Boot Barn Holdings, Inc. — Q3 FY2024 Form 10-Q
Reporting period: Thirteen and thirty-nine weeks ended December 30, 2023. Comparisons are with the periods ended December 24, 2022. Fiscal 2024 is a 52-week year; fiscal 2023 was a 53-week year.
Business context and performance
Boot Barn operates western and workwear retail stores and e-commerce channels. At quarter-end it operated 382 stores in 44 states, versus 333 stores in 43 states a year earlier. Stores generated 87% of Q3 sales and e-commerce 13%. New-store sales supported reported revenue growth, while comparable-store sales declined.
Key financial metrics
| Metric | Q3 FY2024 | Q3 FY2023 | 39 weeks FY2024 | 39 weeks FY2023 |
|---|---|---|---|---|
| Net sales | $520.4 million | $514.6 million | $1,278.6 million | $1,232.0 million |
| Gross profit | $199.1 million | $187.8 million | $475.0 million | $454.7 million |
| Gross margin | 38.3% | 36.5% | 37.2% | 36.9% |
| Operating income | $75.1 million | $72.5 million | $160.0 million | $169.1 million |
| Operating margin | 14.4% | 14.1% | 12.5% | 13.7% |
| Net income | $55.6 million | $52.8 million | $117.6 million | $124.1 million |
| Diluted EPS | $1.81 | $1.74 | $3.84 | $4.09 |
- Q3 consolidated same-store sales fell 9.7%; excluding e-commerce, they fell 9.4%. For the 39-week period, consolidated same-store sales fell 6.3%; excluding e-commerce, they fell 5.6%.
- Q3 merchandise margin improved, aided by lower freight expense, lower promotional activity and greater exclusive-brand penetration. Higher occupancy and distribution costs, including costs from 49 new stores and the Kansas City distribution center, partly offset the benefit.
- Q3 SG&A rose 7.5% to $124.0 million; as a share of sales it increased to 23.8% from 22.4%. For 39 weeks, SG&A rose 10.3% to $315.0 million and increased to 24.6% of sales from 23.2%.
Cash flow, debt and liquidity
- For 39 weeks, operating cash flow was $240.5 million, versus $87.1 million a year earlier. The filing attributes the improvement in part to inventory decreasing by $26.1 million, compared with a $117.9 million inventory increase in the prior-year period, and to changes in payables and accrued liabilities.
- Capital expenditures were $91.3 million, versus $83.1 million. Cash and cash equivalents increased to $107.2 million at December 30, 2023, from $18.2 million at April 1, 2023.
- The company repaid $66.0 million on its revolving credit facility during the 39-week period. No revolver borrowings were outstanding at quarter-end; the facility is $250 million and matures July 11, 2027. Letters of credit totaled $2.3 million. The company reported compliance with its debt covenants.
- Interest expense was $0.5 million for Q3 and $2.0 million for 39 weeks, down from $2.3 million and $4.3 million, respectively. The company reported no revolver borrowings at quarter-end, though the facility has variable-rate exposure when drawn.
- Lease liabilities totaled $434.6 million, including $419.1 million for operating leases and $15.5 million for finance leases. The filing also reports $93.6 million of minimum commitments for operating leases signed but not yet commenced.
Outlook, commentary and risks
- Management expects fiscal 2024 capital expenditures of $95–$105 million, net of estimated landlord tenant allowances of $26.5 million, funded from operating cash flows. Planned investment includes new stores, store remodeling, technology and the Kansas City distribution center.
- Management believes operating cash flows and credit-facility availability will cover working capital, planned capital spending and other anticipated cash needs for at least the next 12 months. The filing provides no earnings or revenue guidance.
- Management cautions that performance is sensitive to consumer discretionary spending, economic conditions, consumer confidence and inflation. Results are also affected by seasonality, weather, promotional activity, competition, merchandise mix and the pace and economics of store openings.
- Management said pending or threatened litigation is not expected to have a material effect on financial position, results or liquidity. No long-lived asset impairment charges were recorded in the periods presented, and no goodwill or intangible impairment indicators were identified at quarter-end.
- Disclosure controls and procedures were assessed as effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported during the quarter.
Most important facts for investors to verify
- Whether comparable-store sales stabilize after the Q3 decline, and how much reported growth continues to depend on new stores.
- Whether gross-margin gains persist as freight and product margins evolve, while new-store, occupancy, distribution-center and SG&A costs remain elevated.
- Whether operating cash flow remains strong when inventory and payable movements normalize; this period’s cash generation reflected material working-capital changes.
- Actual fiscal 2024 capital expenditures versus the $95–$105 million estimate, and the returns and utilization of new stores and the Kansas City distribution center.
- Lease commitments, variable-rate borrowing exposure if the revolver is drawn, and consumer-demand and inflation risks.