Boot Barn Holdings, Inc. (NYSE: BOOT) today announced its financial results for the second fiscal quarter ended September 29, 2018.

Highlights for the quarter ended September 29, 2018, were as follows:

• Net sales increased 17.5% to $168.1 million.
• Same store sales increased 11.3%.
• Net income was $4.5 million, or $0.16 per diluted share, compared to net income of $1.1 million, or $0.04 per diluted share in the prior-year period. Net income per diluted share in the second quarter of fiscal 2019 includes approximately $0.04 per share of tax benefit related to stock option exercises.
• Added 3 stores through new openings and acquisitions.

Jim Conroy, Chief Executive Officer, commented, “We are very pleased with our second quarter results and the underlying strength in the business. Same store sales increased double digits, both in our retail stores and online, which combined with merchandise margin expansion from increased full-price selling and exclusive brand penetration, drove 130 basis points of operating margin improvement over last year. During the quarter, we made significant progress across each of our four strategic growth initiatives. Most notably, in mid-September we successfully launched our new exclusive brand, Idyllwind, Fueled by Miranda Lambert. We are well positioned to continue driving improved results during our upcoming holiday quarter and over the long term.” Mr. Conroy continued, “We are also pleased with sales through the first three weeks of our fiscal third quarter, which continue to be very strong both in our retail stores and online.”

Operating Results for the Second Quarter Ended September 29, 2018

• Net sales increased 17.5% to $168.1 million from $143.1 million in the prior-year period. The increase in net sales was driven by an 11.3% increase in same store sales, the sales contribution from the stores acquired from Wood’s Boots, Lone Star and Drysdales, and sales from new stores added over the past twelve months.
• Gross profit was $50.9 million, or 30.3% of net sales, compared to $41.7 million, or 29.1% of net sales, in the prior-year period. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. Gross profit rate increased primarily from a 30 basis point increase in merchandise margin rate and 90 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and increased exclusive brand penetration.
• Selling, general and administrative expense was $42.2 million, or 25.1% of net sales, compared to $36.1 million, or 25.2% of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of increased sales, expenses for new and acquired stores, higher marketing costs as a result of the Idyllwind launch, and costs associated with the addition of a mid-year physical inventory.

• Income from operations was $8.7 million, or 5.2% of net sales, compared to $5.6 million, or 3.9% of net sales, in the prior-year period.
• Net income was $4.5 million, or $0.16 per diluted share, compared to $1.1 million, or $0.04 per diluted share, in the prior-year period. Net income per diluted share in the second quarter of fiscal 2019 includes approximately $0.04 per share of tax benefit related to stock option exercises.
• Added 3 stores through new openings and acquisitions, bringing the total count at quarter-end to 232 stores in 31 states.

Operating Results for the Six Months Ended September 29, 2018

• Net sales increased 16.9% to $330.1 million from $282.5 million in the prior-year period. The increase in net sales was driven by an 11.4% increase in same store sales, the sales contribution from the stores acquired from Wood’s Boots, Lone Star and Drysdales, and sales from new stores added over the past twelve months.
• Gross profit was $102.4 million, or 31.0% of net sales, compared to $83.1 million, or 29.4% of net sales, in the prior-year period. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. Gross profit rate increased primarily from an 80 basis point increase in merchandise margin rate and 80 basis points of leverage in buying and occupancy costs. The higher merchandise margin was driven by more full-price selling and increased exclusive brand penetration.
• Selling, general and administrative expense was $83.8 million, or 25.4% of net sales, compared to $72.5 million, or 25.7% of net sales, in the prior-year period. Selling, general and administrative expenses increased primarily as a result of increased sales, expenses for new and acquired stores, higher marketing costs as a result of the Idyllwind launch, and costs associated with the addition of a mid-year physical inventory. Selling, general and administrative expenses as a percentage of sales decreased as a result of expense leverage on higher sales.
• Income from operations was $18.5 million, or 5.6% of net sales, compared to $10.6 million, or 3.7% of net sales, in the prior-year period.
• Net income was $11.3 million, or $0.39 per diluted share, compared to $1.9 million, or $0.07 per diluted share, in the prior-year period. Net income per diluted share in the six months ended September 29, 2018 includes approximately $0.12 per share of tax benefit related to stock option exercises.
• Added 9 stores through new openings and acquisitions.

Balance Sheet Highlights as of September 29, 2018

• Cash of $9.4 million.
• Average inventory per store was up 2.6% on a same store basis compared to September 30, 2017.
• Total net debt of $199.9 million, including $26.1 million drawn under the revolving credit facility.

Fiscal Year 2019 Outlook

For the fiscal year ending March 30, 2019, the Company now expects:

• To add 23 new stores, including the 9 stores opened and acquired during the first six months of fiscal 2019.
• Same store sales growth of 6.5% to 8.0%.
• Income from operations between $57.5 million and $60.5 million compared to the Company’s prior outlook of $54.0 million and $57.9 million.
• Interest expense of $17.0 million to $18.0 million.
• Net income of $33.6 million to $35.8 million, compared to the Company’s prior outlook of $29.9 million to $32.8 million.
• Net income per diluted share of $1.16 to $1.24 based on 28.9 million weighted average diluted shares outstanding, compared to the Company’s prior outlook of $1.04 to $1.14.

For the fiscal third quarter ending December 29, 2018, the Company expects:

• Same store sales growth of 5.0% to 7.0%.
• Net income per diluted share of $0.56 to $0.60 based on 29.1 million weighted average diluted shares outstanding.

Conference Call Information

A conference call to discuss the financial results for the second quarter of fiscal year 2019 is scheduled for today, October 25, 2018, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (866) 548-4713. The conference call will also be available to interested parties through a live webcast at investor.bootbarn.com. Please visit the website and select the “Events and Presentations” link at least 15 minutes prior to the start of the call to register and download any necessary software. A telephone replay of the call will be available until November 25, 2018, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 2518566. Please note participants must enter the conference identification number in order to access the replay.

About Boot Barn

Boot Barn is the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories for men, women and children. The Company offers its loyal customer base a wide selection of work and lifestyle brands. As of the date of this release, Boot Barn operates 232 stores in 31 states, in addition to an e-commerce channel www.bootbarn.com. The Company also operates www.sheplers.com, the nation’s leading pure play online western and work retailer and www.countryoutfitter.com, an e-commerce site selling to customers who live a country lifestyle. For more information, call 888-Boot-Barn or visit www.bootbarn.com.

Forward Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to, by way of example and without limitation, our financial condition, liquidity, profitability, results of operations, margins, plans, objectives, strategies, future performance, business and industry. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate", "estimate", "expect", "project", "plan“, "intend", "believe", “may”, “might”, “will”, “could”, “should”, “can have”, “likely”, “outlook” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events, but not all forward-looking statements contain these identifying words. These forward-looking statements are based on assumptions that the Company’s management has made in light of their industry experience and on their perceptions of historical trends, current conditions, expected future developments and other factors they believe are appropriate under the circumstances. As you consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control) and assumptions. These risks, uncertainties and assumptions include, but are not limited to, the following: decreases in consumer spending due to declines in consumer confidence, local economic conditions or changes in consumer preferences; the Company’s ability to effectively execute on its growth strategy; and the Company’s failure to maintain and enhance its strong brand image, to compete effectively, to maintain good relationships with its key suppliers, and to improve and expand its exclusive product offerings. The Company discusses the foregoing risks and other risks in greater detail under the heading “Risk factors” in the periodic reports filed by the Company with the Securities and Exchange Commission. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. Because of these factors, the Company cautions that you should not place undue reliance on any of these forward-looking statements. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict those events or how they may affect the Company. Further, any forward-looking statement speaks only as of the date on which it is made. Except as required by law, the Company does not intend to update or revise the forward-looking statements in this press release after the date of this press release.

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