Boot
Barn Holdings Inc (BOOT, $40.24): “These BOOTs Were Made for Buying”
By:
Ellie O’Donoghue, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Boot Barn Holdings (NYSE:BOOT) is an American retail
company that sells western and work-related footwear, apparel, and accessories
through the brands Ariat, Wrangler, Lucchese Boots, Idyllwind, and Cinch. BOOT
operates in 248 stores in 33 states, alongside an e-commerce channel.
• BOOT’s operating
segments have a diversified sales mix, with footwear accounting for 52% of
revenues, followed by apparel at 34%, and Hats, Accessories & Other at
14%.
• Management has
indicated that sustained positive performance is due to broad-based strength
across all segments, strong full-price selling, a sharp increase in exclusive
brand penetration, and the continuation of increased store openings.
• Management has
indicated a focus on delivering innovative digital experiences in the store and
a seamless e-commerce experience, which will continue to accelerate top-line
growth.
• BOOT could be heading
to new 52-week highs with the recent earnings update’s guidance outlook for
fiscal 2020, showing increases in same-store sales to 6.5% and earnings per
share to $1.75.
Key
points:
With
management’s focus on continuing BOOT’s profitable growth, four strategic
initiatives have been the drivers in BOOT’s strong performance this past year.
In the recent earnings report, management provided updates on their initiatives
of driving same-store sales growth, strengthening omni-channel leadership,
exclusive brands, and expanding BOOT’s store base. Same-store sales saw a 7.0%
top line growth, creating a solid ground for continuing the trend of currently
a 10-consecutive quarter period of positive store comps.
Alongside
top-line growth, BOOT has made major moves in the western and country market in
order to capitalize on growing trends as well as diversify to retain and grow
their customer base. With the launch of Idyllwind, a brand by popular Country
Music Star Miranda Lambert, BOOT’s has continued to grow their exclusive private
band portfolio driving in-store sales. In addition to adding more in-store
experiences, BOOT’s has enhanced their store logistics by offering more floor
space, upgraded POS systems in more than 100 legacy stores, and alternative pay
options like Apple Pay. With new store capabilities, BOOT’s has been able to
create more omni-channel transactions which has created seamless multi-media
transactions, providing them the ability to remain on pace to add 25 new stores
in the current fiscal year. With some doubts coming from investors about the
sensitive tariff battles and BOOT’s suppliers, management touched on the issue
saying any impact, if any, will be mitigated by their suppliers.
What
has the stock done lately?
BOOT
has increased 134.59% YTD and up 14.47% in the past quarter. Since reporting
strong second quarter results on October 30th, the stock has continued to
slowly, but surely, rise to hit its current price and 52 Week high of $40.24.
Although a price range of $15.01-$40.24 shows some volatility, management’s
clear vision and four-point strategic initiatives shows for a continued steady
increase in stock performance.
Past
Year Performance:
Over the past year,
BOOT’s Net Income has increased about 11% alongside hitting new highs for sales
figures. EPS in the past year jumped to $1.05 comparable to the previous year
of $0.53, with continued growth expected in the next fiscal year. With strength
seen overall in valuation factors for the past year, I expect performance to
continue to meet and exceed expectations.
Source: FactSet
My
Takeaway
With
a clear vision driven by already proven strategic initiatives and the lucrative
holiday season arriving, I believe BOOT should remain in the AIM small-cap
portfolio. Since being added to the portfolio in March 2018 at a price of
$17.35, BOOT has proved itself to be a purchase, like a fine pair of western boots
that only gets better with age. With a growing western and work wear market,
BOOT is taking initiative by diversifying their product base and capitalizing
on exclusive private labels in order to set themselves up for a long period of
top-line growth. Through expanding and refining their media mix and their focus
on current and new customer bases, BOOT deserves a solid YEE-HAW.
Source: FactSet
