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 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 2020 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 for joining us. On today’s call, I’ll discuss the highlights of our first quarter results as well as the progress we have been making on each of our core strategic initiatives. Greg will review then our financial performance in more detail and then we’ll open the call up for your questions. We are extremely pleased with our start to fiscal 2020, as first quarter results improved significantly on a year-over-year basis, despite cycling a very strong double-digit comp in the first quarter last year. Our consolidated same-store sales showed sequential acceleration with an increase of 9.4% in the quarter. Consistent with the past several quarters, we saw broad-based strength with virtually all geographies and product categories posting gains. In terms of channels, our retail same-store sales increased 11.1%, marking our ninth consecutive quarter of positive store comps at our retail locations. E-commerce sales increased 0.9% as we continue to focus on maximizing the EBIT dollar contribution of our digital business. The same-store sales two-year stack in both our stores and online channels increased more than 20% for the second consecutive quarter. In conjunction with the strong revenue growth, we once again demonstrated significant merchandise margin expansion. A clean inventory position drove more full-price selling in the quarter as we continue to minimize promotion and clearance events. This coupled with a significant expansion in exclusive brand penetration drove a 150 basis point increase in merchandise margin. We also saw a healthy expense leverage in the quarter with an improvement of 90 basis points in our SG&A rate. A combination of strength across the P&L drove significant year-over-year growth in both operating income and earnings per share. Excluding the impact of the tax benefit from the exercise of stock options in both years, we achieved a 63% increase in operating income and more than 100% increase in earnings per share relative to the first quarter of last year. Our sustained success is the result of strong execution and continued progress on each of our four strategic growth initiatives. Let me review the first quarter highlights from each initiative, beginning with driving same-store sales growth. Our 11.1% retail same-store sales growth was driven by strong performance across our merchandising store operations and marketing functions. This sales growth was consistent across most of our geographies. We saw continued strength in our Texas business and have seen a healthy sequential increase in the rest of the country. Same-store sales growth in Texas was slightly stronger than our chain average and has remained at a similar growth rate for the last three quarters. From a merchandising perspective, all major product categories grew year-over-year with particular strength in work apparel, work boots, hats, and ladies’ Western apparel. Driving these results was the continued expansion of our exclusive brands, inventory investment in key categories, and an improved assortment, including new styles, broader size ranges, and greater merchandise variety. We’re also working to optimize our selling space on a store-by-store basis, including the expansion of work boots and work apparel categories in many stores to satisfy growing demand. Shifting to operations, our stores team is performing at a very high level, as demonstrated by consistently strong comp growth and continual improvement in customer service scores. We have streamlined the operational aspects of store management by eliminating non-value-added administrative tasks and automating several reports. We believe that these efficiencies coupled with improved store labor scheduling has refocused a considerable amount of time on service and selling, resulting in improved results. From a marketing perspective, we continue to utilize customer segmentation to customize our communication to each segment. We believe that the combination of more tailored messaging, greatly improved brand creative, and the changes we have made to our immediate mix continue to both attract new customers and reengage lapsed customers. We continue to see increased customer count driving more transactions and growth in same-store sales. Moving to our second initiative, strengthening our omni-channel leadership. Growth in our e-commerce channel grew approximately 1%, progressively improving each month during the quarter with the combined May and June same-store sales, increasing approximately 6%. Consistent with our goal, we experienced healthy growth in both operating income dollars and EBITDA margin rate as we’ve continued to focus on eliminating low margin products and targeting a higher return on advertising for our online marketing spend. A key component of our omni-channel strategy is utilizing our e-commerce platform to create an engaging visual experience inside our retail stores. We’ve been pleased with the reception of our range finder touchscreens, which allow our customers to browse our in-store assortment in many of our stores. This is often used to help better understand what type of boot a customer is looking for with the goal of improved in-store conversion. If they are unable to find this specific item or size in the store, they’re able to order it from our web tablet, which accesses our broader e-commerce assortment, plus the entire selection for most of our major vendors directly. This technology enables our stores to fulfill nearly every customer’s needs and have their items shipped to their house or to the store for pickup. In addition, we have added alternative payment options to our websites, creating more flexibility for our customers. We are also expanding the versatility of our commercial accounts business by launching our business-to-business website, which we believe will be an advantage to Boot Barn in attracting and developing larger and national commercial accounts by showcasing the strong assortment of work boots and apparel available to their employees. Now to our third strategic initiative, exclusive brand. During the first quarter, exclusive brands reached approximately 20% of total sales, an increase of nearly 500 basis points of penetration compared to the prior year period. We saw strong growth in both of our longstanding exclusive brands Cody James and Shyanne, as well as continued success and increased penetration from our four other major proprietary brands. Idling in Moonshine Spirit continue to grow and are playing a key role in introducing new customers to Boot Barn. Hawx and Cody James Work had been very well-received by our work customers and have exceeded our expectations. Our exclusive brands provide us with competitive differentiation, enhancing our margin by more than 1,000 basis points versus national brands. We continue to believe that exclusive brands will complement the assortment provided by our vendor partners and we are pleased that we’ve been able to achieve ongoing sales growth while we transform our assortment. Finally, our fourth initiative is expanding our store base. We opened one store during the first quarter, plan to open eight stores during the current quarter, and expect to open a total of 25 stores during the current fiscal year. We remain focused on augmenting our new store development with opportunistic tuck-in acquisitions that enable us to quickly enter a new market, and will continue to target a three-year payback or better on both new and acquired stores. As a reminder, all acquired stores are rebranded in relatively short order, integrated into our field operations structure, and quickly become part of the Boot Barn marketing program. Turning our attention to current business, we have 4.5 weeks into our second fiscal quarter, and our consolidated same-store sales growth is approximately 8%, with stores once again outpacing the growth of e-commerce. Notably, we made a decision to eliminate a sale in July that had been part of our business every summer for more than 20 years. This multi-week sale traditionally offered customers either $20 or $50 off virtually every pair of boots in the store, and recycling last year’s sale, we continued to see strong growth in same-store sales along with a material improvement in merchandise margin rate and dollars. The strength in the current business continues to be broad-based across most geographies and product categories. We continue to see strength in merchandise margin due to the elimination of the sale, the expansion of exclusive brands, and a reduction in clearance markdowns given the health of our inventory. 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 14.7% to $186 million. Sales growth was driven by a 9.4% increase in same-store sales, sales from new stores added over the past 12 months from the sales contributions from acquired stores. Gross profit increased 20.8% to $62.2 million or 33.5% of sales compared to gross profit of $51.4 million or 31.8% of sales in the prior year period. The 170 basis point increase in gross profit rate resulted from a 150 basis point increase in merchandise margin and 20 basis points of leverage in buying and occupancy cost. Merchandise margin rate increased as a result of better full-price selling and growth in exclusive brand penetration. Operating expense for the quarter was $46.1 million or 24.8% of sales compared to $41.6 million or 25.7% of sales in the prior year period. We leveraged the operating expense by 90 basis points on higher sales. Income from operations was $16.1 million or 8.6% of sales in the quarter compared to $9.8 million or 6.1% of sales in the prior year period. This represents a 260 basis point improvement in operating margin. Income tax expense was $2.4 million in the quarter, based on an effective income tax rate of 20.1%. Income tax in the first quarter of last year was a $1 million benefit resulting from stock option exercises. We now expect our tax rate for the balance of the year to be 25.2%. Net income was $9.7 million or $0.33 per diluted share compared to $6.8 million or $0.24 per diluted share in the prior year period. Net income in the current year period and prior year period includes $0.01 or $0.09 per share of tax benefit respectively from the exercise of stock options. Excluding this tax benefit, net income for the diluted share in the current year period grew 113% to $0.32 compared to $0.15 in the prior year period. Turning to the balance sheet, inventory increased 9% on a comp store basis compared to last year, with approximately half of this increase supporting the investment in our work business Jim mentioned earlier. On a consolidated basis, inventory rose 24% to $254 million compared to a year ago. This increase is primarily driven by an increase in inventory at our Fontana distribution center to support our exclusive brands, inventory for new and acquired stores added over the past 12 months, and merchandise being staged for the eight stores scheduled to open over the next eight weeks. During the quarter we amended our revolving credit facility and term loan, extending the maturity date two years to June 2023. The amendment of our revolving credit facility increased our capacity by $30 million from $135 million to $165 million. In conjunction with these amendments, we prepaid $65 million of our term loan, reducing the term loan balance outstanding to $111.5 million. The prepayment of this loan is expected to save more than $1 million in interest expense in the current fiscal year. As of June 29, 2019, we had a total of $188.5 million of debt outstanding, including $80 million drawn on our $165 million revolving credit facility and $23 million of cash on hand. Our net debt leverage ratio at the end of the quarter was $1.8 million. Turning to our outlook for fiscal 2020, we have updated our guidance, and now expect same-store sales to increase approximately 6% and earnings per share to be in the range of $1.57 to $1.65, based on an estimated weighted average diluted share count of 29.4 million shares for the full fiscal year. This compares to our previous guidance of $1.42 to $1.50 per share. Our income from operations is now expected to be between $75.4 million and $78.6 million. We expect net income for fiscal 2020 to be between $46.2 million and $48.5 million. Interest expense is now expected to be approximately $14.2 million. As we look at the second quarter, we expect same-store sales to increase approximately 7% and net income per diluted share to be in the range of $0.17 to $0.19 per share. Now I’d like to turn the call back to Jim for some closing remarks.

Thanks, Greg. We are very excited about our first quarter results from the positive momentum that has continued into the current quarter. We are confident in our ability to drive same-store sales, strength in our omni-channel experience, growth in exclusive brands, and continue to expand our national footprint through new unit growth. I would like to thank the thousands of associates in the stores, distribution center, call center, and helpline office for their hard work and dedication to growing the Boot Barn business. Now I’d like to open up the call to take your questions. Madison?

Thank you. Our first question will come from Matthew Boss from JPMorgan.

Great. Congrats on another solid quarter, guys.

Thanks, Matt.

Thanks, Matt.

Jim, with 21% gross profit dollar growth actually on top of 24% expansion is durable. Can you speak to how you’re managing that balance today between the top line growth and bottom line profitability? And how does your position as the Western wear industry leader factor into the process, do you think?

Sure. If we look at the two channels separately, on the store side, a combination of more full-price selling, we’ve eliminated our anniversary sale in this quarter and have been eliminating promotional periods over the last several months as you all know. Our inventory is extremely clean, so we’re not clearing as much. We’ve also grown exclusive brands. We are improving merchandise margin significantly on our store side, and on our e-commerce side we’re experiencing healthy growth in operating income and EBIT margin rate. The higher than modeled same-store sales growth is giving us very nice leverage on occupancy, which is all driving operating income or EBIT on the store side. In the most recent quarter, we saw that grow strongly. It’s a little unusual to have the store business growing much stronger than our e-commerce business, but we are pleased with that strategy and I’m glad we’re continuing to execute it. As a leader in the industry, we view Boot Barn as a lifestyle brand with a massive addressable market and extremely loyal customers. They’re looking for authentically provided boots and apparel both in Western and work, across the men’s and ladies’ segments. Our efforts to attract more customers outside the core Western and core work part of our business seem to be paying off, and we are very pleased with the performance of business overall.

Great. And as a follow-up on gross margin with the less promotional stance, how best to think about second quarter merchandise margin expansion opportunity relative to the 150 basis points in the first quarter? And how should we size up the merchandise margin opportunity in the back half of the year?

Yes. The way I would think about it is likely it will expand beyond the 150 basis points given that the sale was only a two-week sale last year. So it wasn’t a month-long sale or a third of the year, but it was a significant portion of that quarter. So it’ll be above the 150, but we haven’t given much guidance beyond that. Most of the margin expansion or earnings expansion will come from merchandise margins. If we think about the growth in exclusive brands and that the merchandise margin could look ongoing outside of Q2 to be 50 basis points of improvement in Q3 and Q4.

That’s great color. Congrats again, guys.

Thanks very much, Matt.

Thank you, Matt.

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

Hey, good afternoon, guys. It’s actually Bobby Friedner on for Peter. Really nice quarter.

Hey, Bobby.

I just want to follow up on the merchandise margin, specifically on your e-commerce profitability initiatives. Is there any way to frame up how these initiatives are impacting EBIT margins? And how should we think about the tale of the e-commerce profitability benefit as you start to lap it from fiscal Q3?

Well, Bobby, we’ve already started to lap it. The work we did was primarily in Q1. So in Q2, we’ll be up against that profitability initiative. The e-commerce business is around 17% of our business. The improvements we’re making are certainly contributing to consolidated margin expansion, but to a lesser degree than the penetration of the e-commerce business. It could be 20 to 30 or 40 basis points of improvement at the consolidated line by improving that profile.

Got it. Thank you. And just one more if I can on the comp guidance. It seems like trends remain very robust. Full year guidance though would seem to imply a drop off in the back half of the year. Is that mainly just a function of conservatism or is there anything else we should be aware of?

Yes. That tends to be how we look at it. We feel good about how the year has unfolded so far. As Jim mentioned, wrapping the anniversary sales from last year and quarter-to-date being at a plus 8%, we feel pretty good about the business. But we haven’t really changed how we think about the back half of the year, so we’re raising our guidance mainly based on the Q1 beat.

All right. Got it. Thanks a lot, guys.

Thank you.

Thanks, Bobby.

Next we’ll go to Jonathan Komp with Baird.

Yes. Hi. Thanks, guys. I wanted to ask your take a little on the environment. And maybe first, Jim, the comment about stores outside of Texas accelerating, what would you attribute that to? And any thoughts on kind of the environment and sustainability there, especially with a few of the macro-level oil indicators softening a bit?

Sure. As a company, we try to have a quiet confidence in modesty about us, but I think our results are primarily due to good execution. Employment is strong right now, but it’s not really any stronger than last year. The oil environment is relatively strong this year, not any stronger than last year. So our business has grown almost 10% comp and 100% earnings. I can’t point to anything in the external marketplace that’s different than last year other than our internal efforts. Sustainability wise, last year we comped up plus 10%. We just comped up plus 9.4%, and we’ve run about plus 8% for 10 years. So I think it’s very sustainable. The correlation between the price of a barrel of oil and our results has likely been overstated. My concern is more on the business execution and performance in stores rather than external factors. The Texas business remains strong and is pretty much in line with the most recent two quarters, while the rest of the country continues to improve. We’re firing on all cylinders.

Okay, great. And then maybe a follow-up on the e-commerce side.

Yes. Jon, it’s Greg. The e-commerce business in the first quarter was flattish, which is what we thought. In Q2, we’ll have a plus 8% stores outpacing e-commerce, so you can deduce the e-commerce business is mid-single digit. We expect the business to be mid to high single digit moving forward. The Boot Barn e-commerce business is strong, but the Sheplers business has been a bit tougher.

Okay, great. And just last one, Greg, following up on the second half margin outlook. I think you mentioned most of the expansion will come from merchandise margin rate. Are you implying flattish expenses on that side?

That’s right. We’ll get a little bit of leverage at a plus 6% for the year.

Okay, great. Thank you.

Thanks, Jon.

Thanks, Jon.

Next we’ll take a question from Oliver Chen with Cowen and Company.

Hi. Great results. Regarding the primary driver, the better than expected comp, what are your thoughts on how that manifested in the lens of perhaps new versus existing customers? Also, could you share thoughts around where your product assortment most outperformed?

There are multiple drivers for our same-store sales growth, and I would point to the merchandise margin rate as a significant driver of our earnings. On the same-store sales piece, we have seen extremely healthy same-store sales growth, particularly with more transactions per store. We have seen growth in the average transaction size, especially on the AUR side. Over the last couple of quarters, we have experienced growth in our ladies’ Western boots, which had been a drag on the business for several quarters prior to Q4. We are happy with the performance of all major categories, particularly work and ladies’ Western apparel.

And also on the optimization of selling space as you brought in private label, what are your thoughts on the magnitude of that impact and timing? And how will that manifest into the numbers?

We have seen a strong disparity in sales productivity and margin dollars per square foot across categories, particularly in our higher volume smaller footprint stores. We’re optimizing space and moving departments around, focusing on expanding work apparel and work boots as part of our strategy to maximize sales productivity.

Regarding your relationship with Amazon, what are your latest thoughts on your partnership and how you can benefit from that relationship?

Amazon serves as another selling channel and a way to get visibility for our exclusive brands. It’s a small part of our business; given the rev share piece Amazon takes, it’s not a tremendously profitable venture for us. We view it as a way to increase exposure, but we remain focused on growing our stores and company website.

Thank you. Best regards.

Thank you.

Thanks, Oliver.

Our next question will come from Janine Stichter with Jefferies.

Hi. Good afternoon. Congrats.

Thank you, Janine.

I’m interested in the private brand penetration. You mentioned about 500 basis points this quarter, which I think was the strongest growth in a while. Does this change how you’re thinking about the ultimate long-term penetration?

We’ve been really pleased with the receptivity of the new brands, and we’ve seen an expansion of our exclusive brands. While we believe there’s definitely upside, we’d caution we don’t plan to go above 30% penetration. Our model continues to focus on providing a broad assortment of both exclusive and vendor brands.

Are you seeing improvement in your denim business as well?

Yes, the denim business has been strong in ladies’ Western and on the men’s Western side; it’s been sort of in line with the rest of the business.

Next, we’ll take a question from Paul Lejuez with Citi.

Thanks. It’s Tracy filling in for Paul. My question is about the new customers you’re attracting. How are you performing with the millennial customer, and are you targeting your marketing at all to capture that customer?

We’re seeing nice growth across various customer segments, including millennials. I believe our marketing efforts on social media, particularly Instagram, have contributed to this growth. Our core customer is 44 years old, and while we want to nurture the millennial segment, we remain focused on retaining loyalty from our traditional customers who are critical to our business.

Great. Thanks, guys.

Thank you.

Thank you.

Next, we’ll take a question from Dylan Carden with William Blair.

Yes. Hi, thank you. Can you give us a sense of timing around the B2B platform?

We haven’t attributed any outsized sales growth to the B2B business. We aimed to get it outlined and launch this quarter to help our sales team land new accounts, particularly with larger businesses that require an electronic means of selling.

What’s the opportunity to scale back on promotions and do that more targeted with the new omni applications you added?

About 85% of our store business is conducted at full price. Taking away the anniversary sale was an aggressive move, but we’ve seen a strong positive reaction. Following our plans, we have only a few sale periods left and will always look critically at inventory health and markdowns.

Great. Thank you very much.

Thank you.

Thank you.

Our next question will come from John Morris with DA Davidson.

Hey, thanks. I wanted to talk about the expansion into new markets. How are you tracking performance relative to your historical expansion efforts?

The new store model we quote of a three-year payback around $1.7 million in annual sales remains solid. We’ve opened in new states, including North Carolina, which has performed well, supporting our forecast for continued expansion into the mid-Atlantic and Northeast.

Do you see any performance differences between newly acquired versus stores you’ve built yourself?

Yes, we tailor our assortment by region, yet many newly acquired stores have performed above chain average. The integration of these stores has complemented our existing brand and marketing strategies.

That’s great color. Good luck for all, guys.

Thank you.

That does conclude our question-and-answer session for today. I’d like to turn the call back to Jim Conroy for closing remarks.

Great. Thank you everyone for joining the call today. We look forward to speaking with you all on our second quarter earnings call. Take care.

That does conclude our conference for today. Thank you for your participation.