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Part 1. Financial Information
Item 1. | Condensed Consolidated Financial Statements (Unaudited) |
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 28, |
| March 30, | ||||
| 2024 |
| 2024 | |||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
| |
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Inventories |
| |
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Prepaid expenses and other current assets |
| |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets, net | | | ||||
Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
| |
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Short-term lease liabilities | | | ||||
Total current liabilities |
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Deferred taxes |
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Long-term lease liabilities | | | ||||
Other liabilities |
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Total liabilities | | | ||||
Commitments and contingencies (Note 6) | ||||||
Stockholders’ equity: | ||||||
Common stock, $ |
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Preferred stock, $ |
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Additional paid-in capital |
| |
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Retained earnings |
| |
| | ||
Less: Common stock held in treasury, at cost, | ( | ( | ||||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
September 28, | September 30, | September 28, | September 30, | |||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
$ | | $ | | $ | | $ | | |||||
| |
| |
| |
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Gross profit |
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Selling, general and administrative expenses |
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Income from operations |
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Interest expense |
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Other income (loss), net | | ( | | | ||||||||
Income before income taxes |
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Income tax expense |
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| |
| |
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Net income | $ | | $ | | $ | | $ | | ||||
Earnings per share: | ||||||||||||
Basic | $ | | $ | | $ | | $ | | ||||
Diluted | $ | | $ | | $ | | $ | | ||||
Weighted average shares outstanding: | ||||||||||||
Basic |
| |
| |
| |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Additional |
| ||||||||||||||||||
Common Stock | Paid-In | Retained | Treasury Shares |
| |||||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings |
| Shares |
| Amount |
| Total | ||||||
Balance at March 30, 2024 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at June 29, 2024 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at September 28, 2024 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Additional |
| ||||||||||||||||||
Common Stock | Paid-In | Retained | Treasury Shares |
| |||||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings | Shares |
| Amount | Total | ||||||||
Balance at April 1, 2023 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income |
| — | — | — | | — | — | | |||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense |
| — | — | | — | — | — | | |||||||||||
Balance at July 1, 2023 |
| | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twenty-Six Weeks Ended | ||||||
September 28, |
| September 30, | ||||
| 2024 |
| 2023 | |||
Cash flows from operating activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation |
| |
| | ||
Stock-based compensation |
| |
| | ||
Amortization of intangible assets |
| |
| | ||
Noncash lease expense | | | ||||
Amortization and write-off of debt issuance fees and debt discount |
| |
| | ||
Loss on disposal of assets |
| |
| | ||
Deferred taxes |
| ( |
| | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable, net |
| |
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Inventories |
| ( |
| | ||
Prepaid expenses and other current assets |
| ( |
| | ||
Other assets |
| ( |
| | ||
Accounts payable |
| |
| | ||
Accrued expenses and other current liabilities |
| |
| | ||
Other liabilities |
| |
| | ||
Operating leases | ( | ( | ||||
Net cash provided by operating activities | $ | | $ | | ||
Cash flows from investing activities | ||||||
Purchases of property and equipment | ( | ( | ||||
Net cash used in investing activities | $ | ( | $ | ( | ||
Cash flows from financing activities | ||||||
Payments on line of credit, net | — | ( | ||||
Repayments on debt and finance lease obligations | ( | ( | ||||
Tax withholding payments for net share settlement | ( | ( | ||||
Proceeds from the exercise of stock options | | | ||||
Net cash used in financing activities | $ | ( | $ | ( | ||
Net (decrease)/increase in cash and cash equivalents | ( | | ||||
Cash and cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents, end of period | $ | | $ | | ||
Supplemental disclosures of cash flow information: | ||||||
Cash paid for income taxes | $ | | $ | | ||
Cash paid for interest | $ | | $ | | ||
Supplemental disclosure of non-cash activities: | ||||||
Unpaid purchases of property and equipment | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business Operations
Boot Barn Holdings, Inc. (the “Company”), the parent holding company of the group of operating subsidiaries that conduct the Boot Barn business, was formed on November 17, 2011, and is incorporated in the State of Delaware. The equity of the Company consists of
The Company operates specialty retail stores and e-commerce websites that sell western and work boots and related apparel and accessories. The Company operates retail locations throughout the United States and sells its merchandise via the internet. The Company operated a total of
Recent Developments
Our business and opportunities for growth depend on consumer discretionary spending, and as such, the Company’s results are particularly sensitive to economic conditions and consumer confidence. Inflation and other challenges affecting the global economy could impact the Company’s operations and will depend on future developments, which are uncertain. These and other effects make it more challenging for management to estimate the future performance of the Company’s business, particularly over the near-to-medium term. For further discussion of the uncertainties and business risks affecting the Company, see Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2024 filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2024 (the “Fiscal 2024 10-K”).
Basis of Presentation
The Company’s condensed consolidated financial statements as of September 28, 2024 and March 30, 2024 and for the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023 are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), and include the accounts of the Company and each of its subsidiaries, consisting of Boot Barn, Inc., RCC Western Stores, Inc., Baskins Acquisition Holdings, LLC, Sheplers, LLC and Sheplers Holding LLC (together with Sheplers, LLC, “Sheplers”). All intercompany accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation. The vast majority of the Company’s identifiable assets are in the United States. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted.
In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments that are of a normal and recurring nature necessary to fairly present the Company’s financial position, results of operations and cash flows in all material respects as of the dates and for the periods presented. The results of operations presented in the interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the fiscal year ending March 29, 2025.
Fiscal Periods
The Company reports its results of operations and cash flows on a 52- or 53-week basis ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a
7
2. Summary of Significant Accounting Policies
Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s Fiscal 2024 10-K. Presented below and in the following notes is supplemental information that should be read in conjunction with those consolidated financial statements.
Comprehensive Income
The Company does not have any components of other comprehensive income recorded within its condensed consolidated financial statements and, therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements.
Segment Reporting
GAAP has established guidance for reporting information about a company’s operating segments, including disclosures related to a company’s products and services, geographic areas and major customers. The Company’s retail stores and e-commerce websites represent
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Among the significant estimates affecting the Company’s condensed consolidated financial statements are those relating to revenue recognition, lease accounting, inventories, goodwill, intangible and long-lived assets, stock-based compensation and income taxes. Management regularly evaluates its estimates and assumptions based upon historical experience and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, the Company’s future results of operations may be affected.
Inventories
Inventories consist primarily of purchased merchandise and are valued at the lower of cost or net realizable value. Cost is determined using the weighted-average cost method and includes the cost of merchandise and import-related costs, including freight, duty and agent commissions. The Company assesses the recoverability of inventory through a periodic review of historical usage and present demand. When the inventory on hand exceeds the foreseeable demand, the value of inventory that, at the time of the review, is not expected to be sold at or above cost is written down to its estimated net realizable value.
Leases
Operating and finance lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating and finance lease right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by cash payments received from landlords as lease incentives, plus any prepaid rent and other direct costs from executing the leases. Amortization of both operating and finance lease right-of-use assets is performed on a straight-line basis and recorded as part of rent expense in cost of goods sold and selling, general and administrative expenses on the consolidated statements of operations. The majority of total lease costs is recorded as part of cost of
8
goods sold, with the balance recorded in selling, general and administrative expenses on the condensed consolidated statements of operations. The interest expense amortization component of the finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense as they are incurred.
Fair Value of Certain Financial Assets and Liabilities
The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which requires disclosure of the estimated fair value of certain assets and liabilities defined by the guidance as financial instruments. The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. ASC 820 defines the fair value of financial instruments as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.
| ● | Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. |
| ● | Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates, incremental borrowing rates, and volatility, can be corroborated by readily observable market data. |
| ● | Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. The Company’s Level 3 assets include certain acquired businesses and the evaluation of store impairment. |
Cash and cash equivalents, accounts receivable and accounts payable are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified as Level 2 or Level 3 even though there may be certain significant inputs that are readily observable. The Company believes that the recorded value of its financial instruments approximates their current fair values because of their nature and respective relatively short maturity dates or duration.
Although market quotes for the fair value of the outstanding debt arrangement discussed in Note 4, “Revolving Credit Facility”, is not readily available, the Company believes that its carrying value approximates fair value due to the variable interest rates, which are Level 2 inputs. There were
Revenue Recognition
Revenue is recorded for store sales upon the purchase of merchandise by customers. Sales are recorded net of taxes collected from customers. Transfer of control takes place at the point at which the customer receives and pays for the merchandise at the register. E-commerce sales are recorded when control transfers to the customer, which generally occurs upon delivery of the product. Shipping and handling revenues are included in total net sales. Shipping costs incurred by the Company are included in cost of goods sold.
9
Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions, estimated future award redemption and other promotions. The sales returns reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages. The total reserve for returns is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company accounts for the return asset and liability separately on a gross basis.
The Company maintains a customer loyalty program. Under the program, customers accumulate points based on purchase activity. For customers to maintain their active point balance, they must make a qualifying purchase of merchandise at least once in a
Customer Loyalty Program |
| |||||
(in thousands) |
| September 28, 2024 | September 30, 2023 | |||
Beginning balance as of March 30, 2024 and April 1, 2023, respectively |
| $ | | $ | | |
Year-to-date provisions | | | ||||
Year-to-date award redemptions | ( | ( | ||||
Ending balance | $ | | $ | | ||
Proceeds from the sale of gift cards are deferred until the customers use the cards to acquire merchandise. Gift cards, gift certificates and store credits do not have expiration dates, and unredeemed gift cards, gift certificates and store credits are subject to state escheatment laws. Amounts remaining after escheatment are recognized in net sales in the period escheatment occurs and the liability is considered to be extinguished. The Company defers recognition of a layaway sale and its related profit to the accounting period when the customer receives the layaway merchandise. Income from the redemption of gift cards, gift card breakage, and the sale of layaway merchandise is included in net sales. Deferred revenue is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The following table provides a reconciliation of the activity related to the Company’s gift card program:
Gift Card Program |
| |||||
(in thousands) |
| September 28, 2024 | September 30, 2023 | |||
Beginning balance as of March 30, 2024 and April 1, 2023, respectively |
| $ | | $ | | |
Year-to-date issued | | | ||||
Year-to-date redemptions | ( | ( | ||||
Ending balance | $ | | $ | | ||
Disaggregated Revenue
The Company disaggregates net sales into the following major merchandise categories:
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||
% of Net Sales |
| September 28, 2024 | September 30, 2023 | September 28, 2024 | September 30, 2023 | ||||||
Footwear |
| % | % | % | % | ||||||
Apparel | % | % | % | % | |||||||
Hats, accessories and other | % | % | % | % | |||||||
Total | % | % | % | % | |||||||
10
The Company further disaggregates net sales between stores and e-commerce:
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||
% of Net Sales |
| September 28, 2024 | September 30, 2023 | September 28, 2024 | September 30, 2023 | ||||||
Stores |
| % | % | % | % | ||||||
E-commerce | % | % | % | % | |||||||
Total | % | % | % | % | |||||||
Recent Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update (“ASU’) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disaggregated information about an entity’s effective tax rate reconciliation, as well as information on income taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. The amendments should be applied on a prospective basis, although retrospective application is permitted. The Company is currently evaluating the impact of adoption on its financial disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendment improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. The Company is currently evaluating the impact of adoption on its financial disclosures.
3. Goodwill and Intangible Assets, Net
The Company performs its annual goodwill impairment assessment on the first day of its fourth fiscal quarter, or more frequently if it believes that indicators of impairment exist. The Company’s goodwill balance was $
During both the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023, the Company did
Net intangible assets as of September 28, 2024 and March 30, 2024 consisted of the following (in thousands, except for weighted average useful life):
September 28, 2024 | |||||||||||
Gross |
|
|
| Weighted | |||||||
Carrying | Accumulated | Average | |||||||||
| Amount |
| Amortization |
| Net |
| Useful Life | ||||
Customer lists—definite lived | $ | | $ | ( | $ | — |
| ||||
Trademarks—indefinite lived |
| |
| — |
| | |||||
Total intangible assets | $ | | $ | ( | $ | | |||||
March 30, 2024 | |||||||||||
Gross | Weighted | ||||||||||
Carrying | Accumulated | Average | |||||||||
| Amount |
| Amortization |
| Net |
| Useful Life | ||||
Customer lists—definite lived | $ | | $ | ( | $ | |
| ||||
Trademarks—indefinite lived |
| |
| — |
| | |||||
Total intangible assets | $ | | $ | ( | $ | | |||||
Amortization expense for intangible assets totaled less than $
11
4. Revolving Credit Facility
The Company has a $
Revolving credit loans under the Wells Fargo Revolver bear interest at per annum rates equal to, at the Company’s option, either (i) Adjusted Term Secured Overnight Financing Rate (defined as “Term SOFR” for the applicable interest period plus a fixed credit spread adjustment of
The borrowing base of the Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves.
The amounts outstanding under the Wells Fargo Revolver and letter of credit commitments as of September 28, 2024 and March 30, 2024 were
All obligations under the Wells Fargo Revolver are unconditionally guaranteed by the Company and each of its direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries), which are not named as borrowers under the Wells Fargo Revolver.
The Wells Fargo Revolver contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default. In addition, the terms of the Wells Fargo Revolver require the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio (as defined in the Wells Fargo Revolver) of at least
As of September 28, 2024, the Company was in compliance with the Wells Fargo Revolver debt covenants.
Debt Issuance Costs
Debt issuance costs totaling $
Total amortization expense of less than $
12
Total amortization expense of $
5. Stock-Based Compensation
Equity Incentive Plans
On October 19, 2014, the Company approved the 2014 Equity Incentive Plan, which was amended as of August 24, 2016 (as amended, the “2014 Plan”). The 2014 Plan authorized the Company to issue awards to employees, consultants and directors for up to a total of
On August 26, 2020 (the “Effective Date”), the Company’s stockholders approved the Boot Barns Holdings, Inc. 2020 Equity Incentive Plan, and on August 25, 2021, the Company’s stockholders approved Amendment No. 2021-1 to the Boot Barn Holdings, Inc. 2020 Equity Incentive Plan (as amended, the “2020 Plan”). Following the approval of the 2020 Plan, no further grants have been made under the 2014 Plan. The 2020 Plan authorizes the issuance of awards to employees (including executive officers) of the Company or any of its subsidiaries or other Affiliates (as defined in the 2020 Plan) and non-employee directors of the Company’s board of directors or any member of any board of directors of any Affiliate for up to a total of
Stock Options
During both the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023, the Company did
13
The following table summarizes the stock option activity for the twenty-six weeks ended September 28, 2024:
Grant Date | Weighted | |||||||||
Weighted | Average | Aggregate | ||||||||
Stock | Average | Remaining | Intrinsic | |||||||
| Options |
| Exercise Price |
| Contractual Life |
| Value (1) | |||
(in years) | (in thousands) | |||||||||
Outstanding at March 30, 2024 |
| | $ | | ||||||
Granted |
| — | — | |||||||
Exercised | ( | | $ | | ||||||
Cancelled, forfeited or expired |
| — | — | |||||||
Outstanding at September 28, 2024 |
| | $ | |
| $ | | |||
Vested and expected to vest after September 28, 2024 |
| | $ | |
| $ | | |||
Exercisable at September 28, 2024 |
| | $ | |
| $ | | |||
| (1) | Intrinsic value for stock options is defined as the difference between the market price of the Company’s common stock on the last business day of the fiscal quarter and the weighted average exercise price of the in-the-money stock options outstanding at the end of each fiscal period. |
A summary of the status of non-vested stock options as of September 28, 2024, including changes during the twenty-six weeks ended September 28, 2024, is presented below:
|
| Weighted- | |||
Average | |||||
Grant Date | |||||
| Shares |
| Fair Value | ||
Nonvested at March 30, 2024 |
| | $ | | |
Granted |
| — | — | ||
Vested |
| ( | | ||
Nonvested shares forfeited |
| — | — | ||
Nonvested at September 28, 2024 |
| | $ | | |
Restricted Stock Units
During the thirteen weeks ended September 28, 2024, the Company did
During the twenty-six weeks ended September 28, 2024, the Company granted
During the thirteen weeks ended September 30, 2023, the Company did
During the twenty-six weeks ended September 30, 2023, the Company granted
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Performance Share Units
During both the thirteen weeks ended September 28, 2024 and September 30, 2023, the Company did
During the twenty-six weeks ended September 28, 2024 and September 30, 2023, the Company granted
The performance metrics for these awards were established at the beginning of the performance periods. At the end of the performance periods, the number of performance share units to be issued is fixed based upon the degree of achievement of the performance goals. If the cumulative three-year performance goals are below the threshold level, the number of performance share units to vest will be
The grant date fair value of the performance share units granted during both the twenty-six weeks ended September 28, 2024 and September 30, 2023, respectively, was initially measured using the Company's closing stock price on the dates of grant with the resulting stock compensation expense recognized on a straight-line basis over the three-year vesting periods (subject to certain exceptions). The expense recognized over the vesting periods is adjusted up or down on a quarterly basis based on the anticipated performance level during the performance periods. If the performance metrics are not probable of achievement during the performance periods, any previously recognized stock compensation expense is reversed. The awards are forfeited if the threshold performance goals are not achieved as of the end of the performance periods.
Stock-Based Compensation Expense
Stock-based compensation expense was $
As of September 28, 2024, there was $
15
6. Commitments and Contingencies
The Company is involved, from time to time, in litigation that is incidental to its business. The Company has reviewed these matters to determine if reserves are required for losses that are probable and reasonable to estimate in accordance with FASB ASC Topic 450, Contingencies. The Company evaluates such reserves, if any, based upon several criteria, including the merits of each claim, settlement discussions and advice from outside legal counsel, as well as indemnification of amounts expended by the Company’s insurers or others pursuant to indemnification policies or agreements, if any.
The Company is also subject to certain other pending or threatened litigation matters incidental to its business. In management's opinion, none of these legal matters, individually or in the aggregate, will have a material effect on the Company's financial position, results of operations, or liquidity.
During the normal course of its business, the Company has made certain indemnifications and commitments under which the Company may be required to make payments for certain transactions. These indemnifications include those given to various lessors in connection with facility leases for certain claims arising from such facility leases, and indemnifications to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. The majority of these indemnifications and commitments do not provide for any limitation of the maximum potential future payments the Company could be obligated to make, and their duration may be indefinite. The Company has not recorded any liability for these indemnifications and commitments in the condensed consolidated balance sheets as the impact is expected to be immaterial.
7. Leases
The Company does not own any real estate. Instead, most of its retail store locations are occupied under operating leases. The store leases generally have a base lease term of or
ROU assets are tested for impairment in the same manner as long-lived assets. During both the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023, the Company did
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ROU assets and lease liabilities as of September 28, 2024 and March 30, 2024 consisted of the following:
September 28, 2024 | March 30, 2024 | |||||||
Balance Sheet Classification | (in thousands) | (in thousands) | ||||||
Assets | ||||||||
Finance lease assets | $ | | $ | | ||||
Operating lease assets |
| |
| | ||||
Total lease assets | $ | | $ | | ||||
Liabilities |
|
| ||||||
Current | ||||||||
Finance | $ | | $ | | ||||
Operating | | | ||||||
Total short-term lease liabilities | $ | | $ | | ||||
Non-Current | ||||||||
Finance | $ | | $ | | ||||
Operating | | | ||||||
Total long-term lease liabilities | $ | | $ | | ||||
Total lease liabilities | $ | | $ | | ||||
Total lease costs for the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023 were:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
(in thousands) |
| September 28, 2024 | September 30, 2023 | September 28, 2024 | September 30, 2023 | |||||||
Finance lease cost | ||||||||||||
Amortization of right-of-use assets | $ | | $ | | $ | | $ | | ||||
Interest on lease liabilities | | | | | ||||||||
Total finance lease cost | $ | | $ | | $ | | $ | | ||||
Operating lease cost | $ | | $ | | $ | | $ | | ||||
Short-term lease cost | | | | | ||||||||
Variable lease cost | | | | | ||||||||
Total lease cost | $ | | $ | | $ | | $ | | ||||
The following table summarizes future lease payments as of September 28, 2024:
Operating Leases | Finance Leases | |||||
Fiscal Year | (in thousands) | (in thousands) | ||||
2025 (Remainder) | $ | | $ | | ||
2026 |
| |
| | ||
2027 |
| |
| | ||
2028 | | | ||||
2029 | | | ||||
Thereafter |
| |
| | ||
Total | | | ||||
Less: Imputed interest | ( | ( | ||||
Present value of net lease payments | | | ||||
As of September 28, 2024, the Company’s minimum lease commitment for signed but not yet commenced was $
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The following table includes supplemental lease information:
| Twenty-Six Weeks Ended |
| Twenty-Six Weeks Ended | |||||
Supplemental Cash Flow Information (dollars in thousands) | September 28, 2024 | September 30, 2023 | ||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||
Operating cash flows used for operating leases | $ | | $ | | ||||
Operating cash flows used for finance leases |
| |
| | ||||
Financing cash flows used for finance leases | | | ||||||
$ | | $ | | |||||
Lease liabilities arising from new right-of-use assets | ||||||||
Operating leases | $ | | $ | | ||||
Finance leases | $ | — | $ | — | ||||
Weighted average remaining lease term (in years) | ||||||||
Operating leases | ||||||||
Finance leases | ||||||||
Weighted average discount rate | ||||||||
Operating leases | | % | | % | ||||
Finance leases | | % | | % | ||||
8. Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”). In accordance with ASC 740, the Company recognizes deferred tax assets and liabilities based on the liability method, which requires an adjustment to the deferred tax asset or liability to reflect income tax rates currently in effect. When income tax rates increase or decrease, a corresponding adjustment to income tax expense is recorded by applying the rate change to the cumulative temporary differences. ASC 740 prescribes the recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. ASC 740 requires the Company to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recognized. Additionally, ASC 740 provides guidance on recognition measurement, derecognition, classification, related interest and penalties, accounting in interim periods, disclosure and transition.
The income tax rate was
The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. At September 28, 2024 and March 30, 2024, the Company had
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. As of September 28, 2024, the Company was not aware of tax examinations (current or potential) in any tax jurisdictions.
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9. Related Party Transactions
During both the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023, the Company had capital expenditures with Floor & Decor Holdings, Inc., a specialty retail vendor in the flooring market, that amounted to less than $
10. Earnings Per Share
Earnings per share is computed under the provisions of FASB ASC Topic 260, Earnings Per Share. Basic earnings per share is computed based on the weighted average number of outstanding shares of common stock during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method, whereby proceeds from such exercise and unamortized compensation, if any, on stock-based awards, are assumed to be used by the Company to purchase the shares of common stock at the average market price during the period. The dilutive effect of stock options and restricted stock is applicable only in periods of net income. Performance share units are included in the calculation of diluted earnings per share to the extent that shares underlying such awards would be issuable if the end of the reporting period were the end of the contingency period. Market-based stock option awards are excluded from the calculation of diluted earnings per share until their respective market criteria has been achieved.
The components of basic and diluted earnings per share of common stock, in the aggregate, for the thirteen and twenty-six weeks ended September 28, 2024 and September 30, 2023 were as follows:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
September 28, | September 30, | September 28, | September 30, | |||||||||
(in thousands, except per share data) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Weighted average basic shares outstanding |
| |
| |
| |
| | ||||
Dilutive effect of options and restricted stock |
| |
| |
| |
| | ||||
Weighted average diluted shares outstanding |
| |
| |
| |
| | ||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
During the thirteen weeks ended September 28, 2024 and September 30, 2023, securities outstanding totaling approximately
During the twenty-six weeks ended September 28, 2024 and September 30, 2023, securities outstanding totaling approximately
11. Subsequent Events
On October 22, 2024, James G. Conroy notified the Company of his intent to resign as the Chief Executive Officer of the Company and as a member of the Company’s Board of Directors effective November 22, 2024. On October 23, 2024, the Board of Directors appointed John Hazen, the Company’s current Chief Digital Officer, as the Interim Chief Executive Officer of the Company effective as of November 22, 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read together with the unaudited financial statements and related notes of Boot Barn Holdings, Inc. and Subsidiaries included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), on May 15, 2024 (the “Fiscal 2024 10-K”). As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the terms “Company”, “Boot Barn”, “we”, “our” and “us” refer to Boot Barn Holdings, Inc. and its subsidiaries.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “seek”, “should”, “target”, “will”, “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. These forward-looking statements are subject to numerous risks and uncertainties, including the risks and uncertainties described under the section titled “Risk Factors” in our Fiscal 2024 10-K, and those identified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statement. We qualify all of our forward-looking statements by these cautionary statements.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Our business and opportunities for growth depend on consumer discretionary spending, and as such, our results are particularly sensitive to economic conditions and consumer confidence. Inflation and other challenges affecting the global economy could impact our operations and will depend on future developments, which are uncertain. For further discussion of the uncertainties and business risks affecting the Company, see Item 1A, Risk Factors, of our Fiscal 2024 10-K.
Overview
We believe that Boot Barn is the largest lifestyle retail chain devoted to western and work-related footwear, apparel and accessories in the U.S. As of September 28, 2024, we operated 425 stores in 46 states, as well as our e-commerce websites consisting primarily of bootbarn.com, sheplers.com, countryoutfitter.com, idyllwind.com and third-party marketplaces, as well as the Boot Barn app. Our product offering is anchored by an extensive selection of western and work boots and is complemented by a wide assortment of coordinating apparel and accessories. Our stores feature a comprehensive assortment of brands and styles, coupled with attentive, knowledgeable store associates. Many of the items that we offer are basics or necessities for our customers’ daily lives and typically represent enduring styles that are not meaningfully impacted by changing fashion trends.
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We strive to offer an authentic, one-stop shopping experience that fulfills the everyday lifestyle needs of our customers, and as a result, many of our customers make purchases in both the western and work wear sections of our stores. We target a broad and growing demographic, ranging from passionate western and country enthusiasts, to workers seeking dependable, high-quality footwear and apparel. Our broad geographic footprint, which comprises more than four times as many stores as our nearest direct competitor that sells primarily western and work wear, provides us with significant economies of scale, enhanced supplier relationships, the ability to recruit and retain high quality store associates and the ability to reinvest in our business at levels that we believe exceed those of our competition.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators that we use to evaluate the financial condition and operating performance of our business are net sales and gross profit. In addition, we also review other important metrics, such as same store sales, new store openings, and selling, general and administrative (“SG&A”) expenses, and operating income.
Net sales
Net sales reflect revenue from the sale of our merchandise at retail locations, as well as sales of merchandise through our e-commerce websites and app. We recognize revenue upon the purchase of merchandise by customers at our stores and upon delivery of the product in the case of our e-commerce websites and app. Net sales also include shipping and handling fees for e-commerce shipments that have been delivered to our customers. Net sales are net of estimated and actual sales returns and deductions for estimated future award redemptions. Revenue from the sale of gift cards is deferred until the gift cards are used to purchase merchandise.
Our business is moderately seasonal, and as a result, our revenues fluctuate from quarter to quarter. In addition, our revenues in any given quarter can be affected by a number of factors, including the timing of holidays, weather patterns, rodeos and country concerts. The third quarter of our fiscal year, which includes the Christmas shopping season, has historically produced higher sales and disproportionately larger operating income than the other quarters of our fiscal year. However, neither the western nor the work component of our business has been meaningfully impacted by fashion trends or seasonality historically. We believe that many of our customers are driven primarily by utility and brand, and our best-selling styles.
Same store sales
The term “same store sales” generally refers to net sales from stores that have been open at least 13 full fiscal months (“comparable stores”) as of the end of the current reporting period, although we include or exclude stores from our calculation of same store sales in accordance with the following additional criteria:
| ● | stores that are closed for five or fewer consecutive days in any fiscal month are included in same store sales; |
| ● | stores that are closed temporarily, but for more than five consecutive days in any fiscal month, are excluded from same store sales beginning in the fiscal month in which the temporary closure begins (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes) until the first full month of operation once the store re-opens; |
| ● | stores that are closed temporarily and relocated within their respective trade areas are included in same store sales; |
| ● | stores that are permanently closed are excluded from same store sales beginning in the month preceding closure (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes); and |
| ● | acquired stores are added to same store sales beginning on the later of (a) the applicable acquisition date and (b) the first day of the first fiscal month after the store has been open for at least 13 full fiscal months, regardless of whether the store has been operated under our management or predecessor management. |
If the criteria described with respect to acquired stores above are met, then all net sales of such acquired store, excluding those net sales before our acquisition of that store, are included for the period presented. However, when an acquired store is included for the period presented, the net sales of such acquired store for periods before its acquisition are included (to the extent relevant) for purposes of calculating “same store sales growth” and illustrating the comparison
21
between the applicable periods. Pre-acquisition net sales numbers are derived from the books and records of the acquired company, as prepared prior to the acquisition, and are not been independently verified by us.
In addition to retail store sales, same store sales also include e-commerce sales, e-commerce shipping and handling revenue and actual retail store or e-commerce sales returns. Sales as a result of an e-commerce asset acquisition are excluded from same store sales until the 13th full fiscal month subsequent to the Company’s acquisition of such assets.
We exclude gift card escheatment, provision for sales returns and estimated future loyalty award redemptions from sales in our calculation of net sales per store.
Measuring the change in year-over-year same store sales allows us to evaluate how our store base is performing. Numerous factors affect our same store sales, including:
| ● | national and regional economic trends; |
| ● | our ability to identify and respond effectively to regional consumer preferences; |
| ● | changes in our product mix; |
| ● | changes in pricing; |
| ● | competition; |
| ● | changes in the timing of promotional and advertising efforts; |
| ● | holidays or seasonal periods; and |
| ● | weather. |
Opening new stores is an important part of our growth strategy, and we anticipate that a percentage of our net sales in the near future will come from stores not included in our same store sales calculation. Accordingly, same store sales are only one measure that we use to assess the success of our business and growth strategy. Some of our competitors and other retailers may calculate “same” or “comparable” store sales differently than we do. As a result, data in this Quarterly Report on Form 10-Q regarding our same store sales may not be comparable to similar data made available by other retailers.
New store openings
New store openings reflect the number of stores, excluding acquired stores, that are opened during a particular reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs consist of costs incurred prior to opening a new store and primarily consist of manager and other employee payroll, travel and training costs, marketing expenses, initial opening supplies and costs of transporting initial inventory and certain fixtures to store locations, as well as occupancy costs incurred from the time that we take possession of a store site to the opening of that store. Occupancy costs are included in cost of goods sold, and the other pre-opening costs are included in SG&A expenses. All of these costs are expensed as incurred.
New stores often open with a period of high sales levels, which subsequently decrease to normalized sales volumes. In addition, we experience typical inefficiencies in the form of higher labor, advertising and other direct operating expenses, and as a result, store-level profit margins at our new stores are generally lower during the start-up period of operation. The number and timing of store openings has had, and is expected to continue to have, a significant impact on our results of operations. In assessing the performance of a new store, we review its actual sales against the sales that we projected that store to achieve at the time we initially approved its opening. We also review the actual number of stores opened in a fiscal year against the number of store openings that we included in our budget at the beginning of that fiscal year.
Gross profit
Gross profit is equal to our net sales less our cost of goods sold. Cost of goods sold includes the cost of merchandise, obsolescence and shrinkage provisions, store and distribution center occupancy costs (including rent, depreciation and utilities), inbound and outbound freight, supplier allowances, occupancy-related taxes, compensation costs for merchandise purchasing, exclusive brand design and development, distribution center personnel, and other inventory acquisition-related costs. These costs are significant and can be expected to continue to increase as we grow. The
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components of our reported cost of goods sold may not be comparable to those of other retail companies, including our competitors.
Our gross profit generally follows changes in net sales. We regularly analyze the components of gross profit, as well as gross profit as a percentage of net sales. Specifically, we examine the initial markup on purchases, markdowns and reserves, shrinkage, buying costs, distribution costs and occupancy costs. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns or in inventory shrinkage, or a significant increase in freight and other inventory acquisition costs, could have an adverse impact on our gross profit and results of operations.
Gross profit is also impacted by shifts in the proportion of sales of our exclusive brand products compared to third-party brand products, as well as by sales mix changes within and between brands and major product categories such as footwear, apparel or accessories.
Selling, general and administrative expenses
Our SG&A expenses are composed of labor and related expenses, other operating expenses and general and administrative expenses not included in cost of goods sold. Specifically, our SG&A expenses include the following:
| ● | Labor and related expenses - Labor and related expenses include all store-level salaries and hourly labor costs, including salaries, wages, benefits and performance incentives, labor taxes and other indirect labor costs. |
| ● | Other operating expenses - Other operating expenses include all operating costs, including those for advertising, pay-per-click, marketing campaigns, operating supplies, certain utilities, and repairs and maintenance, as well as credit card fees and costs of third-party services. |
| ● | General and administrative expenses - General and administrative expenses include expenses associated with corporate and administrative functions that support the development and operations of our stores, including compensation and benefits, travel expenses, corporate occupancy costs, stock compensation costs, legal and professional fees, insurance, long-lived asset impairment charges and other related corporate costs. |
The components of our SG&A expenses may not be comparable to those of our competitors and other retailers. We expect our selling, general and administrative expenses will increase in future periods as a result of incremental stock-based compensation, legal, and accounting-related expenses and increases resulting from growth in the number of our stores.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. A summary of our significant accounting policies is included in Note 2 to the Company’s consolidated financial statements included in the Fiscal 2024 10-K.
Certain of our accounting policies and estimates are considered critical, as these policies and estimates are the most important to the depiction of our consolidated financial statements and require significant, difficult or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Fiscal 2024 10-K. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates described in the Fiscal 2024 10-K.
Results of Operations
We operate on a fiscal calendar that results in a 52- or 53-week fiscal year ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a 52-week fiscal year, each quarter includes thirteen weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include thirteen weeks of operations and the fourth quarter includes fourteen weeks of operations. Both the current fiscal year ending on March 29, 2025 (“fiscal 2025”) and the fiscal year ended on March 30, 2024 (“fiscal 2024”) consist of 52 weeks.
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The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||
September 28, |
| September 30, |
| September 28, |
| September 30, | |||||||
(dollars in thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Condensed Consolidated Statements of Operations Data: | |||||||||||||
Net sales | $ | 425,799 | $ | 374,456 | $ | 849,185 | $ | 758,151 | |||||
Cost of goods sold |
| 272,941 |
| 240,540 |
| 539,578 |
| 482,272 | |||||
Gross profit |
| 152,858 |
| 133,916 |
| 309,607 |
| 275,879 | |||||
Selling, general and administrative expenses |
| 112,879 |
| 95,338 |
| 219,406 |
| 191,056 | |||||
Income from operations |
| 39,979 |
| 38,578 |
| 90,201 |
| 84,823 | |||||
Interest expense |
| 384 |
| 463 |
| 735 |
| 1,486 | |||||
Other income (loss), net | 949 | (50) | 1,545 | 174 | |||||||||
Income before income taxes |
| 40,544 |
| 38,065 |
| 91,011 |
| 83,511 | |||||
Income tax expense |
| 11,116 |
| 10,385 |
| 22,674 |
| 21,578 | |||||
Net income | $ | 29,428 | $ | 27,680 | $ | 68,337 | $ | 61,933 | |||||
Percentage of Net Sales (1): | |||||||||||||
Net sales |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % | |
Cost of goods sold |
| 64.1 | % |
| 64.2 | % |
| 63.5 | % |
| 63.6 | % | |
Gross profit |
| 35.9 | % |
| 35.8 | % |
| 36.5 | % |
| 36.4 | % | |
Selling, general and administrative expenses |
| 26.5 | % |
| 25.5 | % |
| 25.8 | % |
| 25.2 | % | |
Income from operations |
| 9.4 | % |
| 10.3 | % |
| 10.6 | % |
| 11.2 | % | |
Interest expense |
| 0.1 | % |
| 0.1 | % |
| 0.1 | % |
| 0.2 | % | |
Other income, net | 0.2 | % | — | % | 0.2 | % | — | % | |||||
Income before income taxes |
| 9.5 | % |
| 10.2 | % |
| 10.7 | % |
| 11.0 | % | |
Income tax expense |
| 2.6 | % |
| 2.8 | % |
| 2.7 | % |
| 2.8 | % | |
Net income |
| 6.9 | % |
| 7.4 | % |
| 8.0 | % |
| 8.2 | % | |
| (1) | Percentages may not recalculate due to rounding. |
Thirteen Weeks Ended September 28, 2024 Compared to Thirteen Weeks Ended September 30, 2023
Net sales. Net sales increased $51.3 million, or 13.7%, to $425.8 million for the thirteen weeks ended September 28, 2024 from $374.5 million for the thirteen weeks ended September 30, 2023. Consolidated same store sales increased 4.9%. Excluding the impact of the 10.1% increase in e-commerce same store sales, same store sales increased by 4.3%. The increase in net sales was the result of incremental sales from new stores and the increase in consolidated same store sales.
Gross profit. Gross profit increased $18.9 million, or 14.1%, to $152.9 million for the thirteen weeks ended September 28, 2024 from $133.9 million for the thirteen weeks ended September 30, 2023. As a percentage of net sales, gross profit increased by 10 basis points to 35.9% for the thirteen weeks ended September 28, 2024 from 35.8% for the thirteen weeks ended September 30, 2023. Gross profit increased primarily due to an increase in sales and merchandise margin, partially offset by the occupancy costs of new stores. The increase in gross profit rate of 10 basis points was driven primarily by a 70 basis-point increase in merchandise margin rate, partially offset by 60 basis points of deleverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was primarily the result of supply chain efficiencies, while the deleverage in buying, occupancy and distribution center costs was driven by the occupancy of new stores.
Selling, general and administrative expenses. SG&A expenses increased $17.6 million, or 18.4%, to $112.9 million for the thirteen weeks ended September 28, 2024 from $95.3 million for the thirteen weeks ended September 30, 2023.
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The increase in selling, general and administrative expenses as compared to the prior-year period was primarily a result of higher store payroll and store-related expenses associated with operating more stores, incentive-based compensation, marketing expenses, and legal expenses in the current year. As a percentage of net sales, SG&A increased by 100 basis points to 26.5% for the thirteen weeks ended September 28, 2024 from 25.5% for the thirteen weeks ended September 30, 2023, primarily as a result of higher incentive-based compensation, legal expenses, and marketing expenses in the current year, partially offset by lower store payroll expenses.
Income from operations. Income from operations increased $1.4 million, or 3.6%, to $40.0 million for the thirteen weeks ended September 28, 2024 from $38.6 million for the thirteen weeks ended September 30, 2023. The increase in income from operations was attributable to the factors noted above. As a percentage of net sales, income from operations was 9.4% and 10.3% for the thirteen weeks ended September 28, 2024 and September 30, 2023, respectively.
Interest expense. Interest expense was $0.4 million and $0.5 million for the thirteen weeks ended September 28, 2024 and September 30, 2023, respectively. The decrease in interest expense in the current-year period was primarily the result of a lower average debt balance in the current year.
Income tax expense. Income tax expense was $11.1 million for the thirteen weeks ended September 28, 2024 compared to $10.4 million for the thirteen weeks ended September 30, 2023. Our effective tax rate was 27.4% and 27.3% for the thirteen weeks ended September 28, 2024 and September 30, 2023, respectively. The tax rate for the thirteen weeks ended September 28, 2024 was consistent with the tax rate for the thirteen weeks ended September 30, 2023.
Net income. Net income was $29.4 million for the thirteen weeks ended September 28, 2024 compared to $27.7 million for the thirteen weeks ended September 30, 2023. The increase in net income was primarily attributable to the factors noted above.
Twenty-Six Weeks Ended September 28, 2024 Compared to Twenty-Six Weeks Ended September 30, 2023
Net sales. Net sales increased $91.0 million, or 12.0%, to $849.2 million for the twenty-six weeks ended September 28, 2024 from $758.2 million for the twenty-six weeks ended September 30, 2023. Consolidated same store sales increased 3.1%. Excluding the impact of the 8.4% increase in e-commerce same store sales, same store sales increased by 2.5%. The increase in net sales was the result of incremental sales from new stores and the increase in consolidated same store sales.
Gross profit. Gross profit increased $33.7 million, or 12.2%, to $309.6 million for the twenty-six weeks ended September 28, 2024 from $275.9 million for the twenty-six weeks ended September 30, 2023. As a percentage of net sales, gross profit increased by 10 basis points to 36.5% for the twenty-six weeks ended September 28, 2024 from 36.4% for the twenty-six weeks ended September 30, 2023. Gross profit increased primarily due to an increase in sales and merchandise margin, partially offset by the occupancy costs of new stores. The increase in gross profit rate of 10 basis points was driven primarily by an 80 basis-point increase in merchandise margin rate, partially offset by 70 basis points of deleverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was the result of supply chain efficiencies, while the deleverage in buying, occupancy and distribution center costs was driven primarily by the occupancy of new stores.
Selling, general and administrative expenses. SG&A expenses increased $28.3 million, or 14.8%, to $219.4 million for the twenty-six weeks ended September 28, 2024 from $191.1 million for the twenty-six weeks ended September 30, 2023. The increase in selling, general and administrative expenses as compared to the prior-year period was primarily a result of higher store payroll and store-related expenses associated with operating more stores, marketing expenses, and incentive-based compensation in the current year. As a percentage of net sales, SG&A increased by 60 basis points to 25.8% for the twenty-six weeks ended September 28, 2024 from 25.2% for the twenty-six weeks ended September 30, 2023, primarily as a result of higher incentive-based compensation and marketing expenses in the current year, partially offset by lower store payroll and store-related expenses.
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Income from operations. Income from operations increased $5.4 million, or 6.3%, to $90.2 million for the twenty-six weeks ended September 28, 2024 from $84.8 million for the twenty-six weeks ended September 30, 2023. The increase in income from operations was attributable to the factors noted above. As a percentage of net sales, income from operations was 10.6% and 11.2% for the twenty-six weeks ended September 28, 2024 and September 30, 2023, respectively.
Interest expense. Interest expense was $0.7 million and $1.5 million for the twenty-six weeks ended September 28, 2024 and September 30, 2023, respectively. The decrease in interest expense in the current-year period was primarily the result of a lower average debt balance in the current year.
Income tax expense. Income tax expense was $22.7 million for the twenty-six weeks ended September 28, 2024 compared to $21.6 million for the twenty-six weeks ended September 30, 2023. Our effective tax rate was 24.9% and 25.8% for the twenty-six weeks ended September 28, 2024 and September 30, 2023, respectively. The tax rate for the twenty-six weeks ended September 28, 2024 was lower than the tax rate for the twenty-six weeks ended September 30, 2023, primarily due to a higher tax benefit caused by an increase in tax deductions for share-based compensation awards for the twenty-six weeks ended September 28, 2024 and changes to state enacted tax rates for the period ended September 30, 2023.
Net income. Net income was $68.3 million for the twenty-six weeks ended September 28, 2024 compared to $61.9 million for the twenty-six weeks ended September 30, 2023. The increase in net income was primarily attributable to the factors noted above.
Store Operating Data:
The following table presents store operating data for the periods indicated:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||
September 28, | September 30, | September 28, | September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
Selected Store Data: | |||||||||||||
Same Store Sales growth/(decline) | 4.9 | % | (4.8) | % | 3.1 | % | (3.8) | % | |||||
Stores operating at end of period | 425 | 371 | 425 | 371 | |||||||||
Comparable stores open during period | 363 | 312 | 363 | 312 | |||||||||
Total retail store selling square footage, end of period (in thousands) | 4,720 | 4,027 | 4,720 | 4,027 | |||||||||
Average retail store selling square footage, end of period | 11,105 | 10,855 | 11,105 | 10,855 | |||||||||
Average sales per comparable store (in thousands)(1) | $ | 952 | $ | 950 | $ | 1,894 | $ | 1,924 | |||||
| (1) | Average sales per comparable store is calculated by dividing comparable store trailing three-month or six-month sales for the applicable period by the number of comparable stores operating during the period. |
Liquidity and Capital Resources
We rely on cash flows from operating activities and our credit facility as our primary sources of liquidity. Our primary cash needs are for inventories, operating expenses, occupancy expenses, capital expenditures associated with opening new stores and remodeling or refurbishing existing stores, improvements to our distribution facilities, marketing and information technology expenditures, debt service and taxes. We have historically used cash for acquisitions and the subsequent rebranding and integration of the stores acquired in those acquisitions. In addition to cash and cash equivalents, the most significant components of our working capital are accounts receivable, inventories, accounts payable and accrued expenses and other current liabilities. We believe that cash flows from operating activities and the
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availability of cash under our credit facility will be sufficient to cover working capital requirements, anticipated capital expenditures and other anticipated cash needs for at least the next 12 months from the date of this filing.
Our liquidity is moderately seasonal. Our cash requirements generally increase in our third fiscal quarter as we increase our inventory in advance of the Christmas shopping season.
We are planning to continue to open new stores, remodel and refurbish our existing stores, and make improvements to our e-commerce and information technology infrastructure, which will result in increased capital expenditures. Included in our fiscal 2025 capital expenditures are continued investments in our new distribution center in Kansas City, Missouri. We estimate that our total capital expenditures in fiscal 2025 will be between $115.0 million and $120.0 million (including the capital expenditures made during the twenty-six weeks ended September 28, 2024), which is net of estimated landlord tenant allowances of $30.2 million. We anticipate that we will use cash flows from operations to fund these expenditures.
Wells Fargo Revolver
The Company has a $250.0 million syndicated senior secured asset-based revolving credit facility (the “Wells Fargo Revolver”) for which Wells Fargo Bank, National Association is agent (“Wells Fargo”). Under the Wells Fargo Revolver, the sublimit for letters of credit is $10.0 million, and the maturity date is July 11, 2027.
Revolving credit loans under the Wells Fargo Revolver bear interest at per annum rates equal to, at the Company’s option, either (i) Adjusted Term Secured Overnight Financing Rate (defined as “Term SOFR” for the applicable interest period plus a fixed credit spread adjustment of 0.10%) plus an applicable margin for Term SOFR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated at the highest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rate and (c) Term SOFR for a one-month tenor in effect on such day plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case is linked to quarterly average excess availability. For Term SOFR loans, the applicable margin ranges from 1.00% to 1.25%, and for base rate loans it ranges from 0.00% to 0.25%. The interest on base rate loans under the Wells Fargo Revolver is payable in quarterly installments ending on the maturity date and for Term SOFR loans is payable on the earlier of the last day of each interest period applicable thereto, or on each three-month interval of such interest period. The Company also pays a commitment fee of 0.25% per annum of the actual daily amount of the unutilized revolving loans.
The borrowing base of the Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves.
The amounts outstanding under the Wells Fargo Revolver and letter of credit commitments as of September 28, 2024 and March 30, 2024 were zero and $2.3 million, respectively. Total interest expense incurred on the Wells Fargo Revolver during the thirteen and twenty-six weeks ended September 28, 2024 was $0.2 million and $0.4 million, respectively, and the weighted average interest rate for the thirteen weeks ended September 28, 2024 was 8.5%. Total interest expense incurred on the Wells Fargo Revolver during the thirteen and twenty-six weeks ended September 30, 2023 was $0.3 million and $1.2 million, respectively, and the weighted average interest rate for the thirteen weeks ended September 30, 2023 was 8.2%.
All obligations under the Wells Fargo Revolver are unconditionally guaranteed by the Company and each of its direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries), which are not named as borrowers under the Wells Fargo Revolver.
The Wells Fargo Revolver contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default. In addition, the terms of the Wells Fargo Revolver require the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio (as defined in the Wells Fargo Revolver) of at least 1.00:1.00 during such times as a covenant trigger event shall exist. The Wells Fargo Revolver also requires the Company to pay additional interest of 2.0% per annum upon triggering certain specified events of default set forth therein. For financial accounting purposes, the requirement for the Company to pay a higher interest rate upon an event of default is an embedded derivative. As of September 28, 2024, the fair value of this embedded derivative was estimated and was not significant.
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As of September 28, 2024, the Company was in compliance with the Wells Fargo Revolver debt covenants.
Cash Position and Cash Flow
Cash and cash equivalents were $37.4 million as of September 28, 2024 compared to $75.8 million as of March 30, 2024.
The following table presents summary cash flow information for the periods indicated below:
Twenty-Six Weeks Ended | ||||||
September 28, |
| September 30, | ||||
(in thousands) |
| 2024 |
| 2023 | ||
Net cash provided by/(used in): | ||||||
Operating activities | $ | 33,542 | $ | 145,460 | ||
Investing activities |
| (65,403) |
| (64,687) | ||
Financing activities |
| (6,609) |
| (60,301) | ||
Net (decrease)/increase in cash | $ | (38,470) | $ | 20,472 | ||
Operating Activities
Net cash provided by operating activities was $33.5 million for the twenty-six weeks ended September 28, 2024. The significant components of cash flows provided by operating activities were net income of $68.3 million, the add-back of non-cash lease expense of $32.2 million, depreciation and intangible asset amortization expense of $29.6 million, and stock-based compensation expense of $10.9 million. Accounts payable and accrued expenses and other current liabilities increased by $29.6 million due to the timing of payments. Inventory increased by $113.9 million as a result of an increase in purchases.
Net cash provided by operating activities was $145.5 million for the twenty-six weeks ended September 30, 2023. The significant components of cash flows provided by operating activities were net income of $61.9 million, the add-back of non-cash depreciation and intangible asset amortization expense of $22.6 million, and stock-based compensation expense of $7.8 million. Accounts payable and accrued expenses and other current liabilities increased by $20.7 million due to the timing of payments. Inventory decreased by $3.9 million as a result of a decrease in purchases.
Investing Activities
Net cash used in investing activities was $65.4 million for the twenty-six weeks ended September 28, 2024, which was attributable to capital expenditures related to store construction, investments in our Kansas City, Missouri distribution center, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities.
Net cash used in investing activities was $64.7 million for the twenty-six weeks ended September 30, 2023, which was attributable to capital expenditures related to store construction, investments in our Kansas City, Missouri distribution center, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities.
Financing Activities
Net cash used in financing activities was $6.6 million for the twenty-six weeks ended September 28, 2024. We paid $7.6 million in taxes related to the vesting of restricted stock. We also received $1.4 million from the exercise of stock options.
Net cash used in financing activities was $60.3 million for the twenty-six weeks ended September 30, 2023. We paid $66.0 million on our revolving line of credit and paid $2.4 million in taxes related to the vesting of restricted stock. We also received $8.6 million from the exercise of stock options.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
We are subject to interest rate risk in connection with borrowings under our credit facility which bears interest at variable rates. As of September 28, 2024, there were no amounts outstanding under the Wells Fargo Revolver.
As of September 28, 2024, there were no other material changes in the market risks described in the “Quantitative and Qualitative Disclosure of Market Risks” section of the Fiscal 2024 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 28, 2024. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 28, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 28, 2024, no changes occurred with respect to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Part II. Other Information
Item 1. Legal Proceedings
For information on legal proceedings, see Note 6, “Commitments and Contingencies”, to our unaudited financial statements included in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows, including the risks contained in “Item 1A—Risk Factors” in our Fiscal 2024 10-K. As of September 28, 2024, there were no material changes to the risks described in our Fiscal 2024 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During the quarter ended September 28, 2024, except as described above, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s common stock intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).
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Item 6. Exhibits
Exhibit No. | Description of Exhibit | |
31.1 | ||
31.2 | ||
32.1* | ||
32.2* | ||
101 | Interactive data files from Boot Barn Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statement of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) Notes to the Condensed Consolidated Financial Statements. | |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2024, formatted in Inline XBRL. |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Boot Barn Holdings, Inc. | |
Date: October 30, 2024 | /s/ James G. Conroy |
James G. Conroy | |
President and Chief Executive Officer | |
Date: October 30, 2024 | /s/ James M. Watkins |
James M. Watkins | |
Chief Financial Officer and Secretary |
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