Shares for Boot Barn Holdings were up 17.55% at market close on Thursday to $87.42 after the western apparel and footwear retailer reported sales gains in the third quarter of fiscal 2023 and noted declining freight costs.
In the quarter, the Irvine, Calif.-based company reported net sales of $514.6 million, an increase of 5.9% over the same time last year. Net income was down however, coming in at $52.8 million in the quarter compared to $69.2 million in the prior year. These numbers match the company’s preliminary report ahead of this month’s ICR Conference.
On the company’s earnings call on Wednesday afternoon, Boot Barn president and CEO Jim Conroy said that the company’s strongest categories in the period were work apparel and men’s western apparel, while sales of men’s and ladies western boots, ladies apparel and hats all declined. The executive was quick to note, though, that these declines are due to the “incredibly strong” double-digit or triple-digit growth seen in these categories in the prior year period.
Asked by analysts on the call which categories have seen a bump in post-holiday sales, Conroy said that most segments have gotten “sequentially better” from the third quarter into January. “We really love to see some of the very functional, more basic businesses performing positively,” the CEO said. “Work boots and men’s cowboy boots have gotten stronger into January.”
“We’re also seeing less decline in some of the businesses that had been under pressure,” added Conroy. “For example, ladies cowboy boots were up against ridiculously strong numbers last year, as was ladies apparel. And they’ve both gotten sequentially better into January. Ladies western apparel is actually slightly positive as we got into January.”
Looking ahead, Boot Barn is adjusting its guidance due to changes in freight expenses. “Our end of year inventory is now projected to be lower than what we expected, and freight charges are declining faster and to lower rates than what we anticipated three months ago,” Conroy told analysts.
Fom an accounting standpoint, Boot Barn will no longer carry as much capitalized freight on its balance sheet. The company now expect that more freight expense will be recorded in the fourth quarter and will be 290 basis points higher than last year. While this freight expense negatively impacts the fourth quarter, it is overall very positive as Boot Barn’s current inventory purchases are being burdened with lower freight charges which will benefit merchandise margin more than it has expected going into next fiscal year.
For the total year, fiscal 2023, though, the company now expects total sales for fiscal 2023 of $1.67 billion to $1.68 billion, representing growth of 12.2% to 12.9% over the prior year. This is up from the company’s previous guidance of total sales of $1.65 billion to $1.67 billion for the year.
“We are very pleased with our third quarter business and believe our runway for future growth is extremely promising,” Conroy added. “As we head into fiscal ’24, we have multiple levers of earnings growth from same-store sales and new store openings to margin accretion from exclusive brands and lower freight charges.”