Boot Barn Holdings, Inc.

Good day, everyone, and welcome to the Boot Barn Holdings third quarter fiscal year 2022 earnings call. As a reminder, this call is being recorded. Now I'd like to turn the conference over to your host, Mark Dadovish, Vice President of Financial Planning. Please go ahead, sir. Thank you. Good afternoon, everyone.

Thank you for joining us today to discuss Boot Barn's third quarter fiscal 2022 earnings results. With me on today's call are Jim Conroy, President and Chief Executive Officer of Greg Hackman, Executive Vice President and Chief Operating Officer, and Jim Watkins, 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 these 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 third 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, Group Barn's President and Chief Executive Officer. Jim?

Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On today's call, I'll review our third quarter fiscal 22 results, highlight each of our key strategic initiatives, and provide an update on current business. Following my remarks, Jim Watkins will review our financial performance in more detail and then we'll open the call up for questions. Consistent with our last earnings call and given the impact COVID had on our performance in fiscal 21, we believe that a comparison of our third quarter results to the same period two years ago provides the most helpful view into our performance. Our business continues to perform extremely well as third quarter total sales grew 71% on a two-year basis, with retail stores up 71% and e-commerce up 70%. The consistency and broad-based strength of the business has been remarkable, with every one of the 13 weeks in the quarter growing in excess of 55% on a two-year basis. The majority of the sales growth was a result of an increase in transactions with a substantial portion coming from new customers, underscoring the success of our merchandise and marketing initiatives aimed at broadening our consumer audience. At the same time, better full-price selling and growth in exclusive brand penetration fueled a 420 basis point increase in merchandise margin over the same period two years ago. The combination of strong sales growth and robust merchandise margin expansion helped drive earnings of $2.27 per diluted share compared to $0.85 in the same period two years ago. When adjusting for the tax benefit in both years, we grew earnings per diluted share more than 175% to $2.23 compared to $0.81 in the same period two years ago. I would now like to provide an update on each of our four initiatives, beginning with driving same-store sales growth. Third quarter same-store sales on a two-year basis improved sequentially from Q2, with strong comps each week and across all regions. Geographically, sales growth in the West again outperformed the rest of the chain, while sales in the South were up strong double digits but below the chain average. From a merchandise perspective, every major category demonstrated solid double-digit growth. Ladies apparel and ladies western boots, cowboy hats, ball caps, and belts remain our strongest performing categories when compared to the two-year-ago period. Additionally, we saw healthy growth in men's western boots, accessories, kids boots, and men's apparel. Work boots and work apparel were also double-digit positive. While flame resistant work apparel was negative in the quarter compared to two years ago, it has shown sequential improvement each quarter and has turned double digit positive in January. We believe that a strong portion of the growth can be attributed to the work done by the merchandising team in managing the challenges of the supply chain to ensure healthy in stock positions, expanding our customer segments by broadening our product assortment and bolstering our legacy offerings. From a marketing perspective, our investments in traditional marketing programs such as radio, television, and direct mail, in addition to digital advertising, drove increased traffic into our stores and to our e-commerce sites. We continue to execute on our strategy of expanding the addressable market to include customers that are adjacent to a pure Western customer. With the addition of a more fashionable Wonder West customer a few years ago, followed by the more recent addition of the Just Country segment, we have grown our active customer count significantly. At the same time, we have evolved and upgraded the creative aesthetic of the brand, which has embraced these new segments while not losing sight of our legacy Western customer. As we continue to gain more insight from our database analytics, it is becoming increasingly apparent that these new customers are exhibiting similar shopping patterns to our legacy customers in terms of average transaction size and their propensity to be repeat customers. We believe the ability for us to connect with a broader customer lifestyle will provide growth opportunities for years to come. From an operational perspective, our teams performed extremely well during the holiday shopping season, working hard amidst a difficult labor environment. I am very pleased with the partnership between our field organization, and human resources team that was able to support the volume associated with such a strong sales trend coupled with the typical holiday build. The team was able to fill the increased hours needed to support our existing stores, as well as recruit, train, and onboard the store teams for the 11 stores that we opened in the quarter. This achievement is more notable when you consider that we took the decision to significantly ramp up our ship-from-store capability to support our online channel during the busy period around Cyber Week. Moving to our second initiative, strengthening our omni-channel leadership. E-commerce sales in the third quarter grew 70% compared with the same period two years ago, and EBIT increased more than 200% over the same time as our focus on enhancing the profitability of our e-commerce business continues to drive exceptional results. Specifically in the third quarter, we reduced our online-only promotions in order to better align with the in-store pricing during the holidays. Adding to our omnichannel capabilities, we recently made the merchandise in our stores available for sale in our online channels. These orders are executed online but fulfilled by the stores. Our merchandising, store ops, e-commerce, and technology teams worked relentlessly to develop and implement in-store fulfillment in advance of the holidays. With our online customers now able to see the vast selection of our exclusive brand assortment only previously available in our stores, we also drove incremental exclusive brand penetration growth online. In addition, we believe we can elevate the in-store shopping experience even further with inventory purchases focused on more exciting product that will broaden the store selection and expose customers to product that was previously only available online. By placing more exciting product in stores, it will not only be available for in-store purchases, we will also be able to offer these products to online customers utilizing this in-store fulfillment capability, mitigating markdown exposure by selling in bulk channels. This will be yet another tactic for us to leverage our e-commerce channel to drive incremental growth in-store. Now to our third strategic initiative, exclusive brands. It was a fantastic quarter for our exclusive brands as penetration grew 570 basis points compared to the same period two years ago, representing 28.3% of sales in the third quarter. We have six exclusive brands in our current portfolio, and three of them are in our top five overall brands. In the coming months, we will be introducing four new exclusive brands, expanding our offering to address our Just Country segment while also refining our Western offering to target both a younger rodeo customer and a more traditional ranching cowboy. The new assortment looks fantastic and will be arriving in stores and online this spring. I would also like to commend our exclusive brands team on their execution in both designing compelling product and in securing its delivery for the holidays. While many of our third-party branded vendors struggled to deliver our orders due to global supply chain disruptions, our exclusive brands team proved to be successful in obtaining merchandise to sell both online and in our stores. Finally, our fourth initiative, expanding our store base. It was a very busy period as we opened 11 stores during the third quarter, bringing our total store count to 289 stores across 37 states. We expect to open another 11 stores in the fourth quarter, bringing our store count to 300 at the end of fiscal 22. We are extremely pleased with recent new store performance. New stores opened during the last two fiscal years are paying back in approximately one year, well ahead of our targeted three-year period. Additionally, our pipeline for new store openings is very strong for the coming fiscal year. We are particularly excited to continue to expand the geographic reach of the brand into the Northeast with stores scheduled to open in upstate New York, Delaware, Maryland, New Jersey, and West Virginia. Turning to current business, our fourth quarter is off to a strong start with consolidated sales growth on a two-year basis through the first four weeks increasing 89%. This not only represents a sequential improvement from the incredibly strong results in the third quarter, but has extended the trend to 45 consecutive weeks of more than 55% sales growth on a two-year basis. These sales continue to be driven by increases in transactions, coupled with strong expansion in merchandise margin. January sales growth has been broad-based across all merchandise categories and geographies. I'd like to now turn the call over to Jim Watkins.