Boot Barn Holdings, Inc.

Good day, everyone, and welcome to the Boot Barn Holdings for Quarter 2024 earnings call. As a reminder, this call is being recorded. Now, I'd like to turn the conference over to your host, Mr. Mark Dedovesh, Senior 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 fourth quarter and fiscal 2024 earnings results. With me on today's call are Jim Conroy, President and Chief Executive Officer, and Jim Watkins, Chief Financial Officer. The copy of today's press release, along with a supplemental financial presentation, 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 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 and fiscal 2024 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, WhoBurn's President and Chief Executive Officer.

Jim? Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our fourth quarter fiscal 24 results, discuss the progress we have made across each of our four 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 will open the call up for questions. We are pleased with fiscal 24's results as we grew revenue to record levels, opened 55 new stores, which exceeded our original plan, and expanded exclusive brands by 370 basis points. Our full-year fiscal 24 revenue grew to approximately $1.7 billion, which is nearly 100% growth over pre-pandemic levels just four years ago. When excluding the 53rd week of fiscal 23, total revenue grew 2% year-over-year, with growth driven by the new stores added over the last 12 months, which offset a mid-single-digit same-store sales decline. Full-year merchandise margin grew 160 basis points, comprised of 120 basis points of freight improvement and 40 basis points of product margin expansion. The growth in product margin was driven by another healthy increase in exclusive brand penetration and buying economies of scale. For the year, we achieved earnings per diluted share of $4.80, which, while down from last year, is nearly triple our pre-pandemic earnings from four years ago. Turning to our fourth quarter results, same-store sales declined 5.9% on a consolidated basis, slightly better than the high end of our guidance range and meaningfully better than our third quarter performance. We also saw sequential improvement from February to March, driven by better comp growth in our retail stores. From a margin perspective, fourth quarter merchandise margin expanded 160 basis points driven by freight improvements and supply chain efficiencies, which offset slight pressure from a 20 basis point decline in exclusive brands penetration, which we anticipated and called out on our last earnings call. Overall, I am pleased with the company's ability to hold on to the market share gains we achieved over the past few years, in addition to introducing the Boot Barn brand to new markets. I believe the company's foundation is solid and we have multiple growth levers that have proven their effectiveness, and I'm confident in the runway for future growth. We have seen some exciting recent trends in the performance of the business, which I will summarize at the end of my remarks, but I do want to start with our traditional review of our four strategic initiatives. Let's begin with expanding our store base. I would like to take a moment to recognize and celebrate the team as they opened 55 stores in fiscal 24, a more than one store per week on average. Over the past 12 years, the company has transformed from a regional retailer with 86 stores in eight states to a true national lifestyle brand with 400 stores across 45 states. This accelerated growth is a testament to the careful coordination across nearly every function in the company, from locating and building the stores, creating a compelling product assortment, staffing the stores, and attracting a loyal set of customers in each of our new markets. In addition to opening a high number of stores each year, we also are opening stores with much higher first year sales volumes than our historical average. The store portfolio is extremely healthy and we see no signs of slowing momentum as new stores are generating a 60% cash on cash return on capital in their first year. As we look at the roadmap for the future, we continue to believe that we have the opportunity to open at least 500 more stores in the United States alone and plan to maintain our recent pace of adding 15% new units annually. Moving to our second initiative, driving same-store sales growth. Fourth quarter same-store sales declined 5.9%, driven by fewer transactions partially offset by a modest increase in AUR and a larger transaction size. From a merchandise category perspective, we are seeing some encouraging trends in the business with broad-based sequential improvement across virtually every major product department from our third quarter to our fourth quarter. Our Be Rewarded customer database grew 18% year over year, reaching 8.4 million total active customers. This growth represents more than a million customers being added to the program each year for the past three years. We continue to harness the power of this information to assist with planning our media spending, customizing our customer communications, and tailoring our merchandise assortments by store based on local demographics. From a geographic standpoint, each of the four regions showed sequential improvement in the quarter versus Q3. The west, north, and south regions were in line with chain average, and the east was slightly below the chain average. Our stores team continues to execute well as evidenced by another solid year-over-year improvement in customer service scores in the fourth quarter. I do want to explicitly thank the entire field team for their efforts and hard work in driving sales, opening new store locations, and supporting our omni-channel initiatives by fulfilling online orders. Moving to our third initiative, strengthening our omni-channel leadership. In the fourth quarter, our e-commerce sales declined 7.6%, better than the high end of our guidance range. Our branded site of BootBarn.com, which was approximately 75% of our online sales in Q4, comped down low single digits in the quarter. The digital team continues to make progress on our development of artificial intelligence. As mentioned on a prior call, we already have a working model of generative AI embedded in our in-store Bandit platform that helps both customers and sales associates build full outfits, which has been slowly gaining traction. We are in the process now of taking the learnings from that platform and we'll be adding new AI-enabled functionality to our bootbarn.com site over the next few months. Additionally, we are in the beginning stages of using AI to help create more fulsome product descriptions and landing pages to further support our organic search results. We expect the immediate benefits of this additional AI functionality to be minor, but believe we will have an early advantage of what we expect will become an increasingly complicated online channel in the near future. Now to our fourth strategic initiative, exclusive brands and margin expansion. During the fourth quarter, exclusive brands penetration decreased 20 basis points to 37.1%, which is in line with the expectations outlined on our last earnings call. For the full year, exclusive brands penetration increased 370 basis points to 37.7%, which is an increase of more than 1,400 basis points over the last three years, far exceeding our stated goal of 250 basis points per year. We believe we have additional opportunities to expand exclusive brand penetration to augment the product assortments from our third-party national brands, which continue to build our merchandise margin. Additionally, we have been able to grow our markup on merchandise from third-party vendors and expect to see continued tailwind to merchandise margin as that higher markup product works through our inventories. Consistent with recent years, we expect merchandise margin to continue to build through a combination of exclusive brand penetration, buying economies of scale, and ongoing supply chain efficiencies. I would like to commend the merchandising and exclusive brands organizations for continuing to develop compelling assortments with appropriate regional variation to drive the business forward. Turning to current business and some of the positive trends I noted earlier. Through the first six weeks of Q1, quarter to date, same-store sales are flat, and May's business has turned comp positive. It is great to see the momentum in the business and the sequential improvement from Q4. To summarize, we have seen broad-based sequential improvement across virtually all major merchandise departments, both stores and e-commerce channels, and in all four regional geographies. This trajectory began as we progressed from our third quarter into the fourth quarter, then improved in April, and again into May, where we have seen positive same-store sales in both channels on a month-to-date basis. While we are quite pleased to see the inflection in this business, we are careful to note that we are commenting on a relatively short recent trend and are about to cycle the most difficult year-ago trend in the month of June. Additionally, the macro environment continues to be somewhat uncertain, and our core customer is still facing persistent inflationary pressure. Accordingly, we have incorporated these considerations into our guidance and plan to manage the business cautiously until we feel this trend will endure or continue to improve. I'd like to now turn the call over to Jim.