Boot Barn Holdings, Inc.

everyone and welcome to the Boot Barn Holdings fourth quarter fiscal year 2021 earnings conference call. As a reminder, this call is being recorded. It is now my pleasure to turn the conference over to your host, Mr. Jim Watkins, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's fourth quarter and fiscal 2021 earnings results. With me on today's call are Jim Conroy, President and Chief Executive Officer, and Greg Hackman, Chief Operating Officer and Chief Financial Officer. A copy of today's press release is available on the investor relations section of Boot Barn's website at bootbarn.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days on the investor relations section of the company's website. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. These forward-looking statements reflect Boot Barn's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Boot Barn's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made during this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our fourth quarter fiscal 2021 earnings release, as well as our filings with the SEC referenced in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. I will now turn the call over to Jim Conrad, Boot Barn's President and Chief Executive Officer. Jim?

Thank you, Jim, and good afternoon. Thank you, everyone, for joining us. On today's call, I will review our fourth quarter and fiscal 2021 results highlight each of our key strategic initiatives, and provide an update on current business. Following my remarks, Greg will review our financial performance in more detail, and then we will open the call up for questions. Looking at our recent results, the fourth quarter was extremely strong, with consolidated same-store sales growth of 26.9%, driven by a combination of underlying strength in the business and external factors, including a boost from recent government stimulus, as well as an easy comparison to the end of March last year. Same-store sales in our physical stores were very strong, increasing 28.5%, with growth driven primarily by an increase in transactions. The momentum our e-commerce business experienced since the start of fiscal 2021 has continued, with sales increasing 19.5% over the same period last year with even more pronounced growth in profitability. Merchandise margins were also very strong, increasing 300 basis points year over year, driven primarily by better full-price selling. Another component of the improvement in merchandise margin was a 120 basis point benefit from lower shrink. I am pleased with the ability to drive profitable sales and maintain our full-price selling philosophy across both channels. The acceleration in sales and strength in merchandise margin resulted in fourth quarter earnings per diluted share of $0.82 compared to $0.20 in the prior year. When adjusting for the tax benefit in both years, we grew earnings per diluted share more than 300% to $0.75 compared to $0.18 in the prior year period. Moving to the full year, despite the impact of COVID-19 and subsequent macroeconomic headwinds, we were able to achieve very strong results. Consolidated same-store sales grew 3.1%, led by e-commerce growth of 23.6%, partially offset by a 1.1% decline in retail stores. For our store comps to be down only 1% for the year, after such a slow start due to COVID, is truly remarkable and shows how strongly the business has rebounded. Our e-commerce business exhibited very strong sales growth during the year and we made significant progress improving the omnichannel experience for our customers. Our continued focus on full price selling and commitment to profitability drove consolidated operating profit growth of 100 basis points during fiscal 2021 to 9.7% up from 8.7% in fiscal 2020. When adjusting for the tax benefits recognized in both periods, earnings per diluted share grew 23% to $1.92 compared to $1.56 in the prior year. We are extremely pleased with the earnings power demonstrated by the business given the myriad of challenges over the last year. I will now provide an update on each of our four strategic initiatives beginning with driving same-store sales growth. During the fourth quarter, we saw very healthy sales across both our stores and e-commerce business. As discussed on our last earnings call, sales started off strong in January with outsized same-store sales growth of 17%, helped by stimulus payments received at the start of the calendar year. While February business was also positive, both in stores and online, We did see a sequential deceleration compared to January as a result of headwinds, including a lack of rodeos and events, delayed tax refunds, and severe weather across much of the country. With the release of additional stimulus funds in the month of March, business re-accelerated with outsized growth in bulk channels, especially in comparison to March of 2020 when sales declined sharply due to the original onset of COVID. From a geographic perspective, we saw solid growth across all three regions of our stores. Business in the West remains strong, showing sequential improvement over the prior quarter. Notably, the North region showed the most sequential improvement from roughly flat in the third quarter to growth similar to the West region in the fourth quarter. The South region, which includes Texas, posted strong growth in the fourth quarter, rebounding nicely after comping negatively in the third quarter. From a merchandise perspective, we saw broad-based growth across all major merchandise categories, with particular strength in work boots, men's and ladies' Western apparel, and Western boots. Consistent with the third quarter, work boots again performed extremely well. The strength in men's and ladies' Western apparel was driven by solid growth in denim and in knit tops. Our work apparel business comped positively during the fourth quarter despite continued pressure on FR work apparel, which declined mid-single digits year over year, which was a sequential improvement from the third quarter. We believe the broad-based growth across merchandise categories is a testament to the strength of the underlying business represents a desire of our customers to refresh their wardrobe, and has been influenced by our customers' receipt of stimulus payments. From a marketing perspective, we continue to focus on each of our core customer segments through a comprehensive media mix by segment that includes radio, television, direct mail, and digital. We use a combination of customized marketing messages and tailored merchandising strategies to address each of our customer segments. During our third quarter call, we discussed our increased focus and attention on the newly created Just Country segment. As part of this initiative, we have augmented our assortment in hiking boots, outerwear, casual footwear, and apparel. We believe that this work, coupled with advantageous consumer trends towards being outdoors and dressing more casually, has enabled us to further increase sales and capture a broader group of customers. From an operational perspective, our field leadership team once again rose to the challenge of the ongoing acceleration in sales volume. I must call out our regional directors and our district managers who pivoted quickly from the challenge of keeping stores open and operating at the onset of the pandemic to then hiring sales associates aggressively and ensuring that every store has a solid management team in place to meet the outsized consumer demand in the business today. During an incredibly tumultuous year, this team managed to grow total annual sales, maintain a high level of customer service, and keep voluntary store manager turnover below 15%. This is quite a feat in retail today, and even more of an accomplishment during a COVID impacted year. I would be remiss not to express my gratitude to this group for the leadership and strength they have shown over the past year. Similarly, our e-commerce team and each of our two distribution centers have been able to keep pace with the surge in demand. In fact, in order to further support the outsized business we are experiencing, we have reduced the reliance on our vendor supply chain. Accordingly, We are servicing more of our e-commerce orders directly from our fulfillment center rather than relying on vendors to drop ship orders. Additionally, we took action early on in the fiscal year by deciding to temporarily warehouse some non-fashion replenishment goods to ensure that we have more control over the replenishment process to the stores, allowing us to react quickly to customers' product needs. I must commend the entire merchandising and supply chain organization for working tirelessly to fuel the spike in business, minimize out of stocks, and enable us to continue to build market share. Moving to our second initiative, strengthening our omnichannel leadership. During the fourth quarter, we saw very strong sales in our e-commerce business with same-store sales increasing 19.5%. As we've discussed for some time, Increasing the profitability of this channel has been a major focus, and therefore we were very pleased to see EBIT growth more than double during the fourth quarter. Once again, BOOTPLINE.com sales outperformed the balance of our e-commerce business with top-line growth of over 40% in the quarter. Sales at SHEPPLERS.com declined when compared to the prior year as a result of the new pricing structure completed in July of last year. Several omnichannel initiatives we've implemented over the past two years, including buy online pickup in-store, buy online curbside pickup, in-store fulfillment, same day delivery, and buy online return in-store continue to be very well received by our customers. We continue to develop faster and more effective ways to deliver e-commerce orders to our customers, further enhancing customer service and mitigating freight costs. Additionally, we are using many of these new capabilities to drive increased traffic to the stores, which is helping us to both drive incremental store sales as well as grow the percent of our customers that shop across both channels. This should serve us well going forward as it further drives customer loyalty and strengthens our competitive position against pure e-commerce players. As we look to fiscal 2022, Our focus will remain on augmenting our omnichannel service offerings while continuing to build the profitability of that channel. Now to our third strategic initiative, exclusive brands. During the fourth quarter, exclusive brand penetration reached 24.2%, an increase of approximately 10 basis points compared to the prior year period, despite facing product constraints due to supply chain disruptions. Our fiscal 2021, Exclusive brand penetration grew approximately 170 basis points over the prior year to 23.7%. We are very pleased with our penetration growth during the year given the challenges we have faced as a result of COVID-19. The high quality nature of our exclusive product is further evidenced by their representation as top selling brands in our stores. Cody James, Cheyenne, Idlewind, and Hawks for each in our top 10 selling brands in the store during the fourth quarter. As we look to fiscal 2022, we have already seen nice improvement in the supply chain. As a result, we expect exclusive brand penetration to grow approximately 250 basis points in our first fiscal quarter, as well as our fiscal year. Finally, our fourth initiative expanding our store base. During the fourth quarter, we opened eight new stores and closed one store, bringing our total store count to 273 stores across 36 states. For the full fiscal year, we opened 15 new stores as planned. We are pleased with our new store performance during fiscal 2021, given the difficult environment and uncertainty with how new stores would perform during the pandemic. Our new stores opened this past year have exceeded our sales plans. and are expected to pay back within our targeted three-year period or better. We continue to be emboldened by the white space opportunity we have across the country to continue building our store base. We have a solid pipeline set up for fiscal 2022 and expect to deliver 10% new unit growth in the coming year. That said, given the impact of COVID-19, We did not re-accelerate our new unit growth plan until the last six months of fiscal 2021. As a result, we expect new store openings to be back half loaded in fiscal 2022. Our current plan is to open approximately three stores in the first quarter and seven stores in each of the second and third quarters with the balance to be opened in our fourth fiscal quarter. I'd now like to provide an update on current business. Our first quarter is off to a tremendous start with both our stores and digital channels continuing to produce very strong results. Given the impact of COVID on our early fiscal 2021 results, we believe that a comparison of current business to the same period two years ago provides the most helpful view into our results relative to a more normalized environment. When compared to the same period two years ago, total sales in the first six weeks of our first quarter increased approximately 67% from $87 million in fiscal 2020 to approximately $145 million. This also represents a sequential acceleration when comparing total sales growth in Q4 of fiscal 2021 for the same period two years ago. Not only has the business been extremely strong, but the week-to-week sales volume has been relatively consistent for the entire six-week period. We are very pleased with the underlying strength of the business and solid execution of the team, and believe that our growth is outpacing the underlying growth in the industry. That said, we do attribute a portion of the strength in the business to our customers' receipt of stimulus payments, pent-up demand, and an overall more favorable macro environment. I'd like to now turn the call over to Greg Hackman.