Boot Barn Holdings, Inc. — Q1 Fiscal 2024 Form 10-Q
Business and period: Specialty retailer of western and work boots, apparel, and accessories through stores and e-commerce. The filing covers the 13 weeks ended July 1, 2023; the comparable period ended June 25, 2022. Boot Barn operated 361 stores in 44 states, up from 311 stores a year earlier.
Financial results
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Net sales | $383.7 million | $365.9 million |
| Gross profit / margin | $142.0 million / 37.0% | $137.8 million / 37.7% |
| Operating income / margin | $46.2 million / 12.1% | $52.4 million / 14.3% |
| Net income | $34.3 million | $39.3 million |
| Diluted EPS | $1.13 | $1.29 |
| Operating cash flow | $70.8 million | $(25.8) million |
| Capital expenditures | $29.9 million | $20.8 million |
Changes and key drivers
- Sales increased 4.9%, primarily from stores opened in the preceding 12 months and higher average unit retail prices, partly offset by lower comparable sales. Consolidated same-store sales declined 2.9%; e-commerce same-store sales fell 10.8%, while store sales excluding e-commerce declined 1.8%.
- Gross margin declined 70 basis points. A 160-basis-point impact from deleverage in buying, occupancy, and distribution center costs was partly offset by a 90-basis-point increase in merchandise margin, including improved exclusive-brand penetration and lower freight expense as a share of sales.
- SG&A rose 12.1% to $95.7 million, increasing to 24.9% of sales from 23.3%, primarily due to payroll and store-related costs associated with 50 additional stores and higher corporate overhead. Operating income fell 11.8%; net income fell to $34.3 million.
- Operating cash flow improved from cash use in the prior-year quarter, aided by a $23.2 million inventory reduction. Payables and accrued liabilities decreased by $24.7 million, mainly due to payment timing. Cash flow is therefore affected by working-capital movements.
Liquidity, debt, and outlook
- Cash was $17.1 million at July 1, 2023, versus $18.2 million at April 1. Revolver borrowings were $26.2 million, down from $66.0 million; the $250 million asset-based facility matures July 11, 2027. The company reported covenant compliance. Its weighted-average revolver rate for the quarter was 6.6%, versus 2.3% in the prior-year quarter.
- Total lease liabilities were $397.1 million, including $342.5 million long-term. The company leases most store locations and has no owned real estate.
- Management expects operating cash flows and available credit-facility capacity to cover working capital, planned capital expenditures, and other anticipated needs for at least 12 months. Fiscal 2024 capital expenditures are estimated at $90 million to $95 million, net of landlord allowances, including continued investment in the Kansas City distribution center. No earnings or sales guidance is provided in the supplied filing text.
Risks, contingencies, and other items
- Management highlights sensitivity to consumer discretionary spending, economic conditions, consumer confidence, inflation, weather, and seasonal factors. The filing notes that results can vary by quarter; the third fiscal quarter has historically generated higher sales and operating income.
- Interest-rate risk arises from variable-rate revolver borrowings. Management cautions that interim results are not necessarily indicative of the full fiscal year.
- A California wage-and-hour class action settlement was court-approved for an amount management says is not material and was accrued. Management states other pending or threatened litigation is not expected to materially affect financial position, results, or liquidity.
- No goodwill or long-lived-asset impairment charges were recorded in the quarter, and management identified no goodwill or intangible-asset impairment indicators. Disclosure controls were concluded effective; no material change in internal control was reported.
Investor verification priorities
- Assess whether store expansion can offset declining same-store sales, particularly the e-commerce decline.
- Track gross-margin pressure, SG&A leverage, and the performance of newer stores.
- Reconcile operating cash flow with working-capital timing, inventory levels, and planned capital expenditures.
- Monitor variable-rate borrowing costs, revolver availability and covenants, and lease commitments.
- Compare actual fiscal 2024 capital spending and business trends with management’s stated liquidity expectations; the filing provides no earnings guidance.