Tuesday, November 19, 2019

A Current AIM Small Cap Equity Holding: Boot Barn Holdings Inc (BOOT, $40.24): “These BOOTs Were Made for Buying”


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