Conference Transcript - BOOT 2026-06-02

Dylan Cardin, Analyst — Blair

I'm Dylan Cardin. I'm the analyst here at Blair that covers Boot Barn. There are disclosures on our website. I believe that fulfills my duty in that regard. John Hazen, Jim Watkins, CEO, CFO of Boot Barn, respectively. I think there's a spiel you kind of want to lead in with.

Jim Watkins, CEO

Yeah, just a quick opening remarks. We've had a lot of questions since our call about business, so I thought I'd just give a quick update. with four weeks remaining in our fiscal quarter. We're pleased with the trajectory of the business. We're tracking to the high end of our guidance, both in stores and online. So it was a good start to the fiscal year, and that has continued since our last update.

Dylan Cardin, Analyst — Blair

Well, I mean, we can just stay there for a second. And comparisons are kind of even for the balance of the next two quarters, right? So how are you feeling about, I guess there's been a lot of comp volatility, right? You just did a seven after a six on a down six on a zero. After a 54.

Jim Watkins, CEO

After a 54, I mean, how far back do you want to go, right?

Dylan Cardin, Analyst — Blair

So how are you feeling about sort of the composition of your comp? Is there some stability ahead as far as sort of the drivers, the main drivers of business?

Jim Watkins, CEO

Yeah, if we look back to fiscal 26, there were seven weeks where we were up against double-digit comps And we're through five of those seven weeks, which is great. If we look at when we've had the volatility in the comp, 2016, it was oil. We were much more oil dependent. To your point, after the plus 54% year, there was a rebalancing. But outside of those anomalies, we kind of prove year after year that we can comp the comp. So we feel quite good about the business and the guide that we put out. The business right now is being driven by AUR, so it's more AUR than transaction-driven, as we said on the earnings call. But, yeah, we are tracking nicely.

Dylan Cardin, Analyst — Blair

Is it here, is it now to the point where it's mostly a comp waterfall story? You've got the AUR that runs through, I guess, really the latter part of the year when you took price last year. Do you feel like we're at some level of stability?

Jim Watkins, CEO

I do. I think we are through the price increases. not to say there won't be there's price increases every year of course but all the tariff related price increases both from the third party and the repricing of our exclusive brands that was all completed by the end of february let's call it and and uh i've said it a few times i think publicly we're kind of back to business as usual great you heard it here first um let's

Dylan Cardin, Analyst — Blair

talk about the actual business so i know we're doing sort of fireside chat and you've done this now for sale videos, and most people know you. But, you know, I still get fashion questions. I still get how does tractor supply not eat your lunch. So can you just kind of broadly out there

Jim Watkins, CEO

what you do, your competitive positioning? Sure. So Boot Barn, founded in 1978, is the dominant player in a relatively fragmented industry. We have 556 stores right now. And if you look at the composition of the business, the easiest way to look at it is the major merchandise categories. About 50% of our sales comes from boots. And then if you look at the remaining 50%, 35% of that is apparel, 10% women's, 15% men's, and the remaining, or sorry, 20% men's, and then 5% in the work business. And then the remaining 15% of the business is made up of accessories. So boot care, cowboy hats, baseball caps, things of that sort. And so when you, we get this question often about the fashion piece of the business, and I like to remind folks that women's denim, which is what you go to when you think of fashion, is roughly 5% of the business that we do. And our top selling products, many of our top 100 products have, almost all of them, have been in the line for over five years. So we are a needs-based replenishment business for people working, whether in the trades, international brotherhood of electrical workers, ranching, agriculture. We are much more of a needs-based business than a fashion-based business. The business does incredibly well when the weather is a little bit colder. And especially when it rains, people realize that their boots are leaking and they need them to work. And they'll walk into a boot barn and you come into a boot barn on a day when there's heavy rainfall and you will see workers coming in to replace the boots on their feet. And some of the vitals I

Dylan Cardin, Analyst — Blair

always sort of anchor to 75% auto replenish, you know, markdown risk inventory, 10, 15%, 80% plus full price selling. Those are all kind of still the... Yeah, better than that. Right now,

Jim Watkins, CEO

we are in as good a position from a markdown inventory standpoint than we have been outside of COVID. So we feel really, really good about our markdown inventory. I think we're sitting at

John Hazen, CFO

7%, 7, 8? Yeah. So we typically say, you know, around 10% is our markdowns as a percent inventory and we're doing better than that right now and similar to what we were doing last year as far as markdown risk. And as far as replenishment, the majority of what we sell is on replenishment. That number fluctuates over time so we don't have a set number, but yeah, you're right. Close enough.

Dylan Cardin, Analyst — Blair

Yeah. And so then that sort of bleeds into a conversation around sort of your core customer. I mean, you touch a very different piece, I think, of the market, but construction, agricultural, oil and gas, a lot of kind of cross-currents across those industries. How are they doing? Is oil and gas still sort of a boon to you when it's doing well? Sure.

Jim Watkins, CEO

Yeah, so for those new to the story, we break our customers down into really four segments. We have our Western customer. Think of somebody who wears a cowboy hat, who has worked with livestock, who has ridden a horse or worked with cattle. We have our work customer, which is more your traditional tradesman. We have our Just Country customer, who is somebody who listens to country music, lives a rural lifestyle, but wears a baseball cap, likes country concerts and country radio stations, drives an F-150. So that's kind of the picture of a Just Country customer. And then we have our fashion customer, which, again, is a relatively small piece of our business, but we do target that younger fashion customer as well. And so you look at the customer base right now between work and Western, the oil business has been stable. But as you see in the news every day, and this is all public, you can look up rig counts. There hasn't been a rush to drill in the U.S. with the elevated oil prices. I think the expectation in West Texas is this will moderate at some point. And so oil and our oil markets have been doing well, but there hasn't been any sort of rush out there. And as a reminder, when oil dropped from $110 to $30 a barrel in 2016, those oil stores made up a much larger piece of our base. And now those 40 or 50 stores, refining in Permian Basin, Bakken, those sorts of things, again, less than 10% of our stores at this point.

Dylan Cardin, Analyst — Blair

And inversely, the agricultural customer, you know, you read a lot about sort of the plight of the farmer, the American farmer. What have you seen in those markets?

Jim Watkins, CEO

We spend a lot of time talking to our field team, our district managers in the Central Valley of California where much of that food is grown. And it seems to be stable right now. We're not hearing any real noise around drought conditions. We had that question a few times over the last couple of weeks. There was that heat dome, but a temporary or transitory heat dome doesn't create drought conditions in California. So talking with the team, and I was up on the Central Coast this weekend and was going by the fields, and everyone was out there, you know, the fields were full. People were picking strawberries and everything else that they do in the Central Valley, and everything seems to be pretty stable from an ag standpoint.

John Hazen, CFO

Yeah, and when we had some of the oil and other commodity pressure years ago, 10 years ago, I guess at this point, you know, the Midwest and some of those markets, we're seeing it. We haven't called anything out in any of these markets that we've seen softness in the Midwest and, to John's point, in the California markets.

Dylan Cardin, Analyst — Blair

Is that just because it's such a needs-based product? I mean, would you expect, have you looked at periods where you do see that kind of dislocation in those end markets, and is it more just you're still going to buy a pair of work boots? Is that the right way to think about it?

Jim Watkins, CEO

Yeah, if you think of a consumer and the discretionary purchases that they make, the last products they will give up are the ones they need to work, which is the products we sell.

Dylan Cardin, Analyst — Blair

how are you speaking to these different customers? I think if you go back to, you know, so you were effectively a roll-up story. And then 18, 19, you kind of digested a lot of those acquisitions and you really went back and looked at your go-to-market, your marketing, who you're speaking to, how you're speaking to them with what product. How has that evolved coming out of the pandemic? And I know your background sort of is uniquely suited for this.

Jim Watkins, CEO

Sure. It was interesting when I came to Barn roughly 10 years ago, it was the first retailer I had worked at. My career had been on the brand side, and I had run stores for those brands, True Religion, Hurley, Ring, others, but had never been truly on the retail side of things. And as I got to know the brand and our exclusive brands, I realized that our exclusive brands are not private labels. They're not house brands. And Boot Barn, with the marketing that was done over the last 10 years, had become a brand. When I started, Boot Barn was more akin to a rug barn or a pottery barn or another barn that you might see out there, right? And Boot Barn now, I was at a rodeo this weekend in the Central Valley of California in Santa Maria, and we had a giveaway, and we had 2,000 or 3,000 people all wearing Boot Barn-branded trucker hats, similar to what you the Bass Pro as an example. So Boot Barn has truly become a brand on its own. And then what I've done over the last year and a half is one of my adjustments is start marketing our exclusive brands so we can storytell around those brands as well. And let's stick with that then. How do those

Dylan Cardin, Analyst — Blair

fit into the ecosystem? And particularly, why is 50% the right number? You're at, so what, 42-ish now? You know, what's the incremental there? And, you know, you're now starting to put them out into the world on their own, right? It's our sort of private label brand.com websites. You know, what's the evolution? Is that what gets you the extra eight percentage points? Or, you know, why are you picking sort of the 50% level at start there?

Jim Watkins, CEO

Starting with the 50% level, we always have to be a house of brands. As a retailer, we have to provide and sell what the consumer wants to buy. One of the reasons we're only guiding 50 basis points of growth in exclusive brands this year is we're seeing great success with some of our third-party brands, particularly in the workspace. And so it's a little bit of a rebalancing year on the work side, and this happens in different categories every year. And I think there's enough great third-party brands out there that 50% is the right number. Above 50%, it starts to feel skewed or unbalanced to me. So I think 50% is what we can get to. 60% feels uncomfortable to me. We need to be a host of brands.

John Hazen, CFO

Yeah. And some of our own brands are their own brands in their own right. Right. And so so some people come into our competitors looking for some of our exclusive brands, not realizing that their boot barn exclusive brands. And so I think having brands that are standalone brands that do so well on their own makes a 50 percent feel like something less than 50 percent just because they're like a third party brand that's in our store.

Jim Watkins, CEO

The marketing will help the exclusive brands get to that 50%, but it's not going to be from the sales. If it happens, that'd be great, but it's not going to be from the sales. I don't expect it to be from the sales on those exclusive brand websites, codyjames.com, cheyenne.com, idlewin.com. The point of those sites is to tell the story of those brands. Watch, you know, read about what makes that brand, the ethos of the brand. Watch videos about the brand. follow the Instagram account, peruse the full breadth of that product in one place all together, and then realize the best place to buy that product is inside of a booth barn store. Because our stores are where we deliver the best experience. If that is who we are as a company, the customer service from our partners, the assortment, the smell of the leather in the stores. All those things are what make the stores so great. And I love that we're doing these sites. It was my idea, my adjustment, but it was around storytelling to drive people to the stores versus

Dylan Cardin, Analyst — Blair

online sales. So two questions that jump out of that is, one, are you leaving money on the table having your competitors not sell the brands? Or is that strategic and then they then have to come

Jim Watkins, CEO

to you? I mean, is it very unlikely that we would ever sell to our competitors? I do get the question often around wholesale. And I think about it with some of our biggest. Cody James is our biggest exclusive brand on its own. It's likely the third or fourth biggest brand in Western. And at some point, we'll look to do wholesale, perhaps with an international distributor, or perhaps outside of the competition, outside of the true work in Western customer. But I don't see a world where we'd sell it within the space.

Dylan Cardin, Analyst — Blair

Second one would be just simply, you're not talking about increasing your marketing budget. At least I haven't heard you talk about that. And so as you're thinking about seeding these other websites, if it's about storytelling, brand building, how are you kind of allocating those dollars?

Jim Watkins, CEO

Sure. we we are kind of pegged to that three percent marketing spend and with the increase in sales from new stores as well as as comp store growth um it gives us an extra roughly you know 12 million dollars to spend this year from a marketing standpoint and we're taking much of that marketing additional marketing dollars and and pushing it into the digital spend we're seeing really nice performance from meta and tiktok on the digital side both for boot barn and for our exclusive brands. And so we're going to take the digital spend up fivefold or more this year from a social and non-Google digital marketing spend. And is that, I mean, the online business

Dylan Cardin, Analyst — Blair

has been on fire. Is that really the best way to understand it? Is that you're sort of turning on a performance type of marketing that you've never really had before? I think there's, the online

Jim Watkins, CEO

business is doing great. There's three really, if I look at it, the new growth channels, the new sites are a piece of it for sure. But it's also bootbarn.com, which is north of 75% of our online business. And bootbarn.com is doing very well because of the omni-channel team, the search tools that they have put in place, which are now AI-driven, the new merchandising assortments on the site, what our planning and allocation teams are doing around inventory for e-commerce in particular. So the new sites are a contributor to that, but not the majority of the growth we're

Dylan Cardin, Analyst — Blair

seeing from online, for online. And then switching to sort of the retail channel, 900 to 1200 target, 15-ish percent growth per year. Why is that the right, why are those the

Jim Watkins, CEO

right numbers, I guess? There were three things we did. We went through an additional TAM study with a third party. We had a third party look at, you know, designated census areas and figure out where we could and should put stores. And those were good things to do. And those were great studies. But the third component that gave us the confidence was our head of stores and our head of real estate, who are very, very good at what they do. They went area by area and mapped out individually where they thought we could put stores, and they came up with a number that was very close to that 1,200 number. Individual locations? Yes.

Dylan Cardin, Analyst — Blair

Individual locations. By market. By market. And have you opened any of those that were incremental to the 900? Does that question make sense? Not quite. So if there's a 300 location count difference, and that's new, those are three, have you opened any of those in the 300? I couldn't tell you off the top of my head. Yeah. It's a cheeky question, but where I'm going with that is that there's some chatter in and around like, okay, you're opening in Paramus, New Jersey. I probably butchered that name. Paramus. Paramus. Thank you very much. Go Midwest. Does that sort of make sense? Or are you kind of getting into markets that are sort of beyond your core customer, your core competencies

Jim Watkins, CEO

that are sort of introducing that? Yeah. If we look at the stores we opened last year, the stores we're planning on opening this year, it is broad-based in geography. It is in exurbs and rural areas, as well as suburban areas, as well as more dense areas. We just opened in Pasadena and just south of downtown Los Angeles were two stores that we opened in the last couple of months. So it's in legacy markets of California and Texas. It's in new markets in New Hampshire, Maine, Alaska. And the performance has been very good from a broad-based standpoint. So nothing really to call out from a geography or new market versus legacy market. And are they different customers? Is there a construction versus agricultural component to it? That was our thesis when we started in the Northeast pre-COVID. We had this vision of we opened in Pennsylvania, and it was going to be six-inch lace-up work boots that we're going to be selling in that particular market. And ironically, it skewed as Western as our stores and legacy markets, if not slightly more, given the lack of competition.

John Hazen, CFO

I think we've learned that as we've continued to build stores that we can do a little more rural than we thought, a little more metropolitan than we thought, a little more high density than we originally thought back to your earlier question about tractor supply, a great company we love those guys, we compete on a small portion of what they sell but we also cover a different market we are a little more urban than they are, they tend to be a little more rural than we are, they have such a great broad assortment of different categories where we focus on a broad assortment of what we sell in the Western boots and apparel and that sort of thing. But yeah, the strategy, back to the real estate question, is working really well. We don't tend to give a lot of information about where we're going in different markets and how they behave just for competitive reasons, but we're pretty happy with what we're seeing. Is there a different format through which you could

Dylan Cardin, Analyst — Blair

tackle rural? I mean, you know, where I am, it's Lowe's, Walmart, Tractor Supply, Rural King, all in a row. And more people go to Rural King than Tractor Supply. It could be then Boupon. I mean, is there a format which you could go into some of those

John Hazen, CFO

markets? Yeah, we'll continue to study that. Again, we don't want to get into it on this public forum, but there definitely is an opportunity for us. I want to talk about

Dylan Cardin, Analyst — Blair

tariffs in a different way, but in the first way, is there anything that's changed in the competitive landscape kind of coming out of tariffs? Have you seen sort of brands get really, because you deal on a lot of sort of smaller, less sophisticated brands.

Jim Watkins, CEO

No, it has been, as I said earlier, really business as usual post tariffs. There hasn't been a lot of noise around the IEPA refunds or anything of that sort. So it does feel like

John Hazen, CFO

business as usual. Okay. Yeah, our third party partners have done a really nice job navigating tariffs and trying to keep costs down we've we've done the same thing with our own exclusive brands trying to to manage the the pricing down as much as we we can in this environment i'm pretty happy

Dylan Cardin, Analyst — Blair

with that are you all worried i mean thinking about this sort of more broadly from a consumer lens standpoint are you worried that price hits a wall at some point here where there's just such an affordability to everything that not only can you not take price you might even have to pull

John Hazen, CFO

back on price? I think John mentioned this earlier in his opening remarks, that the price increases that we saw last year, we're not anticipating that kind of a price increase this year. And in some instances, some of our partners are holding prices flat this year and not even seeing the regular increase of a point or two percentage-wise of price increase. So we'll have to see how things play out this summer but it's everyone's trying to be as careful as possible on on the price increases and keep them i know some consumer product companies have reduced prices in certain categories right and and we're not seeing that yet but i think things are going

Dylan Cardin, Analyst — Blair

to be more in check and a little more muted this year i think we i want to make sure we spend enough time on margins because there's just so many puts and takes on the margin side this year You've got a very high sort of leverage point. It's increased in the last six months. Can you just walk through how you're thinking about both margin puts and takes but also sort of the pacing throughout the year?

John Hazen, CFO

Sure. So on to the leverage point, we think that this year at a 3% comp that we'll be able to get EBIT margin expansion, which we're pretty proud of given the 15% new unit growth and those stores do open at a lower volume, So that does put some pressure on the occupancy rate of the company. But having some nice drivers on the merchandise margin expansion opportunities, 50 basis points is what we're planning on for merchandise margin expansion this year. The buying occupancy and distribution center costs, we expect those to deleverage around 70 basis points. And that's really a function of the number of stores that we're opening. they open at 75% the volume of a mature store so when you add 15% new units and we've added about half of our stores in the chain have been opened in the last five years and so that puts a little bit of pressure on the occupancy but each of the stores in the chain make four wall EBITDA profit and so we're happy with that and then on the SG&A side of things we expect to see leverage there on a plus two comp And so planning some nice leverage on SG&A to get us to 20 basis points of EBIT expansion on the high end of our range. So happy about that.

Dylan Cardin, Analyst — Blair

And is that the right way to think about sort of the growth targets that you're sort of putting out there, that you're sort of looking for growing at a speed that, you know, you're clearly taking aggressive market share and yet still sort of making progression?

John Hazen, CFO

Is that kind of how you said it? Yes. It feels like we're kind of in as much of an algo year as we could be, right? A low to mid-single-digit same-store sales growth and some nice merchandise margin expansion, some deleverage on buying and occupancy, but making it up with the merchant margin expansion and the SG&A leverage, managing those expenses as tightly as we can, getting leverage on the fixed costs as we open more profitable stores each year. But that kind of feels like the model as we look out over the next few years. The 20 basis points of EBIT margin expansion at the high end of our range this year would put us at 160 basis points of EBIT margin expansion over the last three years. So we're really happy with that as we march towards a 15% EBIT margin over the next few years.

Dylan Cardin, Analyst — Blair

And 15% growth, that's the right – I mean, you still feel like that's – On the new unit? Yeah, sorry, on the new unit, yeah.

John Hazen, CFO

Yes. We're happy with it. We've said 12% to 15%. This year, we've laid out a nice path to 15%. That'd be five years in a row, I believe, of 15% new units. Real estate market's a little tight to find good real estate, but we've seen some nice opportunity over the last few years, and so we're always a little cautious that not committing to 15% every year for the next five years, but 12% to 15%, we feel pretty comfortable with that. some people have asked, you know, why don't we go faster? Some people say, why don't you slow it down a little bit? And we feel good about that. And the team is doing a phenomenal job of getting those stores opened. And the field team, the real estate team, the merchandise planning team, the buyers, everybody's just doing a really nice job. The supply chain has been supporting that also.

Dylan Cardin, Analyst — Blair

But if you can't find the site, you want to open the store?

John Hazen, CFO

That's right. We don't want to open subpar stores just to hit a number. And so that's where we've baked in that flexibility to the long-term algorithm.

Dylan Cardin, Analyst — Blair

And what about tariffs in the margin conversation? I mean, how are you thinking about those through the year? I mean, they could even become a benefit, I guess.

John Hazen, CFO

Yeah, so are you talking about the tariffs that are on the table right now, the tariffs that could be on the table, and then counterbalancing the tariff-free funds? The way we're looking at tariffs is similar to how we did it last year. On the third-party product, as they raise prices, we need to raise prices to maintain that merchandise margin rate. And as we talked about earlier, it seems like it's going to be a year where we won't see the price increases that we saw a year ago and that things will be a little bit more muted as people are trying to keep costs down. And we like that. We want to create a nice value for our customers. and similar on the exclusive brands with the factories. We have some great partners overseas that have helped us kind of absorb the hit of tariffs, and we've kept pricing in check. We've had some price increases that we put in in our fourth quarter to cover the margin, but to the extent we see tariffs go up again, we'll adjust our pricing accordingly. we turn our inventory twice a year a little bit slower than that on our own exclusive brands just given the supply chain and so we have a little bit of time to react if there are additional tariffs that come our way to preserve the model and if there aren't then we don't have to take as much on price and we like that

Dylan Cardin, Analyst — Blair

as well. What about on sourcing? Because you do have some initiatives in place to sort of improve sourcing on the private label several hundred basis points you think that you can kind of put back into some of that product margin is that still on the table is that part of the sort of that is still

Jim Watkins, CEO

ongoing we we uh one of the first adjustments i made coming in as interim uh november a year and a half ago was and i said to the chair i want to build a sourcing department a little bit i know liberation day was was coming down the down the pike and uh so a little bit of serendipity or luck there that we had started to build that department this would have been tougher without out the sourcing department. That team has spent the last year doing an incredible job navigating the tariff environment, which has been very fluid to say the least. And now as this settles, they are pivoting back to growing margin and working with our factories, recosting. This will be more fiscal 28 than fiscal 27, given they got held back a year dealing with the tariff situation. But yes, we still think 100 to 200 basis points of exclusive brand margin improvement is possible as we look into FY28. And that's really just going direct to your own producers? Correct. Right. Correct. Re-costing, raw material, management, all of it.

Dylan Cardin, Analyst — Blair

And what about speed to market? Because there's a lot of younger companies now that are coming out with sort of 30-day, 60-day lead times. Is that part of that sort of same initiative? Could you cut down on some of your private label? We are cutting down on our lead times,

Jim Watkins, CEO

But we're cutting down from a long lead time to a slightly less long lead time. We just, you know, you look, of course, at the quinces of the world or whoever it may be. They do an amazing job, but their business is changing so quickly in that world of fashion. And so much of what we sell is replenishment that the advantage of really trying to pivot that quickly, while possible, is not necessary. And I really don't think it'd be that beneficial at all to our business.

Dylan Cardin, Analyst — Blair

And inventory turns is not something that you kind of target as a metric to improve upon because the business is so consistent.

Jim Watkins, CEO

We would rather be in stock and be able to service a customer. It's part of the reason we had that plus 54 year when everybody else was inventory challenged, right?

Dylan Cardin, Analyst — Blair

You bought in June of 2020. You remember well. Which was crazy. All right. Well, that's time. Thank you, everyone, for joining us. There is a breakout. And it is in room. Richardson. Thank you.