Boot Barn Holdings, Inc. Q2 FY2025 earnings call

Leadership Changes - Jim Conroy announced stepping down as President and CEO to join Ross Stores; John Hazen becomes Interim CEO effective November 22nd, and Pete Starrett transitions to Executive Chairman. ### Second Quarter Results - Revenue increased 14%, same-store sales grew 4.9%. Opened 15 stores, ending the quarter with 425 stores across 46 states. ### Strategic Initiatives - Store Expansion: Expect to open 60 new stores in 2025. Same-Store Sales Growth: Broad-based category growth, with all major merchandise categories showing positive same-store sales. Omnichannel Leadership: E-commerce comp sales grew 10%, Boot Barn app comprises ~10% of online sales, and testing an AI solution Cassidy. Merchandise Margin: Increased 70 basis points in Q2, expected to grow 200 basis points in the second half through supply-chain efficiencies, buying economies, and exclusive brand penetration.

In the second quarter of 2025, net sales increased 13.7% to $426 million. Same-store sales grew 4.9%, with retail store same-store sales up 4.3% and e-commerce same-store sales up 10.1%. Gross profit rose 14% to $153 million, with a gross profit rate of 35.9%. Inventory increased 22% over the prior year to $713 million, with a ~10% increase on a same-store basis. Exclusive brand penetration decreased by 50 basis points in the second quarter but is expected to grow by 200 basis points in the second half of the year, contributing to merchandise margin expansion.

Third Quarter Outlook - Expected total sales at the high end of the guidance range to be $595 million, consolidated same-store sales up 6%, gross profit $232 million (38.9% of sales), income from operations $87 million, and EPS $2.07. ### Full-Year 2025 Outlook - Raised full-year guidance: total sales expected $1.91 billion (14% growth), same-store sales up 5%, gross profit $713 million (37.4% of sales), income from operations $233 million, net income $174 million, and EPS $5.60. Anticipates opening 14 stores in Q3 and 21 stores in Q4.

• Potential impact of the election on consumer spending, which could affect comps. - Tariff risks related to sourcing from China, where over 50% of exclusive brands were previously sourced, though exposure has been derisked. - Distractions from the election period that may impact customer behavior and sales.

Q: Elaborate on the material inflection in comps that was seen as the second quarter progressed and trends in October.

A: Jim Conroy noted broad-based sequential improvement across all categories, regions, and departments, with every major merchandise department and region showing positive same-store sales growth. October same-store sales were 5.1%, with store comp up 4.3% and e-commerce up 12.5%.

Q: What are the drivers of merchandise margin expansion?

A: Jim Conroy stated that merchandise margin is expected to improve 100 basis points in Q3, with half from supply-chain efficiencies, 40 basis points from better-buying economies of scale, and exclusive brand penetration growing by 200 basis points.

Q: How is Boot Barn picking up market share?

A: Jim Conroy attributed market share pickup to outperforming competitors, a balanced assortment, and partnerships with country music stars like Brad Paisley, Miranda Lambert, and Morgan Wallen.

Q: Can you highlight other country music star partnerships and their target demographics?

A: Besides Morgan Wallen, Boot Barn has long-standing partnerships with Brad Paisley and Miranda Lambert. These partnerships target specific demographics, with efforts to expand reach to different audience segments through such relationships.

Q: What are the drivers of comps growth in terms of transactions and basket size?

A: Jim Conroy said transactions were up about 2%, basket size up about 2%, with all four components of the store transaction (transactions, AUR, UPT, average transaction) up in the quarter.

Q: How are new stores performing compared to legacy stores?

A: Jim Watkins mentioned new stores perform extremely well across geographies, with second-year comps showing outperformance against mature stores, though new stores start at lower volume than legacy stores.

Q: Talk about inventory and exclusive brand penetration.

A: Jim Conroy clarified inventory on a same-store basis was up 10.5%, and exclusive brand penetration is up 200 basis points, with expectations of continued growth in the second half.

Q: What qualities are being looked for in the permanent CEO?

A: Jim Conroy stated the Board values collaboration, and John Hazen is well-positioned, though the Board will conduct thorough due diligence, potentially considering internal and external candidates.

Q: Update on Cody James Black 1978 rollout?

A: Jim Conroy said the brand is in 300 stores, is the highest price point, outperforming, but not a major driver of same-store sales comps.

Q: Impact of election and Mexico sourcing?

A: Jim Conroy said the election could be a distraction affecting comps, and ~25% of exclusive brands come from Mexico.

Q: Explanation of SG&A deleverage?

A: Jim Conroy noted higher incentive-based compensation, legal expenses, and timing of sales guide contributed to SG&A deleverage, but leverage is considered on a full-year basis.