‘Yellowstone effect’ adds bottom line boost for Boot Barn

RETAIL: More stores, sales growth, ‘Yellowstone effect’

A focus on brick-and-mortar store locations, enduring pandemic-era shopping trends and a popular television show have all contributed to a strong three-year run for Irvine-based Boot Barn Holdings Inc. (NYSE: BOOT), which continues to defy national retail trends.

The seller of boots and western apparel said it is set to finish another fiscal year of strong same-store sales, and continues to add locations across the country.

“We’ve nearly doubled the size of the business in just three years and achieved store productivity levels that far exceed pre-pandemic levels,” Chief Executive Jim Conroy told analysts in late January, after the company’s latest quarterly results.

Boot Barn reported third-quarter sales of $514.6 million for the period ended Dec. 24, up 5.9% from the year prior. This beat the analysts’ general consensus of around $514 million, and landed in the company’s high end of its previous guidance.

Additionally, Boot Barn updated its fourthquarter forecast to expect sales of $438 million to $448 million, topping analysts’ expectations of $442 million.

Conroy anticipates that Boot Barn’s annual sales would double this year compared to prepandemic levels.

Shares in the company are up more than 30% over the past six months; Boot Barn counts a market cap of about $2.6 billion.

Store Pipeline

Boot Barn added more than 30 stores over the last year, including 12 new stores that opened in the 13-week period ended Dec. 24, which brought its total portfolio up to 333. The company’s added to its presence on the East Coast of late, with new spots in Connecticut and Delaware.

A number of existing stores have also been remodeled to include a larger inventory and incorporate more digital capabilities.

“Looking forward, our growth opportunities remain as strong as ever, with very successful recent store openings combined with a robust new store pipeline,” Conroy said.

Boot Barn aims to continue adding 10 stores or more each quarter and has a long-term goal of reaching 900 locations.

New stores are over-delivering in terms of sales, Conroy said. They are bringing in on average $3.5 million in sales in their first year, which is “more than double our original target. At this level of sales, our new stores are paying back in just over one year with nearly 100% cash-on-cash returns.”

Over 85% of Boot Barn’s business has continued to run through physical stores and Conroy expects the trend to stay.

“If we did nothing but continue to open stores for the next six or seven years, we [would double] the size of the company even

if we didn’t grow [same-store sales],” Conroy said.

New Shoppers

Along with Boot Barn’s physical footprint expanding, the retailer’s customers are buying more when they come to the store.

“We are very encouraged that this three-year growth has been driven primarily by an increase in the number of transactions as we have added a significant number of new customers to the brand while legacy shoppers seem to be purchasing more frequently,” Conroy said.

Boot Barn reports an active customer count of around 6.8 million. The average shopper visits twice a year, according to Boot Barn data.

The company said it gained new shoppers from the pandemic and from mainstream and fashionable retail channels outside the western industry and work customer segment.

The retailer also noted that this growth was done “without resorting to unnecessary sales or promotions” but rather due to expanding its product assortment.

Boot Barn currently has 10 brands in its portfolio for shoppers to choose from, including exclusive top selling lines such as Cody James and Idyllwind which now make up 32.2% of total sales, Conroy said.

Newer categories include more casual and contemporary products like hiking boots and knit shirts.

Cowboy Chic

Pop culture has also appeared to intersect with the niche market of Boot Barn.

The popular Paramount Network television drama “Yellowstone” and a related spinoff series called “1883” on Paramount+ has been credited for a major increase in activity in the western apparel and accessories sector by retail executives.

The Montana environment of the show, along with its characters’ denim outfits topped with cowboy hats, have turned viewers for the show into apparel customers.

“What ‘Sex and the City” did for high-end fashion, “‘Yellowstone’ is set to do for Boot Barn-style western wear,” said a report in Forbes last year.

Yellowstone is in its fifth season.

Analysts from Jefferies see a promising outlook for the retailer.

“We continue to believe BOOT remains well-positioned, primarily driven by the company’s size and scale advantage as well as its attractive unit and margin expansion opportunities,” said a recent Jefferies report. ■