Boot Barn Holdings, Inc.

Good day, everyone, and welcome to the Boot Barn Holdings, Inc. First Quarter 2027 Earnings Conference Call. As a reminder, this call is being recorded. Now, I would like to turn the conference over to your host, Mr. Mark Dedovesh, Senior Vice President of Investor Relations and Finance. Please go ahead, sir.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's First Quarter Fiscal 2027 Earnings Results. With me on today's call are John Hazen, Chief Executive Officer, and Jim Watkins, Chief Financial Officer. A 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 you will make during this call are forward-looking statements. These forward-looking statements reflect Boot Barn's judgments and analysis only as of today, and the actual results may differ materially from current expectations based on the 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 office-long webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter fiscal 2027 earnings release, Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our first quarter fiscal 27 results, provide an update on current business,

and discuss the progress we have made across each of our four strategic initiatives. Following my remarks, Jim Watkins will review our financial performance in more detail, and then we will open up the call for questions. I am encouraged by our start to fiscal 27. First quarter results exceeded our expectations and reflected broad-based strength across the business. Revenue increased 18%, driven by the opening of 27 new stores during the quarter, and consolidated same-store sales growth of 4.7%. Merchandise Margin exceeded our guidance driven by stronger than expected product margin and the recognition of tariff refunds during the quarter. Disciplined Expense Management also contributed to first quarter results with our SG&A rate coming in better than guidance even as we invested in marketing initiatives including our sponsorship at the Stagecoach Music Festival and 28 Grand Opening events. As a result of the factors just mentioned, first quarter earnings per diluted share increased 32% over the prior year to $2.29, including a 38 cent benefit from tariff refunds. Our first quarter results reflect the outstanding execution by our team and the strength of our business. I am confident we are well positioned to deliver continued growth throughout the remainder of the year. Now turning to current business. Through the first four weeks of the fiscal second quarter, consolidated pin store sales are approximately flat. While this represents a moderation from our first quarter performance, it was largely anticipated as we lacked the strongest sales month of the second quarter from last year. July sales did, however, come in below our expectations due to a couple of factors that were not contemplated in our original outlook. We believe fewer Western Lifestyle Stadium events and concerts, together with the temporary impact of World Cup matches, on customer traffic during televised games weighed on our performance during the month. Despite these factors, we remain confident in our outlook for the balance of the year. I will now spend some time discussing each of our four strategic initiatives. Let's begin with new store growth. We opened 27 stores during the first quarter, ending the period with 566 locations across 49 states. New store openings continue to exceed expectations across the country and are projected to generate $3.2 million in average annual revenue, with an investment payback of less than two years. We remain on track to open 70 stores this fiscal year, supported by a new store pipeline. As we continue expanding across the country, we believe we are well-positioned to grow the Boot Barn brand for many years to come as we progress towards our long-term opportunity of 1,200 stores across the United States. Moving to our second initiative, same-store sales. First quarter, consolidated same-store sales increased 4.7%, with brick-and-mortar same-store sales increasing 3.8%. Store comp growth was driven by a 3% increase in average unit retail and approximately flat transactions. From a merchandising perspective, we delivered broad-based growth across most major merchandise categories. Men's western boots increased mid-single digits, and ladies' western boots decreased mid-single digits, as they cycled mid-teen comps in the prior year. Men's and ladies' apparel increased high single digits, led by double-digit growth in denim, which also cycled exceptional growth last year. Our work boots business delivered high single-digit comp growth during the quarter, which marks the fifth consecutive quarter of growth in this category and the strongest growth over the past few years. I am pleased to see the continued acceleration in the work business as the team made a concerted effort to reinvigorate the category last year. These efforts, including enhancements to our in-store merchandising and increased marketing focus, and investments in our key third-party brands to ensure we offer the right assortment for our work customers. Moving to our third initiative, Omnichannel. In the first quarter, e-commerce comp sales increased 13.4% driven by double-digit growth on bootbar.com. In addition to driving online sales growth, our Omnichannel capabilities remain a meaningful competitive advantage and reflect our team's commitment to operate as a stores-first organization. Today, a large portion of our e-commerce orders are fulfilled from our stores, enhancing merchandise margins while providing customers with access to a broader assortment of inventory. We continue to see strong adoption of our buy online, pick up in store, and ship to store offerings, which drives store traffic, reduce fulfillment costs, and enhance customer engagement by delivering a more seamless shopping experience across our digital and physical channels. Now to our fourth strategic initiative, merchandise margin expansion and exclusive brands. I am pleased with the team's continued execution of our merchandise margin strategy. including tariff refunds, first quarter merchandise margin exceeded our expectations driven by strong product margins. While exclusive brands remain an important contributor to merchandise margin expansion, the exceptional performance of our work boots business, driven by strong demand for third-party brands, resulted in lower exclusive brand penetration during the first quarter than anticipated. We expect the strength in our third-party work boots business to continue, and as a result, we now expect full year exclusive brand penetration to be approximately flat to slightly down compared to the prior year. We view this as a positive outcome, as the continued strength of our work boots business reflects healthy customer demand, drives incremental sales, attracts new customers to the Boot Barn brand, and further strengthens our position as the leading destination for work. Thank you, Jon. Thank you, Jon.

I want to begin by explaining the tariff refund impact on our first quarter results and full year guidance. Our first quarter earnings per diluted share benefited by 38 cents due to tariff refunds. This is comprised of a $14.7 million benefit to merchandise margin worth 250 basis points. We also received a half a million dollars of tariff-related interest income. Looking forward, we expect tariff refunds to benefit second quarter merchandise margin by $2.4 million, or 40 basis points, resulting in an estimated $0.06 benefit to earnings per diluted share. For the third quarter, we expect tariff refunds to benefit merchandise margin by $0.7 million, or 10 basis points, resulting in an estimated $0.02 benefit to earnings per diluted share. For the full year, we expect tariff refunds to benefit merchandise margin by $17.8 million or 70 basis points. We also expect a half a million dollar benefit to interest income. These factors result in an estimated 46 cent benefit to earnings per diluted share. Now turning to first quarter results. Net sales increased 18% to $594 million. Consolidated same store sales grew 4.7% driven by a 3.8% increase in retail store same-store sales and a 13.4% increase in e-commerce same-store sales. Merchandise margin increased 220 basis points during the quarter. The increase was driven by 250 basis points of tariff refunds and 60 basis points of product margin expansion, partially offset by a 90 basis point headwind from lapping low freight expense in the prior year period. Buying occupancy and distribution center costs be leveraged by 90 basis points, primarily due to occupancy costs associated with new store growth. As a result, gross profit rate increased 130 basis points compared to the prior year. SG&A expense was $149 million, or 25.2% of sales, an increase of 10 basis points from the prior year period and 30 basis points better than our guidance. Income from operations was $91 million or 15.3% of sales. Earnings per diluted share increased 32% to $2.29 compared to $1.74 in the prior year period. On a consolidated basis, inventory increased 16% year-over-year to $900 million and increased 1% on a same-store basis. The increase in total inventory reflects the growth needed to support new stores, exclusive brands, and inventory purchased at a volume discount. During the quarter, we repurchased more than 158,000 shares of common stock for an aggregate cost of $25 million under our $200 million share repurchase authorization. This brings cumulative repurchases, which began in fiscal 26, to $75 million for approximately 445,000 shares. We ended the quarter with with $139 million in cash and zero drawn on our line of credit. We are pleased to announce that yesterday we completed an amendment to our revolving credit facility. This amendment doubles our capacity on the line of credit to $500 million and extends the maturity date to 2031. Now turning to our raised outlook for fiscal 27. The supplemental financial presentation we released today outlines both the low and high end for the full year and the second quarter. In my following remarks, I will focus on the high end of those ranges. Our updated guidance includes the expected benefit of tariff refunds. For the full year, at the high end of our guidance, we expect total sales of $2.6 billion, representing 16% growth over fiscal 26. We continue to expect same-store sales to increase 4%, including a 3% increase in retail store comps and 13% growth in e-commerce comps. Merchandise margin rate is now expected to be approximately 52.2% of sales, representing a 130 basis point increase year-over-year, including 70 basis points from tariff refunds, 50 basis points of product margin expansion, and 10 basis points of freight improvements. We now expect growth profit rate to increase by 60 basis points year-over-year to approximately 38.7% of sales. We expect to achieve 40 basis points of SG&A leverage. We now expect income from operations of $374 million, or 14.3% of sales, an increase of 100 basis points over last year. Net income is projected to be $281 million, with growth and earnings per diluted share of 26% to $9.23. We continue to expect net capital expenditures to total $130 million, and we anticipate an effective tax rate of 25.7% for the remainder of the fiscal year. Now turning to our second quarter guidance. We expect total sales at the high end of our guidance range to be $582 million and a consolidated same-store sales increase of 2%. We expect a merchandise margin of approximately 51.8% of sales, representing a 140 basis point increase year over year. This guidance reflects a 90 basis point improvement in freight expense, a 40 basis point benefit from tariff refunds, and 10 basis points of product margin expansion on top of 130 basis points of product margin expansion in the prior year period. We expect a gross profit of approximately 36.6% of sales, SG&A for the second quarter is expected to be approximately 25.1% of sales, representing 20 basis points of leverage compared to the prior year period. We expect income from operations of $67 million, or 11.5% of sales, and earnings-prediluted share of $1.65 compared to $1.37 last year. Now I would like to turn the call back to John for some closing remarks.

Thank you, Jim. As we look ahead, I remain very optimistic about the opportunities in front of us. We have built a strong foundation, continue to execute on our strategies with discipline, and believe we are well positioned to deliver another year of profitable growth. None of this would be possible without the dedication and passion of our team members across the country. Every day, they bring our values to life through their commitment to our customers and to one another, and I want to sincerely thank them for everything that they do. Now I would like to open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw, please press star, then 2. We ask that you please limit yourself to one question and one follow-up to ensure we have ample time to answer all the questioners in the queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Matthew Voss of J.P. Morgan. Please go ahead.

Great, thanks. So, Jon, comps in June exited the quarter up 5.4%. That was your best month of the first quarter. Could you help bridge the delta between June and July comps, maybe specifically June The impact, you think, from some of the transitory impact on traffic. If you look at e-commerce, it's up double digits in July. Or just any way to parse out the underlying trend in July, maybe outside of days that you believe were impacted from some of the transitory events.

Yeah, sure. Thanks, Matt. If we look at the major merchandise categories, particularly in Western in July, we saw that Thank you for having me. and it was a traffic issue around the things we described, a lack of stadium country music tours and the World Cup as a distraction in the month. What's important to note, it was across all geographies again, so there wasn't something specific around, you know, weather in a particular geo or something else going on, oil, etc., and the work business was incredibly healthy. Both the work apparel business and the work boot business were in the high single digits, which showed the resiliency of our needs-based customer and a bit of a slowdown in traffic in what is one of our smallest months of the fiscal year.

Great. And then, Jim, as a follow-up, the drivers of outperformance within your first quarter product margin, Absolutely. Absolutely.

You characterized it well, Matt. The product margin expansion was a beat to what we had guided for the quarter, and it really comes down to what we've been talking about over the last several quarters with better buying economies of scale and the product that we're bringing in at discounts, the product that we're selling at full price. The job that the merchandise team has done in getting the right product in the store has really benefited the product margin, particularly as we got into the first quarter. As we look to the merchandise margin guide in the second quarter, we do have a breakdown of some of the components of that on slide 14 in our presentation. But we're expecting freight benefit of 90 basis points, and that was up against some pretty low freight last year. So it's really more of a comparison against the prior year than it was being extremely strong this year. The tariff benefit of 40 basis points is what we're guiding, and then product margin – Great. Best of luck.

Thank you, Matt. Thanks, Matt.

Our next question comes from Peter Keith of Piper Sandler. Please go ahead.

Oh, hey. Thank you. Good afternoon, everyone. John, could you unpack the workbook? I guess, well, it's even work boot and work apparel. It's interesting. I know you've re-merchandised work boots, and maybe that's having some self-help benefits. There's also, you know, a CapEx cycle in the economy, and you've got these data center build-outs. So do you think there's anything also on the macro front that's contributing to this category growth?

Yeah, great question. Yeah, as a reminder, one of the adjustments I made coming in as CEO were to reinvigorate the work boot business. Some of the initiatives were to re-merchandise it, as you just mentioned, shift some of the marketing spend into the work business overall, as well as market our exclusive brands from a work standpoint and not just a Western standpoint with those standalone sites. And The work boot performance I'm incredibly pleased with. It is across both pull-on and lace-up to get to that high single-digit comp, which is great to see it's not one or the other. It is more lace-up than pull-on, so not driven by oil, if that question kind of comes up. and the assortment between some new third-party brands that we brought in and going deeper with some great selling product with existing third-party brands has really bared fruit. So a little bit of a rebalance and that kind of affected that exclusive brand penetration as we had some great selling boots from third-party vendors. When we look at the work apparel side of things, again, increasing positive comps over the last couple of quarters and as we got into July, high single-digit comps, it was a blend between FR and non-FR product as well. So that seemed broad-based and can't point to, you know, FR apparel and data center builds or electrification projects or those sort of things. But we do hear from stores when a big data center project comes to town that and people are working, they tend to shop at Boot Barn for those work needs. So we'll see pockets, but nothing that we have been able to kind of see in the product being bought in a broad-based manner that would say this is driven by that CapEx cycle, although I'm sure it's a piece of it, and we see it at individual stores.

Okay. There are a couple of commentaries. Maybe for Jim Watkins, a shorter from question, if you just help us understand how you framed up the Q2 guide. The compares after July do get quite a bit easier. So on a two-year basis, I could argue things could be a little bit better. But how did you come up with that 0% to 2% outlook?

Yes, you're right, Peter. The compares do get easier as we move throughout the quarter. as we look to guiding the second quarter, we followed a similar approach that we've used historically and we really just took the July, the four-week business of July and applied that to the historical seasonality of the business to arrive at the sales for the balance of the quarter. But then what we did is we added about a point of comp to what that calculation showed us in order to reflect what we believe to be artificially low sales in July due to the points that John mentioned earlier. So, really looking at that July business and forecasting that forward and then bringing that up a little bit. Had we used the June-July business and rolled that forward for the rest of the quarter, we would have gotten something higher than what we guided but wanted to be fair to what we were seeing recently.

Very good. Thanks so much. The impact, you think, from some of the transitory impact on traffic, if you look at e-commerce, it's up double digits in July. or just any way to parse out the underlying trend in July, maybe outside of days that you believe were impacted from some of the transitory events.

Yeah, sure. Thanks, Matt. If we look at the major merchandise categories, particularly in Western in July, we saw that Thank you for joining us. and it was a traffic issue around the things we described, a lack of stadium country music tours and the World Cup as a distraction in the month. What's important to note, it was across all geographies again, so there wasn't something specific around whether in a particular geo or something else going on, oil, etc., and the work business was incredibly healthy. Both the work apparel business and the work boot business were in the high single digits, which showed the resiliency of our needs-based customer and a bit of a slowdown in traffic in what is one of our smallest months of the fiscal year.

Great. And then, Jim, as a follow-up, the drivers of outperformance within your first quarter product margin, Absolutely. Absolutely.

You characterized it well, Matt. The product margin expansion was a beat to what we had guided for the quarter, and it really comes down to what we've been talking about over the last several quarters with better buying economies of scale and the product that we're bringing in at discounts, the product that we're selling at full price. The job that the merchandise team has done in getting the right product in the store has really benefited the product margin, particularly as we got into the first quarter. As we look to the merchandise margin guide in the second quarter, we do have a breakdown of some of the components of that on slide 14 in our presentation. but we're expecting freight benefit of 90 basis points and that was up against some pretty low freight last year so it's really more of a comparison against the prior year than it was being extremely strong this year. The tariff benefit of 40 basis points is what we're guiding and then product margin Great. That's the block.

Thank you, Matt. Thanks, Matt.

Our next question comes from Peter Keith of Piper Sandler. Please go ahead.

Oh, hey. Thank you. Good afternoon, everyone. John, could you unpack the workbook I guess, well, even WorkBoot and WorkApparel. It's interesting. I know you've re-merchandised WorkBoot, and maybe that's having some self-help benefits. There's also a CapEx cycle in the economy, and you've got these data center build-outs. So do you think there's anything also on the macro front that's contributing to this category growth?

Yeah, great question. Yeah, as a reminder, one of the adjustments I made coming in as CEO were to reinvigorate the work boot business. Some of the initiatives were to re-merchandise it, as you just mentioned, shift some of the marketing spend into the work business overall, as well as market our exclusive brands from a work standpoint and not just a Western standpoint with those standalone sites.

And

The work boot performance I'm incredibly pleased with. It is across both pull-on and lace-up to get to that high single-digit comp, which is great to see. It's not one or the other. It is more lace-up than pull-on, so not driven by oil, if that question kind of comes up. and the assortment between some new third-party brands that we brought in and going deeper with some great selling product with existing third-party brands has really bared fruit. So a little bit of a rebalance and that kind of affected that exclusive brand penetration as we had some great selling boots from third-party vendors. When we look at the work apparel side of things, again, increasing positive comps over the last couple of quarters and as we got into July, high single-digit comps, it was a blend between FR and non-FR product as well. So that seemed broad-based and can't point to, you know, FR apparel and data center builds or electrification projects or those sort of things. But we do hear from stores when a big data center project comes to town that and people are working, they tend to shop at Boot Barn for those work needs. So we'll see pockets, but nothing that we have been able to kind of see in the product being bought in a broad-based manner that would say this is driven by that CapEx cycle, although I'm sure it's a piece of it and we see it at individual stores.

Okay, very helpful commentary. Maybe for Jim Watkins, a shorter-term question, if you could just help us understand how you framed up the Q2 guide. The compares after July do get quite a bit easier, so on a two-year basis, I could argue, things could be a little bit better. But how did you come up with that 0% to 2% outlook?

Yes, you're right, Peter. The compares do get easier as we move throughout the quarter. as we look to guiding the second quarter, we followed a similar approach that we've used historically. And we really just took the July, the four weeks business of July and applied that to the historical seasonality of the business to arrive at the sales for the balance of the quarter. But then what we did is we added about a point of comp to what that calculation showed us in order to reflect what we believe to be artificially low sales in July due to the points that John mentioned earlier. So really looking at that July business and forecasting that forward and then bringing that up a little bit. Had we used the June-July business and rolled that forward for the rest of the quarter, we would have gotten something higher than what we guided but wanted to be fair to what we were seeing recently.

Very good.

Thanks so much, guys.

Our next question comes from Stephen Zaccone of Citi. Please go ahead.

Great, good afternoon. Thanks very much for taking my question. I wanted to dig in on the commentary just about the deceleration in Western in the month of July, and you've referenced, you know, more pronounced in women's. So, you know, maybe if we zoom out, you know, what's your assessment of the longevity of some of the strengths you've seen in the women's Western side of the, you know, the women's booth side of the business? You know, is there a concern that the compares are getting too difficult and some of the strengths You've seen may not continue. And then when you look across the industry, have you seen anything from a promotions perspective or maybe the inventory is a little bit heavy, the industry is a little heavy on inventory? Anything to call out there from that perspective?

Sure. Yeah, I'll start with the promotions piece first. The industry continues to be very rational. We track promotions closely and haven't seen anything that really stands out, especially in really in all categories. There's been no shift in the promotional cadence within Independence Farm and Ranch or the other competition in Western and work. When we look at the women's business, you know, We see opportunity in, we break women's boots down between leather and performance and where we were seeing the larger slowdown or the bigger slowdown rather is on the leather side of things and performance has fared better. So we think there's a little bit of a shift going on from leather to our performance boots. We also believe there's opportunity in the leather category where we've had some boots I referenced on the last call that were selling extremely well and we're trying to get those boots into more stores. Those are at a higher price point, at roughly a $280 price point. So we really think that the women's boot category still has opportunity from a merchandising, a good better best standpoint. July is, again, it was a bit of an anomaly. It's not kind of a normal month, and we think there's still great opportunities. And for the merchandising team, for the store operations team, for the marketing team around how we approach women's boots, you know, Stagecoach was new for us this year. Under the Big Sky was year number two in Montana for us, and both of those lean more towards the female customer. So While I've pushed the team on work and the work boot adjustment that I brought in, they also are always trying to kind of improve that women's boot business. So we feel good about the future of women's boots. We don't think it was a trend. We don't think that there's any sort of inventory issue that is being reflected in promotional activity elsewhere within the industry.

Okay, thanks for that detail. The thought I had is just on freight, you know, we're in an environment now where oil is going back up. So maybe Jim, how do we think about, you know, freight on a maybe medium term basis? It sounds like this year is pretty much locked in. But as we think, you know, about oil trending higher, is this a concern as we look into next year potentially for freight costs for your business?

The freight, as we look forward, we'll just have to see what happens with the price of oil and fuel surcharges and that sort of thing. We're operating in the same environment as everybody else is, and as we get into next year, we'll have to see how that plays out. We feel really good about the improvement in freight that we've modeled in for this year of 10 basis points. And given that we turn our inventory twice a year, we feel that that's pretty locked in, I think is what you said, for this year. And that's really based off of those inventory turns. But then as we've talked about last quarter, some of the renegotiations that we've had with some of our logistics and transportation providers and getting those rates down and getting some better discounts that have helped us offset what we've seen so far this year on elevated rates. Freight costs. And I would remind folks that while we have seen container costs come up pretty significantly over the last few months, they're not nearly what they were a couple of years ago when we're dealing with things with COVID. And people had, you know, I think we had 100 basis points of a headwind that year. We're not even close to those levels. So we'll see what the market brings over the next few months. But We're probably in a similar spot as others.

Okay. Thanks for the detail. Best of luck.

Our next question comes from Dylan Carden of William Blair. Please go ahead.

Thank you. In understanding July, I guess two questions kind of immediately arise. One, do you have line of sight into the country music calendar for the balance of the year? and there have been some reports of major headline cancellations broadly in music concerts. And then outside of the World Cup, I guess sort of as the series ended and in periods where there weren't games, were those periods in which you did see better performance?

I'll jump in first on the event calendar. August and September look similar to last year. So we don't see a shift in where the pent-up touring and events kind of got pushed into August and September. The best way to put it is August and September look similar to last year. And there's been some new tours announced with Garth Brooks and others over the last few days. So August and September I would characterize as looking normal.

And your second piece of the question was around the World Cup and when there are games versus not games. Is that right, Dylan?

This series has ended now, right? I mean, are you seeing kind of some recovery?

Yeah, so really we're talking about a four-week period in July where we had a variety of things happening. I don't want to get into the day-by-day, week-by-week, but what I will say on the World Cup piece of it is that we did look at The data, hourly transactions as games were occurring and seeing what was happening in our stores and seeing outsized declines in comp sales during those periods of time. And so that's what led to John mentioning that as being one of the things that we believe was impacting July. I think we just talked about the concerts and events and the World Cup games. But really the bigger piece to remind everyone of is that July last year was a plus 11 comp that we're up against. And so we're talking about a four-week period of time. We're up against really tough, strong comps and had a couple of event shifts and things that didn't happen that happened last year plus some distraction in that four-week period of time. It gives us pretty good comfort in looking forward to the rest of the quarter where we're up against – easier comps and don't have or are not expecting to have at least the same kind of distraction as we just saw. We're feeling pretty good about the guide for the rest of the quarter and this being a short-term hiccup.

And then on the private label work boot strength and third party, would you expect private label penetration to go down because of mix shift into work or is it that you're being somehow less competitive in work?

It's a mix of both. I think we're having really nice success with third-party brands and work boots. And again, as an example, in July, with July comping essentially flat and we're high single digits in work boots, I think it's also the work boot over-penetrating, which is... Great. It was something that I wanted to adjust and pursue from day one coming in as CEO, and I'm happy to see the performance we've had in all of the adjustments we've made to drive work boot comps and have a high single digit in Q1 and have that carry forward into July. So I think it's a mix of the two.

And just to clarify, the If you exclude work boots and the exclusive brand penetration, we had growth during the quarter. And so the exclusive brand business is performing quite well. Right.

Okay. Appreciate the time. Thank you. Thanks, Dylan.

Our next question comes from Jonathan Komp of Baird. Please go ahead.

Yeah, hi, good afternoon. John, I want to follow up and ask whether there's any specific initiatives that you may be contemplating, either with merchandising, your own brands, third-party brands, or any of the categories that you think have potential to drive incremental business that could help inflect the trends that you're seeing.

There's a couple of things we're doing. I meet with the merchant team once a week, and two key initiatives worth calling out are one around this leather women's boot business and getting some additional inventory, additional styles, and additional colors in some of what I would characterize as the boots sitting in the best side of good, better, best. So they're actively trying to get us as much inventory as possible in boots that are selling very, very well at a relatively high price point. So there's some great stories in the women's leather business and the merchandising team is all over it. The other component is denim. And we had made some changes to the men's denim merchandising last year. And as we set the back-to-school floor set up, The start of the back-to-school floor set here in July, we've shifted the women's denim presentation, moved some of the basic core denim to the denim wall, put some of the more premium styles up front, some of the brands re-merchandised. If you're looking for that core women's denim from a replenishment standpoint, and we had already done this on the men's side, You'll be able to find it in that denim wall in women's. And then we're going to have more compelling product stories around denim and more interesting styles up front on the nesting tables and on the fixtures. So on the denim front, it's on women's denim is where we're making the changes. And then on the boot side, again, there are some real winners on women's leather boots that we are pursuing with our third-party vendors.

Okay, great. That's helpful color. And then maybe as a follow-up, Jim, I think previously the impression was maybe there was less room for full-year earnings upside relative to some of the past years for a variety of reasons. Given the underlying raise here, even with a softer Thank you. Yes, so really looking at the transactions, we've guided the year flat to up slightly in transactions, and so any opportunity we have to improve the transactions and

use our traffic counters that we now have in the stores to help drive behavior and sales behavior and improve the transactions. That's something that we can look at. One of the things that was really strong during the first quarter, and you can see that in the sales numbers versus the comp numbers, our new stores have been performing extremely well. We're pleased with that. And so we did flow through some of the We saw a nice flow through in the first quarter to the bottom line. And so as we look to the expenses and making sure that we're continuing to control expenses and being smart with our store labor and other expenses, there's some potential upside that we would look to see as we get through the year and if we're able to drive transactions and get some sales beat to be able to flow through some nice earnings.

Okay, great. Best of luck. Thank you.

Thanks, John.

Our next question comes from Jay Soule of UBS. Please go ahead.

Great. Thank you so much. My first question is just talk to us about how you thought about including the tariff refund in the guide versus potentially excluding it, and what are you assuming for tariffs, tariff rates for the rest of the year?

Yeah, so we If you look at the second page of the earnings release, we laid out what we expect to see through the balance of the year. And really, the way that flows is based upon the accounting. We've received the cash in the door as of the start of the second quarter or near the start of our second quarter. And so the way the P&L impact is going to be recorded over the course of the year based off of our inventory turns and when we actually paid the tariffs is how we account for that. And so that's what's laid out in that table on slide two. And then as we look to the balance of the year and what's included, we've really contemplated the most recent 10% to 12% tariff rate in our guide for the balance of the year. And if there are shifts to those rates, then we will adjust our pricing accordingly, similar to what we did a year ago in navigating the tariff environment. That's our expectation on how we would plan that. And so not really a change in what we had two months ago when we reported what we had considered with the tariff rates as we looked out for the full year.

Definitely. And then I just want to ask about real estate. I'm How are you feeling about the comp leverage point going forward? Is there any change from last quarter? And if you think about 70 stores for the year and going forward to a similar number, how focused are you on hitting a number versus saying, say, well, if the real estate deals aren't right, then it's going to be 65, or if they're really, really good, maybe it's 75. Can you just talk about your flexibility around that and sort of whether you're prioritizing hitting a number in terms of openings or if it's really about real estate and trying to get that leverage point down?

Really, the goal is to open the best stores that we can open and not settle for stores that are going to be subpar. And so we've got the goal out there of the 12% to 15%. We like the pipeline as it's laid out for the balance of this year. We feel good about our guide for this year. As we get into next year, we expect to be within that range. But as we evaluate real estate, we'll be able to lock into a number that's a little bit more precise than what we have out there for next year as we lay out guidance. As far as the leverage points go, we're in a good place with our occupancy and occupancy rates. And I know that the 10% leverage point on buying an occupancy and distribution center cost is often an area of focus. But as we look to The EBIT rate expansion, we feel great about that, particularly this year with the more recent tariff impact or help in the business. It's 240 basis points. We will have expanded EBIT over a three-year period. If you exclude the tariffs, that's 170 basis points of expansion over the three-year period. And so we think we've got the nice merchandise margin drivers that can help offset that and A reminder that every one of our stores is four-wall EBITDA positive. And so while there's a little bit of rate pressure with the new stores, we're able to contribute earnings to the bottom line. And one thing I just added, we've opened 93 stores over the last 12 months, 20% increase. increase in store count over the last 12 months. And so the math on that is just going to put some pressure on the occupancy rate, but that's included in the design of what we're doing here with opening these stores.

Completely makes sense. Thank you so much. Very helpful. Thanks, Jay.

Our next question comes from Janine Strickter of CTRG. Please go ahead.

Hi, thanks for taking my question. I want to go back to the exclusive brand penetration. You're sitting here this year at a bit over 40%. I know in the past you've talked at maybe surpassing 50%. Does this change at all the way that you think about the long-term opportunity? And then also I was just curious what you're seeing on some of the newer e-commerce initiatives. In the past you talked about TikTok shops and also some of the branded e-commerce sites. Thanks very much.

Absolutely. I still believe 50% is the right number. I don't think, as we stand today and the brands that we have, that it is north of 50%. I think we're a house of brands. We're a retailer. But I believe 50% is the right number, and I still have full confidence that we will get to 50% over the coming years. So this is a rebalancing due to some wins in the work boot space, which is good news. As we look at the exclusive brand sites, they continue to gain traction. The traffic or sessions, as well as the sales coming from those sites, continue to comp upwards. Cody James is still, given that it's our biggest brand, makes sense, is the biggest success among those. So I'm still very pleased with the storytelling and the brand building. that we're able to achieve with those sites. The sales that come from them are a nice after effect, but we've got millions of sessions or visitors coming to those sites and learning more about Cheyenne or Cody James or Hawks than they ever would on a product detail or a product listing page on boot barn.com. So thrilled with the amount of traffic we're getting to those sites. TikTok shop continues to be great. We are selling both our own brands on TikTok shop, as well as certain third-party brands have partnered with us, which has been exciting. And we continue to see nice traction on TikTok. It continues to grow very quickly in the U.S., as I'm sure many of you know. I believe it's the size of eBay right now in terms of sales. So TikTok has become a pretty... Broad and large marketplace. And we continue to use everyday influencers, as I called them last time. I've seen this term kind of bandied around lately of nano creators or nano influencers. Everyone seems to be leaning into these, you know, influencers with less than 10,000 followers. We're partnering with different sororities going into rush talk season this year. So all's going well with TikTok shop as well. Still very bullish on it.

Great, thanks so much. Our next question comes from Max Brechtlenkel of TD Cowan. Please go ahead.

Thanks a lot. So first, can you speak to the health of your customer and whether some of the macro pressures from higher gas and other costs may have a greater impact on the more rural economy than the broader consumer? As you did mention, I think that traffic in July was down across all regions, which feels like it's maybe a bit more of a broader situation.

Yeah, again, July, you know, four weeks, summertime, World Cup distraction. It was broad-based. You're absolutely right. And I don't believe it was, you know, gas prices or something macro. When we look at our customer data and we do this at the end of each quarter, we're not seeing a K-shaped customer. We're not seeing, you know, the lower-income customer cutting back versus our higher-end customer. It was very even in terms of Subdue Traffic in the month of July for, we think, the reasons we described. We're not seeing anything that would say the lower-income customer is cutting back on trips or purchases. As a reminder, we're very much a needs-based business, and if you need our product to work, it's going to be one of the last purchases you cut. But nothing we're seeing would indicate, either by geography or income level, that that it's a particular group of consumers that have shifted their behavior. I think it's more the month of July was just a little bit odd for a variety of reasons.

Got it. That's helpful. And then on in-store transaction trends more broadly, can you speak to the mix of new shoppers versus returning shoppers? And then can you discuss the success that you're having with the new websites in getting new shoppers to visit stores as I think that's One of the key sort of strategies to continue to drive in-store transactions.

Yeah, I'll start with the sites. Given, and I just quoted this with Janine, the millions of sessions we have on those sites, as with most e-commerce sites, the conversion usually hovers somewhere around a two. Most of those people aren't shopping on the site. We're trying to drive that traffic to the stores to drive traffic You know, the storytelling on the site. I love the brand. Where can I find it? Well, you can buy it at Boot Barn or Shuffler's Country Outfitter, Amazon, TikTok. But the best place to buy it is in our 550 plus stores. So we're constantly using those exclusive brand sites to drive traffic into stores. The attribution of that, of course, is difficult. Right. So we don't have. You know, it's not a ship-to-store order. These are people who visited the site and then hopefully come to store. So I don't have an attribution number for the sites that I can share with you, but the sustained traffic that we see, I'm pretty darn optimistic about. And the first part of the question, again, my apologies, was?

I guess new verse returning shoppers.

We continue to see a balance between new and returning. in new customers versus existing over the last few years since that big kind of COVID push in fiscal 22.

Got it. That's helpful. Thanks, guys, and good luck. Thank you.

Our next question comes from John Kepor of Goldman Sachs. Please go ahead.

Hey, good afternoon. Thank you for the question. So I wanted to dig into new openings. Just wondering how those have been trending versus a year or two ago. I think you reiterated the 3.2 million. That number has been floating around for a while. Just curious about whether or not that may get an upgrade. And then just in terms of learnings that you could apply from opening to opening and how your assortment changes maybe and how you tailor stores based on region or customer type, I just want to get a sense of productivity in those new stores and how that's advanced. Thank you. Thanks for the question, John.

The $3.2 million number, we're tracking to that. I would say it's roughly in line with that, maybe slightly better, but not meaningfully more than $3.2 million. And so we'll continue to monitor that, and if we – We'll let you know, but they're opening really nicely across the country and different geographies, and so pleased with how those are coming along. As far as the learnings that we've taken as we open stores in different geographies, we start with a pretty similar assortment across the country, and we will look at other stores that we believe are behave similarly to the stores we're about to open up, and we'll make some tweaks around that. And then we'll monitor the new stores very closely to see what's selling, what's not selling, look at the competitive nature of the market that it's in, and make tweaks to the assortment accordingly. Some of those happen before we open. Many of them happen after we open and try to address those so that we're maximizing the The traffic that we get there, and then we're also monitoring the marketing around that and looking at areas that we can improve and how we can drive more people into those stores, depending on what the market or what the store is doing. But it really is a store-by-store analysis that we look at. But as you walk into any of our stores across the country, you likely will not see or notice a significant difference from store to store. But our merchandising team and our stores team, they will notice the subtle differences as you move from market to market or store to store.

Okay, thank you. And then just another one on marketing. That came in a little bit lower, I think, than we might have expected. Just wondering, are you guys seeing a better ROAS or what exactly is driving maybe some of the pullback on the marketing spend?

It's really just timing shifts between quarters. We target a 3% marketing for the full year. We model that marketing out in advance of the quarter. And sometimes we're able to get all of that in. Sometimes things shift. Sometimes there are new store openings that shift or grand openings that move around. And so it really is just timing, nothing more than that. Okay. Thank you, guys. Thank you, John. Thanks.

Our next question comes from Chris Nardone, Bank of America. Please go ahead.

Thanks, guys. So first, how should we think about the pricing assumptions that are embedded in your guidance? Are you expecting third-party brands to take more price this summer? And are you seeing customers chase product on promotion more, you know, over the last few months relative to the trend line over the last few quarters?

Great question. The pricing It feels like we're back to normal price increases, maybe a little bit lower on the increases than what we would historically see, but definitely lower than what we saw last summer. I think that trying to manage price increases and minimize those for the consumers is something that we and also our third-party vendors have been aware of and conscious of and We're seeing those be more muted this year. Typically, summer is when we'll see those price increases. That's what's happening on the pricing front. What was the second part of the question? Sorry about that, Chris.

No worries. Just whether you're seeing a higher take rate of products that are on promotion over the last few months relative to what you've seen over the last several quarters and years. I would say not really.

Not really. It's been very similar. We have marked downs of the percentage of inventory that remain pretty low for us. And as we said on our last call, the promotions that we're doing for clearance items have been not as deep as what we saw maybe a year ago. And so we're not seeing a shift towards promotion.

Okay. And then just one last one. I know inventory per store was only up slightly during the quarter, but just given, I know it's only been a month of slowdown, just talk to us about the health of inventory on the balance sheet, particularly that woman's leather boot category.

Yeah, we feel great about the health of the inventory. As I just mentioned, the markdowns as a percentage of inventory are below historical standards and pretty low. We We've made a conscious effort and we've talked about just being in stock on what we call our tried and true styles, the styles that are on replenishment that oftentimes have been in our assortment for years and making sure that we've got the product that our customers want and our inventory being on replenishment styles.