Prepared remarks
Good day, everyone, and welcome to the Boot Barn Holdings, Incorporated Second Quarter 2025 Earnings Call. As a reminder, this call is being recorded. Now, I'd like to turn the conference over to your host, Mr. Mark Dedovesh, Senior Vice President of Investor Relations and Finance. Please go ahead, sir.
Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's second quarter fiscal 2025 earnings results. With me on today's call are Jim Conroy, President and Chief Executive Officer; John Hazen, Chief Digital Officer; and Jim Watkins, Chief Financial Officer. A copy of today's press release along with a supplemental financial presentation is available on the Investor Relations section of Boot Barn's website at bootbarn.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days on the Investor Relations section of the Company's website. I would like to remind you that certain statements we will make during this call are forward-looking statements. These forward-looking statements reflect Boot Barn's judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting Boot Barn's business.
Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made during this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our second quarter fiscal 2025 earnings release as well as our filings with the SEC referenced in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. I will now turn the call over to Jim Conroy, Boot Barn's President and Chief Executive Officer. Jim?
Thank you, Mark, and good afternoon. Thank you everyone for joining us. As we announced in today's press release, I have made the decision to step down as President and CEO of Boot Barn to pursue an opportunity as CEO of Ross Stores. I am extremely proud of the accomplishments of the Boot Barn organization during my tenure and will be forever grateful to the team with whom I've shared this amazing journey. John Hazen, our Chief Digital Officer, will assume the role of Interim CEO after my departure on November 22nd, while the Company conducts both an internal and external search before making a permanent decision. John is currently responsible for e-commerce, marketing and the customer experience. He has led many of our innovations over recent years and has partnered very closely with both merchandising and store operations as we built out the brand and our omnichannel experience. John's prior experience includes running both the stores and e-commerce businesses at True Religion.
Prior to that role, John ran the Digital Business at Fox Racing, a leading lifestyle action sports brand. John is a very collaborative leader, a solid contributor to the strong culture at Boot Barn, and is highly regarded within the organization. Additionally, Pete Starrett, the Chairman of the Board for the past 12 years, will transition into the role of Executive Chairman. Pete knows the Company extremely well and is committed to working through an orderly transition. John will be well-supported by the senior management team that includes Jim Watkins, our CFO; Laurie Grijalva, our Chief Merchandising Officer; and Mike Love, our Chief Retail Officer. This group has worked together for over a decade, and I have a great deal of confidence that the Company will operate smoothly going forward despite my absence. I am confident in John's ability to lead as Interim CEO, and I'm pleased to now turn the call over to him. John?
Thank you, Jim. I appreciate the vote of confidence from you and the Board, and I'm excited to take on this new role. I feel fortunate that the Company is healthy, has strong momentum, and has a solid team in place that has been working together for a long time. At this point, I would like to turn our attention to our second quarter fiscal '25 results, discuss the progress we have made across each of our four strategic initiatives, and provide an update on current business. Following my remarks, Jim Watkins will review our financial performance in more detail, and then we will open the call for questions. We are very pleased with our second quarter results, which reflect broad-based strength across all major merchandise categories, in-stores and online and across all geographies. During the quarter, revenue increased by 14%, including consolidated same-store sales growth of 4.9%. Same-store sales in both the stores and e-commerce channels were positive and sequentially improved in the quarter with stores increasing 4.3% and e-commerce increasing 10.1%.
We believe both our revenue growth and new-store expansion have significantly outperformed the industry, resulting in substantial market share gains. Earnings per diluted share were $0.95 during the quarter compared to the high-end of our guidance range of $0.87 and versus the prior year earnings per diluted share of $0.90. I'm extremely pleased with our second quarter results and believe that our team's year-to-date execution will continue into the second half of the fiscal year. I will now spend some time discussing each of our four strategic initiatives. Let's begin with expanding our store base. We opened 15 stores in the second quarter, ending the period with 425 stores across 46 states. Our new store engine continues to meet our sales, earnings and payback expectations. As a reminder, we model new-store performance at $3 million of revenue with a cash-on-cash return on capital of approximately 60% in the first year of operation.
Our new-store pipeline remains healthy and we expect to open 60 new units this year, meeting our commitment of 15% new-store growth annually. Given the ongoing success of our new store openings, we believe that we have the market potential to open an additional 500 stores in the US alone, more than doubling our current store count. Moving to our second initiative, driving same-store sales growth. Second quarter consolidated same-store sales grew 4.9% with brick-and-mortar same-store sales increasing 4.3%. Store comp growth was driven by an increase in transactions plus an increase in AUR and UPT, which drove a larger average transaction. From a merchandise category perspective, we experienced broad-based growth during the quarter as all major merchandise categories comp positive led by the combined men's western boots and apparel business, which comp positive high-single-digits. The largest sequential improvement was ladies' western boots and apparel, which collectively comp positive mid-single digits in the second quarter.
Approximately 500 basis points better than the first quarter. Included in the men's and ladies' comps is our denim business, which together comp nearly double-digit positive in the quarter. Our combined work boots and apparel business also comp low single-digit positive in the quarter. Moving to our third initiative, strengthening our omnichannel leadership. E-commerce comp sales grew 10% in the second quarter, led by our bootbarn.com site, which posted sales growth of approximately 15%. We are very pleased with the momentum of our online business and the innovation from the omnichannel team, which continues to make progress on several fronts. The Boot Barn app that we launched two years ago has experienced solid growth and now comprises approximately 10% of Boot Barn's online sales. Additionally, we are beginning to test an in-store consumer-driven AI solution named Cassidy, which we believe has the potential to help build transaction size, improve sales conversion and train new-store associates.
The Cassidy experience is tailored to each unique customer and the specific store they visit. Now to our fourth strategic initiative, merchandise margin expansion and exclusive brands. During the second quarter, merchandise margin increased by 70 basis points compared to the prior year period, driven by supply-chain efficiencies. Exclusive brand penetration decreased by 50 basis points, which was in line with guidance as it wrapped over 600 basis points of growth in the prior year period. Looking at the second half of the year, we expect to grow exclusive brand penetration at a normal pace of approximately 200 basis points over the prior year period, contributing to substantial merchandise margin growth. We continue to believe we can achieve merchandise margin expansion through a combination of supply-chain efficiencies, better-buying economies of scale, and growth in exclusive brand penetration.
Turning to current business. Through October, we have continued to generate broad-based growth in same-store sales. On a consolidated basis, October same-store sales were 5.1% with our store comp increasing 4.3%, and our e-commerce business increasing 12.5%. While we are pleased with the start to our third quarter, October historically represents 25% of the quarter's revenue with December alone representing half of the third quarter's business and even more disproportionate share of the quarter's earnings. We feel very good about the current tone of the business and believe we are well-prepared for a successful holiday season with exciting marketing campaigns, fresh inventory and a well-prepared field organization ready to provide best-in-class customer service. I'd like to now turn the call over to Jim Watkins.
Thank you, John. In the second quarter, net sales increased 13.7% to $426 million. The increase in net sales was the result of the incremental sales from new stores and the increase in consolidated same-store sales. The 4.9% increase in same-store sales is comprised of an increase in retail store same-store sales of 4.3% and an increase in e-commerce same-store sales of 10.1%. Gross profit increased 14% to $153 million compared to gross profit of $134 million in the prior year period. Gross profit rate increased 10 basis points to 35.9% when compared to the prior year period as the result of a 70 basis point increase in merchandise margin rate, partially offset by 60 basis points of deleverage in buying occupancy and distribution center costs. The increase in merchandise margin rate was primarily the result of supply-chain efficiencies, while the deleverage in buying, occupancy and distribution center costs was driven by the occupancy cost of new stores.
Selling, general and administrative expenses for the quarter were $113 million, or 26.5% of sales compared to $95 million, or 25.5% of sales in the prior year period. SG&A as a percentage of net sales increased by 100 basis points, primarily as a result of higher incentive-based compensation, legal expenses, and marketing expenses in the current year, partially offset by lower store payroll expenses. Income from operations was $40 million, or 9.4% of sales in the quarter compared to $39 million, or 10.3% of sales in the prior year period. Net income was $29 million, or $0.95 per diluted share compared to $28 million of net income, or $0.90 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory increased 22% over the prior year period to $713 million and increased approximately 10% on a same-store basis. We finished the quarter with $37 million in cash and zero drawn on our $250 million revolving line of credit.
Turning to our raised outlook for fiscal 2025. The supplemental financial presentation that we released today lays out the low and high-end of our guidance range for both the full year and third quarter. I will be speaking to the high-end of the range for both periods in my following remarks. Please note that our guidance excludes any benefits and costs related to the CEO transition. As we look to the third quarter, we expect total sales at the high end of our guidance range to be $595 million. We expect consolidated same-store sales to increase 6% with a retail store same-store sales increase of 5% and an e-commerce same-store sales increase of 10%. We expect gross profit to be $232 million, or approximately 38.9% of sales. Gross profit reflects an estimated 100 basis point increase in merchandise margin, partially offset by 30 basis points of deleverage in buying occupancy and distribution center costs.
Our income from operations is expected to be $87 million, or 14.7% of sales. We expect earnings per diluted share to be $2.07. As a result of our second quarter performance and our updated outlook for the remainder of the fiscal year, we are raising our full-year guidance. For the full fiscal year, we now expect total sales at the high end of our guidance range to be $1.91 billion, representing growth of 14% over fiscal '24. This is a $57 million increase over our previous sales guide of $1.85 billion. We now expect same-store sales to increase 5% with a retail store same-store sales increase of 4.5%, and e-commerce same-store sales growth of 9.5%. This is an increase from our previous guidance of consolidated same-store sales growth of 1.2%. We now expect gross profit to be $713 million, or approximately 37.4% of sales. Gross profit continues to reflect an estimated 110 basis point increase in merchandise margin driven by supply-chain efficiencies, better-buying economies of scale, and growth in exclusive brand penetration of 110 basis points.
Our income from operations is expected to be $233 million, or 12.2% of sales. We expect net income for fiscal '25 to be $174 million and earnings per diluted share to be $5.60, a $0.25 increase from our prior guidance of $5.35. We continue to expect our capital expenditures to be $120 million, and for the remaining six months of the fiscal year, our effective tax rate is estimated to be 26.6%. We remain committed to our plan to grow new units by 15%, adding a total of 60 new stores during the year. We anticipate opening 14 stores in the third quarter and 21 stores in the fourth quarter. I'd like to now take a moment to thank Jim for his contributions to Boot Barn, and to all of us who have worked with him during the past 12 years. Jim's vision, passion, hard work and leadership style have not only grown Boot Barn into the company it is today but have made Boot Barn a truly special place to work.
From a personal standpoint, I can't say enough about what he has done for me. Jim has been an incredible mentor, partner and friend. Thank you, Jim. I've had the pleasure of working with John for the last six years. He is an incredible leader with tremendous vision and I'm looking forward to working with him in his new role. Now, I would like to turn the call back to John for some closing remarks.
Thank you, Jim. We are very pleased with our year-to-date performance and the continued momentum of the business, and we believe we are well-prepared for a successful holiday season. I would also like to extend my gratitude to the team across our stores, distribution centers, call centers, and corporate offices for their hard work and dedication. Now, I would like to open the call for questions. Operator?
Questions and answers
We will now begin the question-and-answer session. The first question comes from Matthew Boss from JPMorgan. Please go ahead.
Great. Thanks, and congrats on the news, Jim.
Thank you.
So, Jim or John, could you elaborate on the material inflection in comps that you saw as the second quarter progressed, and maybe if you could just walk through trends that you've seen in October as we look across categories or just any notable outliers by region?
Very good. Matt, I'll take that one. As you know, we've seen broad-based sequential improvement across categories, channels, and regions within the stores organization over the last several quarters. From the first quarter to the second quarter, we observed that every department improved. Additionally, in the second quarter, every major merchandise department we track experienced positive same-store sales growth, and every region in the country also had positive same-store sales growth. We felt very good about that improvement. October is aligning well with the second quarter, and while most of the quarter is still ahead of us, we are off to a solid start with a plus 5% for October. We are pleased with the inventory positioning and are looking forward to a strong third quarter.
Great. And then maybe just a follow-up on the margin side. Could you elaborate on the drivers of merchandise margin expansion that you've embedded in the 3Q gross margin outlook and just runway you see remaining for gross margin multi-year?
We expect merchandise margin to improve by 100 basis points in the third quarter. More than half of that improvement will come from supply-chain efficiencies we've observed over the past few quarters, with around 40 basis points attributed to better buying economies of scale. We also anticipate an increase in exclusive brand penetration contributing another 200 basis points. As we move into the fourth quarter, we expect similar trends, with continued expansion in merchandise margin due to supply-chain efficiencies and buying economies of scale, leading to another estimated 200 basis points in Q4.
The next question comes from Peter Keith from Piper Sandler. Please go ahead.
Hey, thanks, everyone. Jim, it's been great working with you and I know you guys are coming right up on 10 years as a public company. So you've done a great job under your tenure. We'll miss you.
Thank you.
We've observed in the last quarter that the farm and ranch sector competes with you since they sell many of the same products, yet they are not seeing improvements in apparel and footwear. In contrast, your performance is improving, indicating potential market-share growth. Can you share your thoughts on which categories you believe your market share might be increasing the most, and what factors might be contributing to this?
Sure. The report indicated that footwear and apparel for farm and ranch decreased by 9% in the most recent quarter. There are a few factors that may give us an advantage over that segment, as they are a strong group of companies. We've observed significant sequential improvement in the women's segment, especially in ladies' western cowboy boots, which performed better than our company average. Our offerings are more balanced compared to their heavy focus on functional products. Additionally, I believe our brand is gaining more traction as we actively engage with country music stars, and we feel that this connection is beneficial. I agree with your assessment that we are likely gaining market share, as we are outperforming many of our competitors. Adding our new store sales to the growth in comparable sales clearly indicates that we are capturing a larger share of the market. We feel very optimistic about this and believe we are well-positioned for the future.
Okay, great. And then you did reference the country music stars. I know we've talked in the past around the Morgan Wallen tour sponsorship and it looks like there's been a few others that have been added. Maybe could you highlight what other stars you've added? Are there sort of demographic audiences that you're targeting with those and how might those relationships evolve?
We have established strong partnerships with both Brad Paisley and Miranda Lambert, who have been excellent collaborators for us. As you mentioned, we've recently sponsored Morgan Wallen, but we're also focusing on artists who resonate with specific target customer segments. For instance, we've worked with Carin Leon as we cater to the Mexican-American demographic and believe that engaging with Hispanic music will help us reach a broader customer base. Additionally, we have some exciting projects lined up with an artist named Jelly Roll, who serves as a connection to country music. This approach is aligned with our strategy to expand our customer demographic beyond just the core western audience, and it has proven to be effective for us.
Very good. Thanks so much, Jim.
Of course.
The next question comes from Steven Zaccone from Citi. Please go ahead.
Great. Thanks very much for taking my question. Jim, sad to see you go. Congrats on the success here and best wishes in the next step. I wanted to ask around the comps inflection and follow up on Matt's question. When you look at the business, what's been the biggest driver of upside? Clearly, you've beaten expectations in the first half of the year here. Is it better transactions? Is it basket size? Like what are you seeing from the customer? And as you think about what's the incremental upside, where are there areas in the assortment that are still a drag, or where can business get a little bit better?
From that perspective, the biggest change has been in transactions. In the first quarter, transactions were slightly down on average, but in the second quarter, they turned positive for the first time in eight quarters. Transactions were up about 2%, and the basket size also increased by around 2%. Combining these two metrics resulted in a 4.3% increase in same-store sales. Additionally, both average unit retail and units per transaction were up, indicating improvement across all four components of store transactions for the quarter. Looking at the merchandise categories, we saw sequential improvement in nearly every part of the business. Some areas that previously had a negative impact on same-store sales have now turned positive, such as the work apparel and work boot businesses, which have shown slight gains. Ladies western apparel also turned positive, moving from a slight decline in the last quarter to a low-single digit increase. Several previously negative areas have shifted to positive, and overall, we are very pleased with how the quarter unfolded.
Okay. Thanks for that. The follow-up I had is just as you've seen the category or maybe your own business start to do better, are there differences in performance in some of the newer stores versus some of your legacy boxes? Like is there anything to call out there because some of the newer stores have been opening much larger sizes and more in the Mid-Atlantic and Northeast? Anything to call out there and differences in performance?
Steve, this is Jim Watkins. The new stores are performing exceptionally well nationwide, regardless of region. I wouldn’t say there’s much difference between geographies. Your question seems to focus more on the comparison with legacy stores. The new stores initially open at a lower volume than the legacy ones, as you're aware. We mentioned this briefly last quarter, and we continue to observe that as we move into the second year of comparable sales, the new stores are starting to outperform the established stores in same-store sales. This trend doesn’t seem to be linked to geography, but rather to the class of stores. During the first year of comparison, the new stores are performing in line with the chain average. However, in the second year, we’re witnessing that outperformance relative to the older stores.
Okay. Thanks for that detail.
No problem.
The next question comes from Max Rakhlenko from TD Cowen. Please go ahead.
Great. Thanks a lot for taking my questions. And Jim, congratulations. It's been a pleasure working with you.
Thank you. Likewise. I appreciate that.
So for the first question, I'm following up on the previous one. As we evaluate the new store performance over the next few years, particularly in terms of comparable store sales, how should we perceive the overall business growth as trends seem to be stabilizing? Additionally, historically, you've consistently outperformed what the algorithms predicted. How do you envision this trend continuing?
Sure. So it's still a little bit early to say what the year three comp is going to be with the new stores picking up volume over the last couple of years and how they're opening. What I would say is this, the second year comp or that store that is starting to get the outsized lift that I was just talking about. We're talking about 3 basis points, 4 basis points, 5 basis points of outperformance or not basis points of outperformance on the chain average, not 10 points of comp. So again, it's still early to call that a tailwind and to include that in our out years model with any specificity. But as we get through the next couple of quarters, Max, I imagine as we outline next year's sales guidance that we'll have some more detail around how those new stores are opening and waterfalling and providing a little bit of a lift to the comp. As far as the long-term algorithm, again, it's nice to see the comp sales for the year get to that 5% comp that has been kind of the high-end of our long-term sales target and to see the earnings per share growth get pretty close to the 20%. And so I think as we look forward into next year, again, we'll give you next year's guidance in a couple of quarters, but I think the components of what we've laid out over the years are coming back and are still intact and we see no meaningful changes to that at this time.
Got it. Okay. And then earlier this year, I think that you made a change to the ladies' merchant team. So how would you assess how the assortment has evolved, if any, or if it's too soon? And then just how are you thinking about the right balance of fashion versus function and whether we should expect any changes ahead?
Sure. I wouldn't try to attribute it to a specific individual, but we did make some adjustments to the ladies' western boot assortment primarily, as we had focused too much on the fashion aspect of the business. We are evaluating price points in terms of good, better, and best and realized that due to a couple of years of inflation, we had undermined the good, better, best structure. We likely neglected some of the good price points. So we took a closer look and reset the assortment to focus more on functional and performance-based ladies' western boots, which is currently the strongest segment of our ladies' western boots business. Additionally, we introduced some lower price points between $149 and $179 that have performed well. It was essentially about getting that assortment properly adjusted. On the apparel front, our apparel business has turned positive, which is largely driven by our strong denim performance, both for ladies and men.
Great. Thanks a lot and best regards.
Of course. Thank you.
And the next question comes from Janine Stichter from BTIG. Please go ahead.
Hi. Thanks for taking my question. And Jim we'll miss you.
Thanks, Janine.
So just wanted to ask about the inventory down 10.5% on a same-store basis. It seems like it might be running a little bit lean. Just wanted to hear how you think about it if there's any areas where you feel like maybe you're missing some sales, or if that has anything to do with the mix of private brands versus third-party brands. Thank you.
Yes, Janine. If I said it was down 10.5%, I misspoke and I apologize. The inventory on a same-store basis…
I see. My mistake.
We feel confident about our inventory as we approach the holiday shopping season. We have increased our inventory strategically and believe we are stocked in the right categories. Markdowns as a percentage of inventory have decreased compared to last year, and weeks of supply are down year-over-year. Overall, we believe we are well-positioned for the upcoming busy months.
Perfect. And then just as we're heading into the election, can you remind us of your exposure to China on both the third-party brand side and on the exclusive brand side, and just how you're thinking about additional tariff risk potential?
Sure. We used north of about 50% on our exclusive brand product coming out of China. I think we said on the last call that this last fiscal year where about 37% of our product comes out of China or came out last year, and what we have on order is approximately 30% coming out of China. So we have derisked our exposure to China. And again, there are a lot of benefits to staying in China. I don't think that we will move completely out of China regardless of what tariff situation or happens. But I feel like we've done a nice job of balancing our exposure while limiting the risk to product and quality and deliverability of the product.
Great. Thanks so much.
Thank you.
The next question comes from Jay Sole from UBS. Please go ahead.
Great. Thank you so much. Jim, just love to just dig into the change. Just talk about why now, what was it? Is it signal any change in strategy at Boot Barn? Any insight you can elaborate on to give us a sense of why you made this choice would be helpful. Thank you.
Sure. This was more of a personal decision for me and the family. In terms of the Boot Barn's strategy going forward, well, we've had the same four strategies for 12 years. We've had the same senior team working on them and I think have performed pretty well. So I would add, yes, as we've discussed this transition, I think I can safely say it's going to be a lot of continuity from what we've been doing for the last decade, and John will hopefully take us forward for the next decade. So I wouldn't expect any significant changes in the strategy. We are stamping out a working model. We have 425-ish stores. We can more than double the store count. We've been able to find opportunities for same-store sales growth on a consistent basis. So I think you can expect more of the same. I will certainly miss this place and be able to speak more to potential opportunities at my next role, but I don't think this is the proper forum for that.
Okay, understood. Thank you. If I can just add in one more. Just any updates on how the Cody James Black 1978 rollout is going? I think last quarter, you think you said it was 100 stores. Just talk about where it is today, and how did that brand perform in the quarter relative to the full assortment?
It's performing quite well. It's now in 300 stores. It is the highest price point in the store. And one of the questions that we often get is, are we seeing a difference in spend by customer income or price point, and what we haven't seen that? And part of that on the boot side is because the Cody James Black brand is outperforming and it's one of the more expensive products in the store, partly because it's an elevated brand and partly because it tends to skew more towards exotic skin versus plain leather. That said, sort of hearkening back to the last call, we're excited about it. It adds some real excitement in the business. Hopefully, it will be a great part of our gift-giving for holiday. But just in terms of quantifying it, it's not multiple points of same-store sales. It's a relatively small piece of our overall business. And I don't want to diminish the excitement of it or the work that's got into it, but it's not comprising 4 points or 5 points of comp.
Okay. Jim, that's helpful. Thank you so much.
The next question comes from Jonathan Komp from Baird. Please go ahead.
Hi. This is Alex Conway on for John. Jim Watkins, just looking at the comp guidance for FQ2, there seems to be a bit of range if you just take October, some to the upside, some to the downside. Could you just walk through maybe a bit of some of the assumptions you have on either side of that and what really you think the swing factors could be for holiday?
For the third quarter guidance, we approached it similarly to previous quarters by analyzing the sales data from July, August, and September and applying historical seasonality to forecast November and December, along with the rest of the year. When compiling those figures, we adjusted our expectations for Q3, particularly for October through December, to account for the election's impact and a shortened holiday season. We also made slight adjustments for Q4 due to macroeconomic uncertainties. Now that October has passed, we have a wide range for November, influenced by the shopping season, the election, and potentially weather conditions in the coming months. The outcomes will depend on consumer confidence and their available shopping time. Nevertheless, recent quarters have shown promising results regarding our customers' resilience. We believe customers continue to seek our needs-based products, which gives us confidence in our guidance, despite some distractions and factors we may face in the near future.
That's helpful. And then maybe a bit longer term. As you go through this leadership transition can you share, maybe it's a little early, but at least any qualities that you might be looking for in the permanent CEO?
This is Jim Conroy. I don't want to speak on behalf of the Board, but I have had discussions with them over the years regarding our succession planning. A couple of years ago, John was identified as the top candidate to succeed me, although we didn't anticipate it would happen this quarter. He possesses all the attributes we desire in a future leader. The Board, given the rapid nature of these changes, intends to conduct thorough due diligence and may consider other candidates. However, John is very well positioned to lead the Company moving forward. While I don't want to assume the Board's perspective, I believe I am reflecting their thoughts accurately to the investment community. Regarding qualities and traits, we have a strong, clearly defined culture with six core values, and collaboration consistently stands out as the most important. This is one reason I am confident the Company will continue to thrive after my departure; we function as a cohesive team. I am just one part of that team, and as I step down, the other 10,000 team members will carry on successfully without me. That is the best response I can offer to your question.
Yes. Thanks again and best of luck in your new role, Jim.
Thank you.
The next question comes from Sam Poser from Williams. Please go ahead.
Thank you for taking my questions. Congratulations, Jim. My question is about the stronger transactions. What was your penetration on exclusive brands this year compared to last year? Additionally, can you provide insight into the breakdown of return customers versus new customers? How do these factors contribute to the strong comparable sales that seem to be continuing?
Sure, sure. So exclusive brands is up about 200 bps.
Yes. I'll take it. For the quarter, Sam, I'm not sure if that was what you're asking about. We were down 50 basis points. That was up against 620 basis points of growth last year, and for the year we're expecting that to be up 110 basis points. So the next two quarters up about 200 basis points for each quarter.
A lot of that coming out of this big strength in denim that you're seeing, which is probably more branded than not.
We are seeing some nice growth from our exclusive brand denim, We're in stock on that, and I think as we get through the next couple of quarters, that will be a driver on the exclusive brand growth. Also, the ladies' business in general has seen a nice improvement and that tends to penetrate a little more heavily on exclusive brands. So that's also a driver. But I think that as we look at the last couple of quarters just being up against some really big numbers last year and taking some time to adjust through our assortment with the third-party vendors that have had some nice product improvements across categories, getting those in the store. I think we're at a spot now where we've got a great assortment from our third-party vendors. We've got some really nice product coming in from our exclusive brand team and we'll be back to kind of our long-term target of growing exclusive brands in that 200 basis point to 300 basis point penetration range not like the outsized growth that we've seen over the last few years that was much higher than that.
Got you. And then on customers?
The customer count has increased again year-over-year, reaching approximately 8.9 million, which is a 14% rise compared to last year. We are pleased with both customer retention and the recruitment of new customers. As new customers get familiar with our brand, it is worth noting that our average frequency of transactions per customer is around twice a year. We are observing similar shopping patterns among both long-standing and newly acquired customers. Their average purchase size is comparable, and we are optimistic about this trend. In terms of our ladies’ business, we are encouraged by the re-engagement of female customers, particularly in ladies' boots and apparel, which now represents nearly 23% of our total sales, up from 18% prior to the pandemic. We are confident in our ability to attract and retain more young female customers.
Thank you and congratulations again.
Thanks, Sam.
The next question comes from Jeremy Hamblin from Craig-Hallum Capital Group. Please go ahead.
Thanks. And I'll add my congratulations on a fantastic tenure. I wanted to come back to just some questions around the election potential implications. And just to get a sense for as you look back 2016-2020, kind of the time period, you've noted before that there's some distraction that happens and a bit of disruption on the typical trends. Wanted to understand, A, the magnitude of that, B, the length of period where you think there might be some distraction. And then also just related to the potential tariff stuff, what portion of your business or your products are produced in Mexico?
The last election in 2020 was somewhat challenging to analyze due to the COVID situation, making it difficult to quantify its effects. In 2016, we mentioned in a slide during Jim's presentation in January of the following year that we experienced a negative impact, although we didn't specify the amount. It might have accounted for a couple of points of comparable sales. Based on the quarterly chart, it likely wasn't as much as 10 points, more in the range of 3 to 5 points, but weather disruptions also affected our performance that quarter. In general, the time period that tends to influence us is now up until the election, so we'll see in the coming weeks how significant that distraction turns out to be. Regarding the question about Mexico, around 25% of our exclusive brands are sourced from Mexico.
Got it. I want to follow up on the strong comparisons and the positive start to the current quarter. You mentioned that occupancy costs had an impact in the quarter, around 60 basis points. Can you provide more insight into the factors contributing to this in a quarter with a plus 5% comparison? Are the real estate costs in some of the markets you're entering relatively higher, or is there additional context you can share on this?
Sure. It's not so much that real estate is becoming more expensive. We're opening new stores, and even though their real estate costs are similar to those of our existing mature stores, they tend to have lower sales volumes. As a result, the occupancy rate relative to sales is higher. Additionally, Q2 is a smaller quarter compared to Q3 and Q4. When we discuss deleverage, we prefer to analyze it on a full-year basis. Regarding your question about Q2 and the reasons for the deleverage, there are also slightly higher utility costs in the second quarter that impact occupancy.
Got it. Thanks for taking the questions and best wishes on continued success.
Thank you.
Thank you.
And we have a follow-up question from Sam Poser. Please go ahead.
Yes. There was a follow-up on the margins. Regarding SG&A, you previously mentioned that achieving a 6 comp should allow for leverage. Why, at the high end, are we observing such significant deleverage in the third quarter, and are we considering the full year in the same manner?
Yes, that's a great question, Sam. We mentioned that at a 2% comparable sales growth, we would achieve SG&A leverage for the year, and we are essentially flat at a 5% comp guide. Several factors contributed to this. First, in the second quarter, we experienced higher-than-expected incentive-based compensation, primarily due to accelerated sales in the previous two quarters which necessitated adjustments for performance-based stock compensation linked to a three-year EPS projection, along with annual bonus calculations. Additionally, we faced unexpected legal expenses during the quarter, mainly tied to a settled dispute regarding one of our properties. While there are aspects we could have predicted more accurately, we did not foresee our sales guidance, which started the year at a high end of minus 1.6% comp, accelerating to a 5% comp, leading to additional expenses that impacted our leverage projections.
And in the third quarter, though, you're talking about deleverage again on a stronger comp.
Yes. As I mentioned earlier, we plan to examine the leverage points on a full-year basis. There are some timing aspects to consider, and our focus remains on the full year and the guidance we are providing.
This concludes our question-and-answer session. I would like to turn the conference back over to John Hazen for closing remarks.
Thank you, everyone, for joining the call today. I would like to give Jim Conroy an opportunity to make some closing remarks before we wrap up.
Thank you, John. After 12 incredible years at Boot Barn, I'm filled with immense gratitude for this Company and the extraordinary partners who have been by my side throughout this journey. Together, we built something truly special and I will forever cherish the shared successes, challenges, and memories that we created. I will step away from Boot Barn knowing that the Company is incredibly healthy, in very good hands, and poised for future growth. I would like to wish the entire Boot Barn family a heartfelt thank you. And with that, we will conclude today's call. Thank you, and take care.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.