Boot Barn Holdings, Inc. Announces Third Quarter Fiscal Year 2018 Financial Results; Updates Fiscal Year 2018 Outlook

01/31/2018

IRVINE, Calif.--(BUSINESS WIRE)-- Boot Barn Holdings, Inc. (NYSE:BOOT) today announced its financial results for the third fiscal quarter ended December 30, 2017.

Highlights for the quarter ended December 30, 2017, were as follows:

  • Net sales increased 12.7% to $224.7 million.
  • Same store sales increased 5.2%, with stores outperforming e-commerce sales.
  • Net income per diluted share was $0.73 based on 27.6 million weighted average diluted shares outstanding. Excluding the impact of the change in federal tax law, net income per diluted share was $0.46 compared to guidance of $0.40 to $0.43, which was based on 27.2 million weighted average diluted shares outstanding.
  • The Company opened four new stores during the quarter.

Jim Conroy, Chief Executive Officer, commented, “We experienced solid sales growth during the third quarter and through January driven by the combination of a healthier consumer environment and solid execution across the company. Our retail stores led our growth with improvements in our marketing, merchandising, and in-store initiatives. I am very pleased with our holiday performance as we drove sales growth without relying on outsized sales promotion, resulting in an increase to merchandise margin. At the same time, we continue to build out our multi-brand e-commerce strategy, having advanced some important capital projects in our fulfillment center. While these investments resulted in some temporary disruption to e-commerce revenue and unanticipated labor and freight costs during the peak holiday season, I believe we are well positioned to build our market share on this platform going forward. I am pleased with the current tone of business and believe we can continue to further expand our market share as we reaccelerate new store openings and capitalize on our advanced omni-channel capabilities.”

Operating Results for the Third Quarter Ended December 30, 2017

  • Net sales increased 12.7% to $224.7 million from $199.4 million in the prior-year period. Net sales increased due to an increase of 5.2% in same store sales, the sales contribution from seven new stores opened over the past twelve months and the four stores acquired from Wood’s Boots, and sales from the Country Outfitter site that was acquired in February 2017.
  • Gross profit was $71.9 million, or 32.0% of net sales, compared to $63.4 million, or 31.8% of net sales, in the prior-year period. Gross profit increased primarily due to increased sales. As a percentage of net sales, consolidated gross profit increased primarily as a result of a 10 basis point increase in merchandise margin rate and a 10 basis point decrease in buying and occupancy costs. The higher merchandise margin rate was driven by more full-price selling, less clearance and increased exclusive brand penetration, partially offset by higher freight due to the temporary challenges in our e-commerce fulfillment center. The improvement in buying and occupancy costs as a percentage of sales resulted from leveraging fixed occupancy costs on increased sales, partially offset by increased labor costs in the Company’s fulfillment center to meet holiday e-commerce demand.
  • Selling, general and administrative expense was $47.5 million, or 21.2% of net sales, compared to $42.5 million, or 21.3% of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of increased sales and additional costs for both new and acquired stores. Selling, general and administrative expenses as a percentage of sales decreased as a result of expense leverage on higher sales. A net pre-tax gain from insurance and other settlements related primarily to losses suffered in the second quarter from Hurricane Harvey was offset by incentive compensation expense in the third quarter.
  • Income from operations increased 16.9%, to $24.4 million, or 10.9% of net sales, compared to $20.9 million, or 10.5% of net sales, in the prior-year period.
  • The Company opened four new stores, ending the quarter with 226 stores in 31 states.
  • Net income was $20.1 million, or $0.73 per diluted share. Excluding the impact of the change in federal tax law that generated approximately $0.24 per share of tax benefit from the revaluation of deferred tax liabilities and $0.03 of tax benefit from a lower effective tax rate, net income per diluted share was $0.46, compared to $0.39 per diluted share, in the prior-year period.

Operating Results for the Nine Months Ended December 30, 2017

  • Net sales increased 8.6% to $507.2 million from $466.8 million in the prior-year period. Net sales increased due to the sales contribution from seven new stores opened over the past twelve months and the four stores acquired from Wood’s Boots, a 3.1% increase in same store sales, and sales from the Country Outfitter site that was acquired in February 2017.
  • Gross profit was $155.0 million, or 30.6% of net sales, compared to $140.6 million, or 30.1% of net sales, in the prior-year period. Gross profit increased primarily due to increased sales. As a percentage of sales, consolidated gross profit increased as a result of a 40 basis point increase in merchandise margin rate and 10 basis points of occupancy leverage.
  • Selling, general and administrative expense was $120.0 million, or 23.7% of net sales, compared to $110.8 million, or 23.7% of net sales, in the prior-year period. Selling, general and administrative expenses increased as a result of additional costs associated with the opening of new and acquired stores over the last twelve months and incremental operational costs associated with the growth in the business.
  • Income from operations increased 17.5%, to $35.0 million, or 6.9% of net sales, compared to $29.8 million, or 6.4% of net sales, in the prior-year period.
  • The Company opened five new stores, acquired four stores from Wood’s Boots and closed two Boot Barn stores, ending the period with 226 stores in 31 states.
  • Net income was $22.0 million, or $0.81 per diluted share. Excluding the impact of the change in federal tax law, net income per diluted share was $0.54, compared to $0.43 per diluted share, in the prior-year period.

Balance Sheet Highlights as of December 30, 2017

  • Cash of $19.1 million.
  • Average inventory per store was flat on a comp store basis compared to December 24, 2016.
  • Total net debt of $182.9 million, including a zero balance under the revolving credit facility.

Fiscal Year 2018 Outlook

For the fiscal fourth quarter ending March 31, 2018 the Company expects:

  • Same store sales growth of 4.0% to 5.0%.
  • Income from operations between $8.3 million and $8.6 million, which includes an estimated $0.3 million of secondary offering costs.
  • Net income of $4.2 million to $4.5 million, which is based on a blended tax rate of 5.8% for the quarter. The Company’s effective tax rate of 36.2% is expected to be further reduced by an estimated tax benefit of $1.4 million, or $0.05 per share, related to stock option exercises made primarily in conjunction with the secondary offering that closed on January 22, 2018. Net income also includes the estimated pre-tax secondary offering costs of $0.3 million, or approximately $0.01 per share.
  • Net income per diluted share of $0.15 to $0.16 based on 28.4 million weighted average diluted shares outstanding.

For the fiscal year ending March 31, 2018, the Company now expects:

  • To open 10 new stores, including the acquisition of the four Wood’s Boots stores.
  • Income from operations between $43.2 million and $43.5 million, which includes an estimated $0.3 million of secondary offering costs.
  • Net income between $26.2 million and $26.5 million, which includes a $6.8 million tax benefit from the revaluation of deferred tax liabilities and an updated annual tax rate pursuant to tax reform.
  • Net income per diluted share of $0.95 to $0.96 based on 27.7 million weighted average diluted shares outstanding compared to the Company’s November 2, 2017 outlook of $0.57 to $0.61 which assumed 27.2 million weighted average diluted shares outstanding.

Conference Call Information

A conference call to discuss the financial results for the third quarter of fiscal year 2018 is scheduled for today, January 31, 2018, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (800) 263-0877. 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 February 28, 2018, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 3460704. 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 226 stores in 31 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. Sheplers has been part of the western, outdoor, and work lifestyle for over 100 years. Beginning in February 2017, the Company has operated 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.

Non-GAAP Financial Measures

The Company presents adjusted income from operations, adjusted net income, adjusted net income per diluted share and adjusted EBITDA to help the Company describe its operating and financial performance. These financial measures are non-GAAP financial measures and should not be construed in isolation or as an alternative to actual income from operations, actual net income, and actual earnings per diluted share and other income or cash flow statement data (as presented in the Company’s consolidated financial statements in accordance with generally accepted accounting principles in the United States, or GAAP), or as a better indicator of operating performance or as a measure of liquidity. These non-GAAP financial measures, as defined by the Company, may not be comparable to similar non-GAAP financial measures presented by other companies. The Company’s management believes that these non-GAAP financial measures provide investors with transparency and help illustrate financial results by excluding items that may not be indicative of, or are unrelated to, the Company’s core operating results, thereby providing a better baseline for analyzing trends in the underlying business. See the table at the end of this press release for a reconciliation of adjusted income from operations to income from operations, adjusted net income to net income, and adjusted net income per diluted share to net income per diluted share. Additionally, see the table at the end of this press release for a reconciliation of adjusted EBITDA, as well as Consolidated EBITDA as defined in the Company’s loan agreements, to net income.

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: decreases in consumer spending due to declines in consumer confidence, local economic conditions or changes in consumer preferences and the Company’s ability to effectively execute on its growth strategy; the failure to maintain and enhance its strong brand image; inability to compete effectively; failure to maintain good relationships with its key suppliers; and inability 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.

       
Boot Barn Holdings, Inc.
Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 
December 30, April 1,
2017 2017
Assets      
Current assets:
Cash and cash equivalents $ 19,126 $ 8,035
Accounts receivable, net 6,388 4,354
Inventories 207,538 189,096
Prepaid expenses and other current assets   12,277           22,818  
Total current assets 245,329 224,303
Property and equipment, net 88,043 82,711
Goodwill 193,095 193,095
Intangible assets, net 63,612 64,511
Other assets   1,144           961  
Total assets $ 591,223   $       565,581  
Liabilities and stockholders’ equity
Current liabilities:
Line of credit $ $ 33,274
Accounts payable 117,513 77,482
Accrued expenses and other current liabilities 50,456 35,983
Current portion of notes payable, net             1,062  
Total current liabilities 167,969 147,801
Deferred taxes 10,102 20,961
Long-term portion of notes payable, net 182,939 191,517
Capital lease obligation 7,440 7,825
Other liabilities   18,440           17,568  
Total liabilities   386,890           385,672  
 
Stockholders’ equity:
Common stock, $0.0001 par value; December 30, 2017 - 100,000 shares authorized, 26,753 shares issued; April 1, 2017 - 100,000 shares authorized, 26,575 shares issued 3 3
Preferred stock, $0.0001 par value; 10,000 shares authorized, no shares issued or outstanding
Additional paid-in capital 144,687 142,184
Retained earnings 59,815 37,791

Less: Common stock held in treasury, at cost, 30 and 14 shares at December 30, 2017 and April 1, 2017, respectively

  (172 )         (69 )
Total stockholders’ equity   204,333           179,909  
Total liabilities and stockholders’ equity $ 591,223   $       565,581  
 

           
Boot Barn Holdings, Inc.
Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 
Thirteen Weeks Ended   Thirty-Nine Weeks Ended
December 30, December 24, December 30, December 24,
2017 2016 2017 2016
Net sales $ 224,732 $ 199,431 $ 507,183 $ 466,813
Cost of goods sold   152,795   136,068   352,164   326,255
Gross profit 71,937 63,363 155,019 140,558
Selling, general and administrative expenses   47,542   42,500 120,046 110,803
Income from operations 24,395 20,863 34,973 29,755
Interest expense, net   3,821   3,637   11,268   10,848
Income before income taxes 20,574 17,226 23,705 18,907
Income tax expense   425   6,719   1,681   7,298
Net income $ 20,149 $ 10,507 $ 22,024 $ 11,609
 
Earnings per share:
Basic shares $ 0.76 $ 0.40 $ 0.83 $ 0.44
Diluted shares $ 0.73 $ 0.39 $ 0.81 $ 0.43
Weighted average shares outstanding:
Basic shares 26,674 26,495 26,614 26,432
Diluted shares 27,596 27,165 27,146 26,891
 

       
Boot Barn Holdings, Inc.
Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Thirty-Nine Weeks Ended
December 30, December 24,
2017 2016
Cash flows from operating activities
Net income $ 22,024 $ 11,609
Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation 11,619 10,688
Stock-based compensation 1,850 2,260
Excess tax benefit (7 )
Amortization of intangible assets 899 1,615
Amortization and write-off of debt issuance fees and debt discount 895 843
Loss on disposal of property and equipment 73 163
Hurricane-related asset write-off 2,525
Insurance recovery receivable (168 )
Accretion of above market leases (1 ) (33 )
Deferred taxes (1,069 ) 3,256
Changes in operating assets and liabilities:
Accounts receivable, net (1,866 ) (2,422 )
Inventories (17,912 ) (3,697 )
Inventories from purchase of Wood's Boots (2,752 )
Prepaid expenses and other current assets 736 2,256
Other assets (183 ) 1,150
Accounts payable 40,683 23,513
Accrued expenses and other current liabilities 14,416 12,762
Other liabilities   873     4,207  
Net cash provided by operating activities $ 72,642   $ 68,163  
Cash flows from investing activities
Purchases of property and equipment $ (18,676 ) $ (17,698 )
Hurricane-related insurance recoveries for property and equipment   697      
Net cash used in investing activities $ (17,979 ) $ (17,698 )
Cash flows from financing activities
Payments on line of credit - net $ (33,274 ) $ (25,795 )
Repayments on debt and capital lease obligations (10,328 ) (1,788 )
Debt issuance fees paid (520 )
Tax withholding payments for net share settlement (103 ) (55 )
Excess tax benefit from stock options 7
Proceeds from the exercise of stock options   653     1,180  
Net cash used in financing activities $ (43,572 ) $ (26,451 )
 
Net increase in cash and cash equivalents 11,091 24,014
Cash and cash equivalents, beginning of period   8,035     7,195  
Cash and cash equivalents, end of period $ 19,126   $ 31,209  
 
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 470 $ 1,389
Cash paid for interest $ 10,192 $ 10,014
Supplemental disclosure of non-cash activities:
Unpaid purchases of property and equipment $ 1,249 $ 1,422
 

                     
Boot Barn Holdings, Inc.
Store Count
 
Fiscal Year Ended Fiscal Year Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended
March 28, March 26, June 25, September 24, December 24, April 1, July 1, September 30, December 30,
2015 2016 2016 2016 2016 2017 2017 2017 2017
Store Count (BOP) 152 169 208 210 212 219 219 220 222
Opened/Acquired 18 47 2 2 6 2 1 4 4
Relocated 1 (1 )
Closed Boot Barn Stores (1 ) (2 ) (1 ) (2 )
Closed Sheplers Stores   (6 )    
Store Count (EOP) 169   208   210 212 219 219   220 222   226
 
             
Adjusted EBITDA Reconciliation
(Unaudited)
 

Thirteen
Weeks Ended

Thirteen Weeks Ended

Fourteen
Weeks Ended

Thirteen
Weeks Ended

December 30,
2017

September 30,
2017

July 1,
2017

April 1,
2017

December 24,
2016

Boot Barn's Net income $ 20,149 $ 1,098 $ 777 $ 2,588 $ 10,507
Income tax expense 425 751 506 1,624 6,719
Interest expense, net 3,821 3,789 3,658 3,851 3,637
Depreciation and intangible asset amortization   4,263   4,142     4,113   4,407     4,207  
Boot Barn's EBITDA $ 28,658 $ 9,780 $ 9,054 $ 12,470 $ 25,070
 
Non-cash stock-based compensation (a) $ 597 $ 678 $ 575 $ 763 $ 754
Non-cash accrual for future award redemptions (b) 47 (162 ) 5 (489 ) 399
Loss/(gain) on disposal of assets (c) 12 47 14 204 (22 )
Store impairment charge (d)   -   -     -   1,164     -  
Boot Barn's Adjusted EBITDA $ 29,314 $ 10,343 $ 9,648 $ 14,112 $ 26,201
 
Additional adjustments (e)   862   418     628   156     778  
Consolidated EBITDA per Loan Agreements $ 30,176 $ 10,761 $ 10,276 $ 14,268 $ 26,979

________________________________________________________

(a)

 

Represents non-cash compensation expenses related to stock options, restricted stock awards and restricted stock units granted to certain of our employees and directors.

(b)

Represents the non-cash accrual for future award redemptions in connection with our customer loyalty program.

(c)

Represents loss/(gain) on disposal of assets from store closures.

(d)

Represents the store impairment charge recorded at three stores in the fourteen weeks ended April 1, 2017 in order to reduce the carrying amount of the assets to their estimated fair values.

(e)

Adjustments to Boot Barn's Adjusted EBITDA as provided in the 2015 Golub Term Loan and June 2015 Wells Fargo Revolver include pre-opening costs, franchise and state taxes, and other miscellaneous adjustments.

Source: Boot Barn Holdings, Inc.

Investor:

ICR, Inc.

Brendon Frey, 203-682-8216

BootBarnIR@icrinc.com

or

Media:

Boot Barn Holdings, Inc.

Jim Watkins, 949-453-4428

Vice President, Investor Relations

BootBarnIRMedia@bootbarn.com

Investor Relations Contact

Brendon Frey
Investor Relations: ICR, Inc.
Phone: 203.682.8216
Email: BootBarnIR@icrinc.com

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Media Relations Contact

Jim Watkins
Vice President, Investor Relations
Phone: 949.453.4400 ext. 579
Email: BootBarnIRMedia@bootbarn.com