Boot Barn Holdings, Inc.

Good day, ladies and gentlemen, and welcome to the Boot Barn Holdings Incorporated first quarter 2022 earnings call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Mr. Jim Watkins, Senior Vice President of Finance and Investor Relations. Mr. Watkins, please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's first quarter fiscal 2022 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 first quarter fiscal 2022 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 Conroy, 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'll review our first quarter of fiscal 2022 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. Given the impact COVID had on our performance in early fiscal 2021, we believe that a comparison of our first quarter results to the same period two years ago provides the most helpful view into the underlying strength of the business. During the first quarter, our business performed very well across the board. We generated strong total sales growth on a two-year basis of 65%, with retail stores up 66% and e-commerce up 56%. While we believe there are macro tailwinds at play, the superb execution by the entire team in securing merchandise, expanding our customer base, and staffing the stores to meet the additional demand has resulted in another exceptional quarter. Compared with two years ago, merchandise margin increased 220 basis points, fueled primarily by better full price selling, growth in exclusive brand penetration, and a less promotional stance online. I am very pleased with the continued momentum in our business. The overall strength in our top line and margin rate drove record earnings of $1.35 per diluted share, compared to 33 cents in the same period two years ago. When adjusting for the tax benefit in both years, we grew earnings per diluted share approximately 300% to $1.26 compared to 32 cents in the same period two years ago. Before I provide an update on each of our four strategic initiatives, I would like to take a minute and reflect back on the broader strategy for Boot Barn over the past few years. With so much recent focus on the impact of COVID, we felt it was time to remind everyone of their broader growth strategy for Boot Barn and our positioning. Historically, Boot Barn had focused heavily on the Western customer and led with our signature category of boots. We were then and continue to be the leading player serving this quite sizable market. Approximately four years ago, we embarked on a three-prong strategy to expand our addressable market which included the following components. First, we sought to expand the brand's reach. We focused intently on growing the work segment, as well as adding new segments, including the more fashion-forward Wonder West category, and more recently, Just Country, which encapsulates a much larger share of the U.S. population. This expansion strategy has introduced new customers from market segments that are not too far removed from Boot Barn's core Western customer. We also shifted our media mix to marketing channels intended to broadcast to a larger population such as television, radio, and digital to drive awareness of Boot Barn. We believe this work contributed to expanding the customer reach of Boot Barn as evidenced by our continuous growth in customers on a comp store basis over this period of time. The second piece of the strategy was to contemporize the Boot Barn brand. We made transformative changes to the creative aesthetic of our brand and our marketing communications. We shifted the focus away from product and price promotion and focused exclusively on building the strength of the Boot Barn brand so it would resonate with both its legacy Western customers as well as the broader cross-section of the population that we were seeking to add that may have some affinity for our merchandise but don't identify as purely a Western lifestyle customer. We broadened our merchandise assortment, remodeled many stores, and upgraded in-store merchandising significantly. Today, we have successfully transformed from what many thought was simply a footwear retailer to a true lifestyle brand. Upgrading and modernizing the brand has played a critical role in enabling us to become more relevant to more customers that are immediately adjacent to our original core customer but may have been unlikely to shop in a pure Western retail store. As for the final piece of the strategy, in order to ensure that we would be relevant to all of our customers, both existing and new, we created an extremely well-defined customer segmentation strategy. We speak to our more than 4 million active customers with email, direct mail, and digital communications that are tailored to them based on their demographics and purchase history. This enables us to speak to each customer group in their language and with relevant merchandise offerings. This was a critical piece of the puzzle as we needed to ensure we were not at risk of alienating our core Western customer in our desire to expand the addressable market. Fortunately, we have successfully achieved both objectives, adding new customers or remaining highly relevant to our original Western customer. As we analyze and evaluate our recent business, we recognize there are some external macro factors providing a tailwind to growth. That said, we believe that the successful execution of this three-pronged growth strategy has enabled us to generate outsized growth in same-store sales and to enter markets with new stores that are not traditionally Western. Further, as concerts, rodeos, and events begin to take hold, we are confident that our strategy will position us well to capture more share from an even larger and broader addressable market. With this recap of our growth strategy serving as context, I will now provide an update on each of our four strategic initiatives, beginning with driving same-store sales growth. During the first quarter, we saw very healthy sales growth across our stores business. As discussed on our last earnings call, Total sales in our retail stores during April and the first half of May were very strong, growing 65% when compared to the same period two years ago. Total sales in our stores maintained this strong growth throughout the remainder of the quarter and finished the quarter up 66% when compared to the same period two years ago. From a geographic standpoint, the growth was broad-based with every store district posting solid, double-digit, same-store sales growth as compared to the first quarter two years ago. While each of our three regions were extremely strong, the growth in our west region outpaced the growth in the north and the south. From a merchandise perspective, on a two-year basis, we saw broad-based growth across our major merchandise categories, with double-digit growth in work boots, men's and ladies' western apparel, men's and ladies' western boots, hats, and non-flame-resistant work apparel. FR work apparel was the only category that declined when compared to the same period two years ago. Our customers are increasingly outside working, participating in recreational activities, and returning to outdoor events and are looking to boot barn to get appropriately outfitted. From a marketing perspective, our creative team continues to enhance our brand aesthetic across all media and communication channels. Our marketing strategy has proven to be successful in drawing in new customers, and we believe the addition of these customers will help us continue to drive sales growth and increase traffic while furthering our brand awareness across the country. From an operational perspective, our store associates, along with our field leadership team, were able to ensure that our stores were adequately staffed in order to handle the increased number of transactions during the quarter. The fact that Boot Barn has relatively low turnover at the store manager level has enabled us to rise to the challenge of the surge in sales and maintain our standard for customer service. I am proud of the store operations team for providing the necessary training and support to our store associates to both meet the growing demand in stores and efficiently fulfill omnichannel orders such as buy online, pick up in store, and in-store fulfillment. Our field team has continued to provide excellent service to our customers and I'm grateful for their ongoing commitment to growing the Blue Farn brand. There's been a great deal of dialogue surrounding supply chain challenges across the retail landscape, resulting in difficulty in securing merchandise and increased freight costs. While we have seen some of these issues as well, we have managed to mitigate the impact on the business significantly. We've now improved our inventory position to flat on a comp store basis relative to last year, which was the result of a tremendous amount of hard work by the merchandising and supply chain teams, particularly in light of the extremely strong sales we have been experiencing. And while freight costs continue to increase, our ability to leverage our store base for e-commerce orders has dampened the impact of increasing inbound freight costs. Moving to our second initiative, strengthening our omnichannel leadership. Compared with the first quarter two years ago, total e-commerce sales grew 56%, and our efforts to increase the profitability of this channel continue to be effective, with EBIT showing significant growth on a two-year basis. The BootBarn.com business continues to be our best-performing site, with total sales growth of more than 100% compared to the same period two years ago. While not as strong as the BootBarn.com business, the balance of our e-commerce sales also exhibited strong double-digit growth compared to the same period two years ago. Underpinning our recent performance are the omnichannel initiatives we have implemented over the past two years, including buy online pickup in-store, buy online curbside pickup, same-day delivery, and buy online return in-store. During the first quarter, we invested further in our in-store fulfillment initiative and have seen strong customer reception to this offering. Making the store's inventory available to our e-commerce customers has had a meaningful impact on our e-commerce growth. This new ability to ship online orders from our stores has had an added benefit of increasing the exclusive brand penetration online, adding further to our ability to expand merchandise margins. We believe our omnichannel initiatives are driving increased traffic to our stores, helping to reduce shipping costs, and improving loyalty with our customers as we encourage them to shop Boot Barn both in-store and online. Now to our third strategic initiative, exclusive brands. Our exclusive brands performed incredibly well during the first quarter, increasing to 26.3% of net sales a gain of approximately 650 basis points compared to the same period two years ago. We are very pleased with the accelerated growth in this portion of the business and the performance of each of our exclusive product lines. Cody James, Cheyenne, Hawks, and Idlewind, fueled by Miranda Lambert, continue to be in our top 10 selling brands in the store. We are proud of this achievement and the brand recognition we have built over the years with our exclusive merchandise. Given the supply chain issues across retail today, we are also fortunate that we've been able to rely on our exclusive brand supply chain to meet the surge in demand. Finally, our fourth initiative, expanding our store base. During the first quarter, we opened three new stores, bringing our total store count to 276 stores across 36 states. Our new store openings continue to perform very well and are expected to pay back within our targeted three-year period or better. We expect to open 27 stores in the current fiscal year as originally planned. I am really pleased with the work our real estate team is doing and am very encouraged about the new store pipeline for the balance of this year as well as for the beginning of next fiscal year. Based on our current momentum, we expect to be well-positioned to grow 10% new units or more in our next fiscal year. I'd now like to provide an update on current business. Our second quarter has continued the strength that we have seen during the last several months, with stores and e-commerce generating strong sales. When compared to the same period two years ago, total sales in the first five weeks of our second quarter increased approximately 65%. Consolidated same-store sales through the first five weeks of our second quarter increased 52.4% when compared to the same period two years ago. To recap the tone of the business, we have seen consistent strength in demand, with nearly every week over the past 20 weeks exceeding 60% growth in sales versus two years ago, coupled with solid growth in merchandise margins. I'd like to now turn the call over to Greg Hackman.