Boot Barn Holdings, Inc. Announces Fourth Quarter Fiscal Year 2020 Financial Results

Boot Barn Holdings, Inc. (NYSE: BOOT) today announced its financial results for the fourth fiscal quarter and fiscal year ended March 28, 2020.

For the quarter ended March 28, 2020:

• Net sales decreased 2.1% to $188.6 million.
• Same store sales decreased 4.7%, comprised of a decrease in retail store same store sales of 7.1% and an increase in e-commerce sales of 7.5%.
• Net sales and same store sales growth were solid during the first 10 weeks of the quarter before declining significantly during the last three weeks as a result of the COVID-19 crisis.
• Net income was $5.7 million, or $0.20 per diluted share, compared to $8.7 million, or $0.30 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes a $0.01 per share benefit due to income tax accounting for share-based compensation and a $0.01 per share benefit from the realization of a state tax operating loss. Net income per diluted share in the prior-year period includes $0.02 per share of tax expense related to a return to provision adjustment. Excluding the tax adjustments in both periods, net income per diluted share was $0.18, compared to $0.32 in the prior-year period.
• The company opened 8 new stores during the quarter.

For the fiscal year ended March 28, 2020:

• Net sales increased 8.8% to $845.6 million.
• Same store sales increased 5.0%, comprised of an increase in retail store same store sales of 4.5% and an increase in e-commerce sales of 7.4%.
• Net income was $47.9 million, or $1.64 per diluted share, compared to $39.0 million, or $1.35 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes a $0.07 per share benefit due to income tax accounting for share-based compensation and a $0.01 per share benefit from the realization of a state tax operating loss. Net income per diluted share in the prior-year period includes a $0.13 per share benefit due to income tax accounting for share-based compensation and $0.02 per share of tax expense related to a return to provision adjustment. Excluding the tax adjustments in both periods, net income per diluted share was $1.56, compared to $1.24 in the prior-year period.
• The company added 20 stores during the year, including 19 new stores and 1 acquired store.

Jim Conroy, Chief Executive Officer, commented, “These are difficult times and our hearts go out to those who are suffering as a result of the COVID-19 crisis. Over the past two months, our primary focus has been on protecting our employees and safely providing our customers with the essential products they need to support our nation during this unprecedented situation. The majority of our stores have remained open, as most jurisdictions have recognized Boot Barn as a business that provides boots and apparel to those working in essential industries.”

Mr. Conroy continued, “From a financial perspective, in mid-March we were expecting to conclude another solid quarter with results tracking within our guidance range. However, as a result of COVID-19 and stay-at-home directives, our business slowed dramatically. Same store sales turned negative, declining 8% in the third week of fiscal March and more than 50% during the final two weeks of the quarter. While business in April continued to be significantly negative, we have seen a sequential steady increase in sales every week since the end of March, potentially driven in part by our customers receiving government stimulus payments. While the majority of our stores remain open, they are operating at reduced hours and are experiencing significant declines in traffic. This headwind has been partially offset by an acceleration in demand on our e-commerce sites. Despite these challenging times, I am confident that we will emerge from this crisis well positioned to resume our momentum and deliver against our long-term financial objectives.”

COVID-19 Update

As described in a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 9, 2020, COVID-19 has impacted the Company through store closures and decreased store traffic. Below is a summary of the current status of the Company’s stores and the actions taken to mitigate the financial impact of COVID-19 and preserve liquidity to-date.

• Store Operations: The Company has remerchandised the stores, prioritizing essential product for critical workers, streamlined the stores to enable customers to get in and out of the store quickly, and augmented the assortment. The Company has worked with authorities, municipalities, and law enforcement in order to comply with local health and safety regulations where stores are open for business. As of May 19, 2020, 242 of the 260 Boot Barn stores are open.
• Board of Directors and Executive Compensation: The Company’s Board of Directors has agreed to waive the current quarter’s payment of their cash retainer fee. The Company’s Chief Executive Officer, senior leadership team and other members of management have significantly reduced their salaries.
• Distribution Centers: To help ensure the well-being of its associates, the Company has put enhanced safety protocols in place, including temperature checks, strict social distancing, hand sanitizer in all areas, and heightened cleaning of the facilities in accordance with CDC guidelines.
• Expense Saving Measures: As a result of decreased traffic in the stores, the Company has reduced its hours of operations and the hours of its store associates. The Company has also temporarily furloughed a significant number of the employees at its central office location, distribution centers, and stores.
• Credit Facility and Cash Position: As of March 28, 2020, the Company had $35.1 million of availability remaining on its $165.0 million line of credit and $69.6 million of cash on hand.
• Capital Expenditures and Cash Management: The Company is intently focused on cash savings as it partners with its vendors on timing of cash payments. It has also suspended most of its capital expenditures and delayed the opening of many new stores.

Operating Results for the Fourth Quarter Ended March 28, 2020

• Net sales decreased 2.1% to $188.6 million from $192.8 million in the prior-year period. Consolidated same store sales decreased 4.7% with retail store same store sales down 7.1% and e-commerce same store sales up 7.5%. Same store sales growth was solid during the first 10 weeks of the quarter before declining significantly during the last three weeks, primarily as a result of decreased traffic in our stores that resulted from store closures and customers staying at home in response to the COVID-19 crisis.

• Gross profit was $58.0 million, or 30.7% of net sales, compared to $63.4 million, or 32.9% of net sales, in the prior-year period. Gross profit decreased primarily due to decreased sales resulting from the COVID-19 crisis. The decrease in gross profit rate of 220 basis points was driven by 210 basis points of deleverage in buying and occupancy costs and a 10 basis point decline in merchandise margin rate. The deleverage in buying and occupancy costs was primarily a result of lower volume sales. Merchandise margin declined 10 basis points as a result of higher shrink when compared to lower than normal shrink in the prior year period and higher outbound freight resulting from growth in e-commerce sales penetration as a percentage of sales. These increases more than offset the product margin expansion from increased exclusive brand penetration and more full-price selling.

• Selling, general and administrative expenses were $48.3 million, or 25.6% of net sales, compared to $46.9 million, or 24.3% of net sales, in the prior-year period. The increase in selling, general and administrative expenses was primarily a result of additional expenses for both new and acquired stores and COVID-19-related expenses. Selling, general and administrative expenses as a percentage of sales increased by 130 basis points as a result of deleverage from lower sales and COVID-19-related expenses in the current-year period.

• Income from operations decreased 41.2% to $9.7 million, or 5.1% of net sales, compared to $16.5 million, or 8.6% of net sales, in the prior-year period. This decline in income from operations is a result of the negative impact on sales, gross margin and selling, general and administrative expenses due to the COVID-19 crisis.

• Net income was $5.7 million, or $0.20 per diluted share, compared to $8.7 million, or $0.30 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes a $0.01 per share benefit due to income tax accounting for share-based compensation and a $0.01 per share benefit from the realization of a state tax operating loss. Net income per diluted share in the prior-year period includes $0.02 per share of tax expense related to a return to provision adjustment. Excluding the tax adjustments in both periods, net income per diluted share was $0.18, compared to $0.32 in the prior-year period.

Operating Results for the Fiscal Year Ended March 28, 2020

• Net sales increased 8.8% to $845.6 million from $776.9 million in the prior-year period. Consolidated same store sales increased 5.0% with retail store same store sales up 4.5% and e-commerce same store sales up 7.4%. The increase in net sales was driven by the increase in same store sales and sales from stores added over the past twelve months, partially offset by the significant decline in net sales in the final three weeks of the fiscal year due to the COVID-19 crisis.

• Gross profit was $276.5 million, or 32.7% of net sales, compared to $251.4 million, or 32.4% of net sales, in the prior-year period. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. The 30 basis point increase in gross profit rate was driven by a 90 basis point increase in merchandise margin rate, partially offset by 60 basis points of deleverage in buying and occupancy costs. Growth in exclusive brand penetration and more full price selling fueled the improvement in merchandise margin. The deleverage in buying and occupancy costs was driven primarily by the addition of personnel in our product design and development team.

• Selling, general and administrative expenses were $202.8 million, or 24.0% of net sales, compared to $187.1 million, or 24.1% of net sales, in the prior-year period. The increase in selling, general and administrative expenses was primarily a result of additional costs to support higher sales and expenses for both new and acquired stores. Selling, general and administrative expenses as a percentage of sales decreased by 10 basis points as a result of expense leverage on higher sales.

• Income from operations grew 14.5% to $73.7 million, or 8.7% of net sales, compared to $64.3 million, or 8.3% of net sales, in the prior-year period. This increase represents approximately 40 basis points of improvement in operating profit margin.

• Net income was $47.9 million, or $1.64 per diluted share, compared to $39.0 million, or $1.35 per diluted share in the prior-year period. Net income per diluted share in the current-year period includes a $0.07 per share benefit due to income tax accounting for share-based compensation and a $0.01 per share benefit from the realization of a state tax operating loss. Net income per diluted share in the prior-year period includes a $0.13 per share benefit due to income tax accounting for share-based compensation and $0.02 per share of tax expense related to a return to provision adjustment. Excluding the tax adjustments in both periods, net income per diluted share was $1.56, compared to $1.24 in the prior-year period.

Current Business

The following table includes same store sales, net sales and e-commerce as a percentage of net sales for Fiscal April, which includes the four weeks beginning March 29, 2020, and the first three weeks of Fiscal May, which began on April 26, 2020:

Fiscal Year 2021 Outlook

The COVID-19 crisis continues to adversely affect the Company’s results. Due to the ongoing uncertainty created by COVID-19, the Company is not providing first quarter and fiscal year 2021 guidance at this time.

Conference Call Information

A conference call to discuss the financial results for the fourth quarter of fiscal year 2020 is scheduled for today, May 20, 2020, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to (877) 451-6152. The conference call will also be available to interested parties through a live webcast at investor.bootbarn.com. Please visit the website and select the “Events and Presentations” link at least 15 minutes prior to the start of the call to register and download any necessary software. A telephone replay of the call will be available until June 20, 2020, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13703850. Please note participants must enter the conference identification number in order to access the replay.

About Boot Barn

Boot Barn is the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories for men, women and children. The Company offers its loyal customer base a wide selection of work and lifestyle brands. As of the date of this release, Boot Barn operates 260 stores in 35 states, in addition to an e-commerce channel www.bootbarn.com. The Company also operates www.sheplers.com, the nation’s leading pure play online western and work retailer and www.countryoutfitter.com, an e-commerce site selling to customers who live a country lifestyle. For more information, call 888-Boot-Barn or visit www.bootbarn.com.

Forward Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to, by way of example and without limitation, our financial condition, liquidity, profitability, results of operations, margins, plans, objectives, strategies, future performance, business and industry. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate", "estimate", "expect", "project", "plan“, "intend", "believe", “may”, “might”, “will”, “could”, “should”, “can have”, “likely”, “outlook” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events, but not all forward-looking statements contain these identifying words. These forward-looking statements are based on assumptions that the Company’s management has made in light of their industry experience and on their perceptions of historical trends, current conditions, expected future developments and other factors they believe are appropriate under the circumstances. As you consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control) and assumptions. These risks, uncertainties and assumptions include, but are not limited to, the following: the effect of COVID-19 on our business operations, growth strategies, store traffic, employee availability, financial condition, liquidity and cash flow; decreases in consumer spending due to declines in consumer confidence, local economic conditions or changes in consumer preferences; the Company’s ability to effectively execute on its growth strategy; and the Company’s failure to maintain and enhance its strong brand image, to compete effectively, to maintain good relationships with its key suppliers, and to improve and expand its exclusive product offerings. The Company discusses the foregoing risks and other risks in greater detail under the heading “Risk factors” in the periodic reports filed by the Company with the Securities and Exchange Commission. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. Because of these factors, the Company cautions that you should not place undue reliance on any of these forward-looking statements. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict those events or how they may affect the Company. Further, any forward-looking statement speaks only as of the date on which it is made. Except as required by law, the Company does not intend to update or revise the forward-looking statements in this press release after the date of this press release.

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