Boot Barn Holdings, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended March 27, 2021 (52 weeks). The filing also reports the fourth quarter of fiscal 2021; this is not a standalone quarterly filing. Boot Barn operates western- and work-wear retail stores and e-commerce sites. At year-end it had 273 stores in 36 states.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $893.5 million | $845.6 million | +5.7% |
| Gross profit / margin | $294.9 million / 33.0% | $276.5 million / 32.7% | Margin +0.3 percentage points |
| Operating income / margin | $86.3 million / 9.7% | $73.7 million / 8.7% | +17.2% |
| Net income | $59.4 million | $47.9 million | +23.9% |
| Diluted EPS | $2.01 | $1.64 | +$0.37 |
| Operating cash flow | $155.9 million | $25.3 million | Increased substantially |
| Capital expenditures | $28.4 million | $37.2 million | Decreased |
Fourth-quarter FY2021 net sales were $258.9 million versus $188.6 million in the prior-year quarter; operating income was $32.9 million versus $9.7 million, and net income was $24.6 million versus $5.7 million.
Year-end cash was $73.1 million. Gross term-loan debt was $111.5 million, with no revolver borrowings and $165.0 million of revolving capacity available. The balance sheet reports $109.8 million of term debt net of issuance costs. Current assets were $374.5 million and current liabilities $221.7 million. Lease liabilities totaled $221.2 million; FY2021 lease expense was $50.3 million.
Same-store sales rose 3.1% overall, while e-commerce same-store sales rose 23.6%; excluding e-commerce, same-store sales declined 1.1%. E-commerce represented 18.6% of net sales. Adjusted EBITDA, a non-GAAP measure, was $119.3 million versus $100.6 million.
Material changes and drivers
- Sales growth reflected new stores and higher same-store sales, including strong online performance. Management attributed weaker in-store results in the first half to COVID-related stay-at-home behavior and temporary closures.
- Gross margin improved as merchandise margin increased 90 basis points, helped by full-price selling, lower shrink and greater private-brand penetration; higher buying and occupancy costs offset 60 basis points.
- SG&A increased 2.8% in dollars but declined to 23.3% of sales from 24.0%, reflecting leverage on higher sales. Interest expense fell 29.1%, mainly due to lower rates and average debt.
- Operating cash flow benefited from lower inventory purchases and higher accounts payable and accrued liabilities, including payment timing. The company used $123.9 million in financing cash flow, including repayment of $129.9 million of revolver borrowings.
- After year-end, on April 26, 2021, Boot Barn voluntarily prepaid $41.5 million of term debt, reducing principal to $70.0 million.
Outlook, risks and unusual items
- Management estimated FY2022 capital expenditures of $33–$36 million, net of landlord allowances, expected to be funded from operating cash flow. It sees potential to grow the domestic store base from 273 to approximately 500 and targets roughly 10% annual store-base growth over the next several years; these are plans and estimates, not guaranteed outcomes.
- COVID-19 remained a significant uncertainty for customer traffic, staffing, supply chains, store operations and liquidity. Management also cited possible event cancellations, economic weakness in work-related industries, and potential effects on consumer spending.
- Other notable risks include foreign sourcing and tariffs, inventory demand and markdown risk, supplier concentration, competition, variable-rate debt, substantial lease commitments and execution risks in store expansion. A 1 percentage-point rate change on year-end term debt would affect annual interest by approximately $1.1 million.
- A California class-action lawsuit alleges deceptive pricing on Sheplers’ e-commerce site; the company says it accrued its estimated cost but does not disclose the amount here. FY2021 included $0.7 million in store asset impairment charges. No goodwill impairment was recorded.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls. Inventory valuation was identified as a critical audit matter because it requires judgment in estimating demand and obsolescence.
Key facts for investors to verify
- Whether online growth and improving store traffic can sustain same-store sales and margin gains after pandemic-related disruptions.
- The sustainability of unusually strong operating cash flow, given its contribution from inventory reductions and payment timing.
- Progress on the $41.5 million post-year-end debt prepayment, remaining debt service and covenant headroom.
- FY2022 capital spending, store-opening pace and returns relative to management’s store-growth and payback targets.
- The amount and potential outcome of the accrued Sheplers pricing litigation, and any changes in COVID-19, supply-chain, inventory or lease risks.