Prepared remarks
Good day, everyone, and welcome to the Boot Barn Holdings, Inc., First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Mr. Mark Dedovesh, Senior Vice President of Investor Relations and Finance. Please go ahead.
Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's First Quarter Fiscal 2026 Earnings Results. With me on today's call are John Hazen, Chief Executive 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 first quarter fiscal 2026 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 John Hazen, Boot Barn's Chief Executive Officer. John?
Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our first quarter fiscal '26 results, discuss the progress we have made across each of our 4 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 up the call for questions. We are very pleased with our start to fiscal '26 as first quarter results significantly increased compared to the prior year and exceeded our expectations. First quarter revenue increased 19% to $504 million, and consolidated same-store sales increased 9.4%. In addition to strong sales growth, merchandise margin rate increased to 180 basis points compared to the prior year period. The strength in sales and margin, combined with solid expense control, resulted in earnings per diluted share of $1.74 during the quarter, which equates to 38% growth compared to the prior year period of $1.26. The team's ability to deliver strong top and bottom line results reflect the execution of our 4 strategic initiatives, which I'll now spend some time discussing. Let's begin with new store growth. We opened 14 stores in the first quarter, ending the period with 473 stores across 49 states. Our new stores continue to exceed expectations across all geographies and are projected to generate approximately $3.2 million in annual revenue and payback in less than 2 years. We are on track to open 65 to 70 new stores this year in both legacy and new markets. In addition to strong revenue in their first year of operation, new stores are also helping drive same-store sales growth once they turn comp. New stores opened over the last six years currently comprise approximately 40% of our comp store count and have outperformed stores opened prior to 2019 by approximately 350 basis points over the last year, resulting in more than a 100 basis point tailwind to consolidated comps. We are very pleased that our new stores are continuing to attract new customers and grow sales after their initial opening, which couples nicely with our sales and customer growth in legacy stores. This underscores the growth potential of our new store initiative, as we believe we have the market potential to double our store count in the U.S. alone over the next several years. Moving to our second initiative, same-store sales, first quarter consolidated same-store sales grew 9.4% with brick-and-mortar same-store sales increasing 9.5%. Store comp growth was driven by an 8.5% increase in transactions and a 1% increase in units per transaction and flat average unit retail. From a merchandising perspective, we saw broad-based growth across all major merchandise categories in the first quarter, led by the combined ladies' western boots and apparel businesses, which comped positive mid-teens. This was followed by the combined men's western boots and apparel businesses, which comped positive high single digits. Our denim business, which is included in the figures just mentioned, comped positive high teens. Our work boots business comped low single-digit positive, and our work apparel business comped high single-digit positive. We are extremely pleased to see the broad-based growth across categories continue through the first quarter. From a store operations perspective, I am proud of the team's performance, delivering strong results and best-in-class customer service during an especially busy quarter. In the first quarter, the team was able to open 14 new stores, navigate the complexity of several large-scale remodels and work through labor-intensive re-ticketing on third-party goods. I would like to extend a heartfelt thank you to the entire field organization for their hard work and dedication. Moving to our third initiative, omnichannel. In the first quarter, e-commerce comp sales grew 9.3%, and bootbarn.com, which is approximately 75% of our online sales, comped low double-digit profit. We are very pleased with the momentum in our online business and the continued innovation from our omnichannel team. The team is actively advancing its AI initiatives, including the rollout of our new AI-powered search functionality on our websites. Boot Barn now leverages AI to enhance product copy, support store associates through our Cassidy assistant, develop multimedia training modules and power the new search experience. In addition to improving our technical abilities, the team's focus on being a store's first organization continues to generate benefits. More than half of our online orders are being fulfilled by the stores, which helps increase merchandise margin and provides the customer with a broader assortment of merchandise to shop. Buy online pick up in store and ship to store have both reached record levels, which will drive increased traffic to our stores, help to reduce shipping costs and improve customer loyalty as we encourage them to shop both in-store and online. Now to our fourth strategic initiative, merchandise margin expansion and exclusive brands. During the first quarter, merchandise margin increased 180 basis points compared to the prior year period. Remarkably, merchandise margin rate has increased approximately 630 basis points over the last six years or over 100 basis points per year on average. First quarter exclusive brand penetration increased 250 basis points to 40.6% of sales. I am proud of the team's commitment to drive sales growth while increasing merchandise margin and growing exclusive brands. From a marketing perspective, we are using the creative team's outstanding content to further support our own exclusive brands, starting with our leading work brand, Hawx. In the first quarter, we launched a new website and marketing campaign for Hawx that focuses on work boots and clothing for blue-collar workers across industries. We are encouraged by the early returns, and the positive results give us confidence to move forward with our strategy to market our exclusive brands directly, and we expect to launch a direct marketing campaign later this year to support our leading men's brand, Cody James. I'd now like to provide a recap on our pricing strategy as it relates to tariffs, which remains consistent with what we shared on our call in mid-May. We have received third-party cost increases from our vendor partners, and our field organization has begun re-ticketing these items to reflect the new MSRP. We expect the re-ticketing of third-party items to be completed by the end of August, resulting in maintaining merchandise margin rate. For exclusive brands, we are planning to hold off on price increases until the fall in order to gauge price elasticity. We will then review exclusive brands by individual style to determine if we should raise or hold price on certain items, which could result in giving up margin rate in order to maintain or gain market share. Now turning to current business. We are 4 weeks into the second quarter of fiscal '26, and we have continued to see broad-based growth as consolidated same-store sales increased 11.7%, driven by an 11% increase in transactions and a 1% increase in average unit retail. While we are pleased with the start to our second quarter, we are mindful that July was the softest month of the second quarter last year. We remain cautious of overall consumer sentiment and macro uncertainty, and we'll continue to manage our business prudently. I would now like to turn the call over to Jim.
Thank you, John. In the first quarter, net sales increased 19% to $504 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 9.4% increase in same-store sales is comprised of a 9.5% increase in retail store same-store sales and a 9.3% increase in e-commerce same-store sales. Gross profit increased 26% to $197 million compared to gross profit of $157 million in the prior year period. Gross profit rate increased 210 basis points to 39.1% when compared to the prior year period as a result of a 180 basis point increase in merchandise margin rate and 30 basis points of leverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was primarily the result of better buying economies of scale, lower freight expense and growth in exclusive brand penetration. The leverage in buying, occupancy and distribution center costs was driven by lower incentive-based compensation and lower distribution center labor cost in the current year period, partially offset by the occupancy cost of new stores. SG&A expenses for the quarter were at $127 million or 25.1% of sales compared to $107 million or 25.2% of sales in the prior year period. SG&A expense as a percentage of net sales decreased by 10 basis points, primarily as a result of lower incentive-based compensation in the current year period, partially offset by higher marketing expenses due to timing. Income from operations was $71 million or 14.0% of sales in the quarter compared to $50 million or 11.9% of sales in the prior year period. Net income per diluted share increased 38% to $1.74, which compares to $1.26 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory increased 23% over the prior year period to $774 million and increased approximately 2.7% on a same-store basis. Total inventory increased as a result of adding 15% new stores and growth in exclusive brands. We feel good about the health of our inventory, and our markdowns as a percentage of inventory are below last year and below historical levels. During the quarter, we purchased approximately 78,000 shares of our common stock for an aggregate purchase price of $12.5 million as part of our authorized $200 million share repurchase program. We finished the quarter with $95 million in cash and no drawn on our $250 million revolving line of credit. Now turning to our raised outlook for fiscal '26. We are increasing full year guidance due to our first quarter results and the strong start to our second quarter. We are maintaining our original guidance for the second half of the fiscal year, which assumes that the uncertainty around tariffs and the resulting impact on consumer spending will result in flat comps in the second half of the year, and unmitigated tariff expenses will increase our cost of goods sold, resulting in a merchandise margin decline in the second half of the fiscal year. The supplemental financial presentation that we released today outlines the low and high end of our guidance range for both the full year and second quarter. I will only be speaking to the high end of the range for both periods in my following remarks. For the full year, we expect total sales to be $2.18 billion, representing growth of 14% over fiscal '25. We expect same-store sales to increase 3.5% with a retail store same-store sales increase of 3.0% and e-commerce same-store sales growth of 8.5%. We expect merchandise margin to be $1.10 billion or approximately 50.3% of sales, a 20 basis point increase over the prior year period, which includes exclusive brand penetration growth of 160 basis points. We expect gross profit to be $812 million or approximately 37.2% of sales. We anticipate 50 basis points of deleverage in buying, occupancy and distribution center costs due to the occupancy of new stores and 50 basis points of leverage in SG&A. Our income from operations is expected to be $277 million or 12.7% of sales. We expect net income for fiscal '26 to be $206 million and earnings per diluted share to be $6.70. We plan to grow new units by 15%, adding between 65 and 70 new stores during fiscal '26. We expect our capital expenditures to be between $115 million to $120 million, which is net of estimated tenant allowances of $35 million. And for the balance of the year, we expect our effective tax rate to be 26%. As we look to the second quarter of fiscal '26, we expect total sales at the high end of our guidance range to be $495 million and a consolidated same-store sales increase of 6.5%. We expect the merchandise margin to be $249 million or approximately 50.3% of sales, a 70 basis point increase over the prior year period, which includes a 250 basis point increase in exclusive brand penetration. We expect the gross profit to be $178 million or approximately 36.0% of sales, which includes 60 basis points of deleverage in buying, occupancy and distribution center costs. Our income from operations is expected to be $53 million or 10.7% of sales, a 130 basis point increase over the prior year period. We expect earnings per diluted share to increase 34% to $1.27. Now I would like to turn the call back to John for some closing remarks.
Thank you, Jim. We are very pleased with our first quarter results and the positive momentum that has continued into the current quarter. We continue to be confident in our ability to execute on our 4 strategic initiatives and drive growth in the current fiscal year and over the long term. I would now like to open the call for questions. Operator?
Questions and answers
The first question comes from Matthew Boss with JPMorgan.
Great. And congrats on the next quarter.
Thanks, Matt.
So, John, could you speak to drivers of demand strength in the first quarter and elaborate on the acceleration in July, notably the double-digit transactions? And then, if you could just walk through the bridge math to flat comps in the back half of the year.
Yes, absolutely. As you mentioned, Matt, the transactions increased from 8.3% in Q1 to double digits in July, so nearly all of that comp growth in July was due to transactions. The average unit retail was up 1% in July as some of those price increases began to take effect. The performance was very broad-based with strength seen across all our regions. We noticed positive comp trends throughout July in all major merchandise categories, but it's worth highlighting denim. We believe we will be a denim destination, and it remains a standout category for us, particularly on the women's side, encompassing both third-party brands we carry and our exclusive brands. We achieved double-digit growth in both men's and women's denim during the quarter. I must credit our team for this transaction growth, including store operations and their ability to convert customers in-store, as well as the marketing team for engaging with cultural moments that resonate with our customers. Looking ahead to the latter half of the year, as we noted on our first call, we had anticipated a decrease in Q3 and Q4 regarding those flat comps. We still think that, given the uncertainties in the macro environment, there could be some decline in consumer demand during that period. This flat comp for Q3 and Q4 is not just due to mid-single-digit price increases on our third-party brands, but rather the macro environment remains somewhat precarious.
Great. And then maybe, Jim, as a follow-up, could you speak to what you saw on markdown levels relative to a year ago in the first quarter and then here in July? And what's embedded in your merchandise margin outlook as it relates to promotional activity and pricing in the second quarter and back half of the year?
Sure. The markdowns have continued to be low, pretty low or very low, I should say, when compared to last year and also historical levels, pre-COVID. They're very low. And so we're expecting that to continue with us, the markdowns to be low. We feel that our inventory is in a very healthy position. It's fresh. We've got the inventory that we want, as we head into the back half of the year and this most upcoming quarter.
Next question comes from the line of Peter Keith with Piper Sandler.
John, you mentioned that you're beginning to engage in marketing and branding efforts for Hawx. I believe you also collaborated on some marketing with Cody James and had concert events earlier this year. I'm curious if this signifies a new approach to exclusive brand marketing and whether it might indicate the potential for distributing these brands beyond Boot Barn in the future.
Yes, Peter. When I took on the permanent role, we discussed the changes I would make under the four strategic initiatives: sourcing, exclusive brands, and revitalizing the work business. We've made the most significant progress with the exclusive brands initiative. It's easier to implement some marketing strategies quickly. We are very pleased with the early results from Hawx, especially our ability to advertise the brand using Meta's tools to reach blue-collar customers we previously couldn't target. This has resulted in substantial spending over the quarter, generating millions of impressions and over a million sessions on the bilingual Hawx site. Our sponsorship of Cody James at the Morgan Wallen Festival in Gulf Shores, Alabama was a tremendous success, bringing in millions of impressions and views of our reels around that concert. It was also the first time we sponsored a stage at a concert with one of our exclusive brands, which was exciting. I have instructed the team to replicate the success we've achieved with Hawx and create a dedicated site for Cody James, utilizing similar marketing strategies and additional initiatives specific to Cody James. I'm encouraged by the early results. Currently, we have no plans to wholesale these brands to other companies or retailers, but that could change in the future. For now, our focus is on advancing these brands at Boot Barn.
Okay. Very good. And on the tariff-related price increases, are the supplier price increases kind of the same as when you updated us 3 months ago? I think China and various tariffs have moved around quite a bit. Is it still kind of at that mid-single-digit level? And then it's probably early, but any read on products where prices have gone up, if there's been any demand shifts?
Yes, we are still looking at that mid-single-digit price increase. We're about halfway through the re-tagging process in stores and expect to complete it by the end of August. All third-party price increases will also be finalized by then. We plan to maintain lower prices for longer on exclusive brands to assess their price elasticity. It is too soon to determine if there have been any slowdowns in specific brands due to the price increases. July's performance was quite positive, and while several brands did well in Q1, that was before the price hikes, so we still need more time to observe the impact of those increases.
Next question comes from the line of Steven Zaccone with Citi Group.
I want to stick on the exclusive brand questions for a moment. So could you talk a little bit more about the strategy for that lower-for-longer pricing? Will you kind of take it month by month to measure elasticity? And then just bigger picture, right, how much bigger can exclusive brand penetration be? It seems like a year where there's a lot of disruption from tariffs. Could we start to see exclusive brand penetration stay above this 40% threshold for some time?
Yes, it was above 40% for Q1, and we expect it to remain in that range for the remainder of the fiscal year, possibly exceeding that figure. We have stated our goal of achieving 50% penetration for exclusive brands over the next 5 to 6 years, which translates to an annual improvement of 100 to 200 basis points. This year, we might see a more significant increase due to the lower-for-longer strategy we are testing. The timing for potential price adjustments on exclusive brands would ideally be in October before the holiday season, or after the holiday season. Essentially, the opportunities for price changes on these items will occur mainly in October or January.
Okay. Understood. And then I guess the follow-up I had, just as we think, maybe, Jim, on the cost side of the business, focusing on SG&A, has anything changed in your thinking around the year in terms of hurdle rate for SG&A through the balance of the year?
No. The hurdle rates still remain where they were when we guided them a couple of months ago. Just a reminder, that we could leverage this year SG&A at a flat comp. And so we've got some leverage modeled in for the year. And at the margin side of things on the EBIT, we expect to leverage that at a 3% comp for the year. And maybe that comes down just slightly because the merchandise margin guide for the year has gone up just slightly.
Next question comes from the line of Jay Sole with UBS.
It was an interesting stat you gave on the prepared remarks about how the newer stores are comping better as they mature. And I guess the consumers in those local markets get more aware of them. I think you talked about the stores opened in the last 6 years, but do you see any nuances between, say, stores opened like last year or the year before versus stores that are open maybe 4 or 5, 6 years ago? And if you do, can you talk about those?
Sure. We haven't seen significant differences between the different class years and kind of talked about that a little bit on the most recent call or the last call about how the early opened stores in that 6-year period are outperforming the stores in the more recent periods and so that they continue to gain momentum as they age. And as we look at each of those class years, it's a very consistent behavior and improving and really driving comp waterfall, but then also looking at those legacy stores and seeing that those older stores are still adding good volume despite all the new stores that we're adding.
Got it. And I guess just thinking about what the productivity per store should be given just a huge growth during the post-COVID period and then sort of normalization and then now where we are today. I mean, do you feel like it's sort of smoothed out to where you're seeing consistent trends? And if so, what should the average store, like a mature store deliver in terms of sales per store in a given year?
Yes. We haven't put a target number out there. We've talked about it in the past that the new stores open at 75% of a mature store. And so if you do the math, you'd get to roughly $3.2 million as the sales volume in year 1 for a new store. It's roughly $4.2 million for a more mature store or legacy store. But we plan on growing the comps in those legacy stores into the future. And so that number will continue to go up in the way we're thinking about the business.
Next question comes from the line of Max Rakhlenko with TD Cowen.
Nice job on all the momentum. So first question is on exclusive brands. Can you walk us through the journey of how you're thinking about where product margins can go over time? I think previous comments make it sound like you think that the opportunity to drive upside is quite large. And I think that you do have a new VP of Sourcing. So just curious how we should think about that on a multiyear basis.
Yes, the new Head of Sourcing is on board. Jennifer started a few months ago and has been outstanding, making a significant contribution to the team. She is currently hiring a dedicated sourcing team of 10 to 12 individuals. However, we expect the benefits from sourcing to materialize by mid-2027, and for a full year's impact, it will be fiscal 2028 before we see the gains. We anticipate an increase of over 100 to 200 basis points, and while there's significant potential, achieving these gains will likely take multiple years. Jennifer is meeting with all the factories, and the team is conducting re-costing exercises with many of them. At this point, we are not ready to provide specific guidance or commitments regarding the sourcing margin improvements, but we remain optimistic about the opportunities, which is why we are expanding this team.
Got it. That's helpful. And then, on the work side, so with that now flipping positive on both sides of that business, do you think that you can maintain that? And do you think some of the challenges are now behind? Or is it more about just easier compares? And then how do you dissect what happened to that business as it used to be pretty steady pre-pandemic?
Yes. Looking back to the first quarter of last year, we had a negative performance in work boots. This quarter, however, we saw a positive performance in work boots. The business has been relatively stable. Last year's fourth quarter presented the toughest comparison with a decline of 3.1%. Overall, it remains a consistent category. I’m not ready to say we’ve fully succeeded with work boots just yet, as they still trail behind the performance of the rest of the business, which is typical. They tend not to fluctuate as much as other merchandise categories. There’s still progress to be made in the work boot segment. We're in the early stages of the Hawx initiative, and the Cody James marketing efforts will focus on work, western, and 1978 styles. More targeted Boot Barn marketing for work is set to launch as we approach September, and I'm optimistic about providing you with a good update next quarter. While there’s no indication of a downturn, I want to emphasize that we haven't quite restored work boots to the low single-digit performance we aim for in the quarter.
Next question comes from the line of Janine Stichter with BTIG.
Question first for John. Just want to hear your thoughts on the competitive landscape. I know when we were initially going through all this tariff volatility, it seemed like there was going to be a lot of disruption with some of the independents in the market. I'm curious anecdotally what you're seeing in a broader market and if you still see a share gain opportunity from some of this volatility?
Yes. I think we're not uniquely disadvantaged as we look at what's happening with tariffs in the market. Everyone will be facing into the same MSRP increases, and I think our exclusive brands and the inventory position that we are in heading into our Q3 or the holiday season, puts us in a nice place relative to the competition. Again, this industry, one of the great things about it is it's very rational from a promotional standpoint. And I respect all of our competitors greatly, but you do see some of the smaller mom and pops kind of regress and take less risk when they run into these disruptive situations. So I do think we are in a better position than most, if not all, as we head into the holiday season, given our exclusive brands and given how we've approached the last few months.
Great. And then maybe for Jim, on the gross margin, I just want to clarify when does tariff inventory actually start to hit the gross margin? I'm wondering if we have a period here in Q2 when you have ticket increases, but you're not yet flowing through the higher tariffs then.
Yes, that's a correct assumption. So as the price increases go into place on the cost side of things, we're purchasing those goods, but we'll have goods that are in the store that are still purchased at the lower price. And so as we're raising the MSRP that we've been given by the third-party vendors that come along with those cost increases, there is a period of time that kind of in the middle of the second quarter here, where we will have a little bit better of a margin opportunity. And you're seeing that in our guide for the quarter, as we've got our merchandise margin up 70 basis points. That stays with us, maybe to a lesser degree, in the third quarter, but a little bit as we head into the third quarter.
Next question comes from the line of Jonathan Komp with Baird.
I want to ask about inventory. It looks like quarter end, it was up less than 3% on a comp store basis. And just given that you're guiding to flat comps in the back half, is there a risk that you could actually run too lean or run out of goods that you need based on how you're aligning your buying plans?
It's a great question, John. We feel very confident about our inventory flow. Considering the positive comparisons we've projected for the second quarter, you're right that typically we would have a bit more inventory as we enter this period. However, we've assessed our current inventory, including what's in transit and on order, and believe we have sufficient stock to meet our guidance and even some room for growth if we exceed our expectations.
Okay, that's very helpful. John, as you think about the broader picture, you are clearly imprinting your vision on the four strategic priorities. As you approach the one-year mark in your interim role and consider permanent leadership, are there any completely new initiatives or priorities you are contemplating? Additionally, do you have any thoughts on the next frontier for growth opportunities?
Yes, absolutely. No, I'm comfortable with the big 3 adjustments that we are making now; the sourcing, the exclusive brand marketing and really treating those brands truly as real brands and then reinvigorating the work, both how we merchandise the work boots in stores, how we talk about work in general and approach the blue-collar customer and the tradesmen. So I catch myself. I think often about different things that we might want to do over time, but it's a lot harder to maintain simplicity and focus than a complexity trap. So I'm sticking with these 3 for the foreseeable future. And yes, there's other things that I think about perhaps as we go into next year. But I think sourcing the marketing piece and work are enough adjustments for the team at this point in time.
Next question comes from the line of Chris Nardone with Bank of America.
So just looking at the 2Q guide, can you just remind us what drove the inflection last August in your business? And just whether you're comfortable with the category mix that's driving the momentum as it relates to fashion product versus your core products?
Yes. Looking back at last year, we noticed a steady increase at the start of the year, with a positive shift in May. June remained positive, but July experienced some general softness in retail. As we noted in our previous transcript, we faced challenges from hurricanes and unusually hot weather in the West. However, the business picked up in August, showing broad-based growth compared to a year ago. Since August, we've maintained mid- to high single-digit growth for the past 12 months, aside from a couple of exceptions, with February being particularly notable. As we approach August, we anticipate more mid-single-digit to low- to mid-single-digit comparable sales due to the stronger numbers from last year. We are pleased with our positioning, believe consumers are healthy, and feel confident in sustaining this momentum for the next couple of months. Additionally, as John mentioned, we are considering the potential pressures from tariffs and consumer sentiment for the latter half of the year.
As we examine the fashion side of the business, the penetration of women's apparel has increased slightly compared to Q1 of last year, primarily due to our denim business. I believe we are establishing ourselves as a jeans destination. The performance is not attributed to any other fashion or apparel categories beyond jeans or denim.
Next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group.
And congrats on the strength of the business. I wanted to come to the store openings. You've seen some of the best kind of new unit productivity, opened 14 in the quarter. I wanted to get a sense for the cadence of the 65 to 70 guidance for the remainder of the year. Do you expect that to be evenly split? Or any color you might be able to share on that here for the last 3 quarters?
Yes, we opened 14 stores in the first quarter. We plan to open 16 in the second quarter, which would bring us to a total of 30. The remaining stores will open in the second half of the year, although we haven't determined the exact number for the third and fourth quarters. We estimate that 35 to 40 stores will open in the latter half of the year.
Great. And just to dig in a little bit deeper on where you're opening the new stores in that kind of outsized AUV, you're getting at $3.2 million. Is this going to inform how you're thinking about where to put stores in FY '27 and beyond? And have you considered at all even potentially taking a slightly higher unit growth opportunity given how well the business is performing?
Yes, great question, Jeremy. We’re excited about the success of our new units. The 15% growth in new unit openings over the past few years has been effective for us. This growth results in an increased number of stores we need to open each year, and I don’t anticipate expanding beyond the stated 15%. We want to ensure we select the right locations, maintain patience, and avoid rushing into openings. Additionally, we aim to avoid overburdening our field team and distribution center staff, ensuring we proceed prudently. Therefore, I believe we will maintain our current plan without exceeding 15% growth for now.
But just to clarify, as you look into FY '27 and beyond, you feel comfortable with that roughly 15% unit growth even as the base gets larger.
Yes. I think we're comfortable with that. It's something that we're always looking at. We haven't guided next year yet. And so we can't give you an exact number of the stores that we're going to put out there, but the 15% is something that we've stated and we've done that for 4 years and feel good about for right now.
Next question comes from the line of Sam Poser with Williams Trading.
How much have you narrowed the assortment within the stores? If so, how is a narrower and deeper assortment helping you, and how do you see that driving sales and margins in the future?
I believe we have definitely improved our denim offerings. Over the past few months, I've visited many stores and heard from associates and managers nationwide about their satisfaction with the increased depth of our denim inventory. Customers are now able to make multiple purchases in the same size, which was a challenge for them previously. The most significant improvement has been in denim. On the men's and women's apparel front, we are maintaining a steady approach. We continue to emphasize our top styles, which account for a significant portion of our sales—around 40% to 50% depending on the quarter. Our primary focus remains on those core styles, but the standout difference is in our denim inventory, where we have excelled, including both third-party products and our exclusive brands.
Within the flat comparisons in the second half of the year, will it remain flat in Q3 and Q4? How do you anticipate this progressing?
Yes. We have it flat in both Q3 and Q4. We stated on the last call that if not for tariffs and macro uncertainty, those would have been plus 3% in Q3 and Q4. And given everything that's going on in the macro environment, we are holding that guidance, and we'll update it as we get to the next call.
Next question comes from the line of Corey Tarlowe with Jefferies.
I just wanted to ask on price increases. Is there perhaps like a timeline that you could give in terms of when you're expecting to see these price increases come through? And then just on the exclusive brand penetration, has that changed at all as you've tweaked the pricing across the other brands that you sell in your store?
Yes. So as we said a little bit earlier, I'll just walk through that timeline one more time. We have received price increases from many third-party partners or vendors. We've started to re-ticket those items in stores. We're about halfway done with the re-ticketing process, and the re-ticketing will be complete by the end of August. So the price increases, which are mid-single digits that we've received from third-party vendors will be done end of August. We are holding lower for longer on our exclusive brands, and we really have 2 windows where we can increase price on exclusive brands as well to preserve rate. And those windows are October and then into January, post-holiday. You, obviously, can't do it in November or December. So we're going to see how exclusive brand penetration performed against third-party vendors over the course of September and probably the first week or two of October and make the call style by style on what we keep lower and maintain pricing on versus what we increase prices on to preserve margin rate.
Understood. Just no color as of yet based on reactions.
No, it's still early days. With half of these items, roughly half of the styles being re-ticketed and that was really completed within a week or two of where we are right now at the time of this call, it's still too early and haven't seen any change. We had nice EB penetration throughout Q1. So the penetration we talked about was not driven by some dislocation between pricing of EB and third-party brands.
Next question comes from the line of Ashley Owens with KeyBanc Capital Markets.
So to follow-up on the exclusive brands questions a bit. I would be curious at all how you plan to communicate or market some of that pricing differential to consumers over the next couple of months. What levers you have in place to drive incremental sales to exclusive brands by choosing to hold those prices, and if it could carry on further past January?
Yes. We generally don't talk about price. We've never been a very promotional retailer, very full-priced business. And I'm personally, especially from some past experience in other positions I've had at other companies, I'm very careful about being promotional or talking about pricing because it's hard to walk back from that. So we know that many of our customers come to bootbarn.com, and they browse the product on bootbarn.com before going into stores. And as you filter and look at different products and different price buckets, they'll be able to see that price differential there, but I don't see a world where we're going to be screaming it from the rooftop and putting it in emails that we're still pre-tariff pricing like you see in the automotive industry and things of that sort. So I don't think we're going to take the approach that you perhaps have seen in other businesses. That being said, a lot of these prices, especially on the boots side of things, there are psychological price barriers that have been breached with some of these mid-single-digit price increases, where now, we have a boot that's under $200 and other boots are now above $200. So I think that will work in our favor. But I don't think we're going to have kind of a pre-tariff pricing marketing campaign in any way around this. And we'll let the consumer choose, and they'll see the pricing, whether they be in stores or they're doing their research at home on bootbarn.com before coming in.
Okay. Got you. And then just as a follow-up. We know you're performing really well in denim. It's been seen by some other brands in apparel are really trying to capitalize in on this in some of the denim tailwinds. We've seen this over the past week. Just any plans to lean into additional marketing there?
We're doing things in stores. So we're focusing on fit guides and talking about denim in stores and making sure our partners are educated on the different fits and the different rises, especially on the women's side. So denim guides that each store partner will have are going out as we speak. I think they landed in all stores over the last week or so, and they look great. So we're going to be educating partners on denim. And our denim continues to be very much our boot-cut silhouette, as you would imagine, given our business and given the footwear or the boots that we sell. And so it really comes down to the rise, the stretch, the different types of boot cuts that continue to sell very well for us. I don't think we're going to have any real kind of denim or jean campaign like others have seen over the last couple of weeks with American Eagle and some others. I think we'll continue to market who Boot Barn is and our broad assortment of product that includes denim, but no large, dedicated denim campaign in the works right now.
Next question comes from the line of Jeff Lick with Stephens.
Congratulations on a great quarter. John or Jim, could you explain the typical difference in pricing between exclusive brands and national third-party brands? How much do you expect this to increase during the interim period? I'm also interested in whether your research suggests that the adoption of exclusive brands is largely influenced by price, and if customers tend to return after trying the products, as it seems you're conducting an interesting experiment with pricing.
Yes. The spread between exclusive brands and third-party brands, and we've said this publicly for several quarters, is generally 1,000 basis points, is what we've seen up until now. The honest answer is we don't know how much price and especially the psychological price barriers are going to play into the customer's choice. And that's why we're running this kind of large-scale elasticity test. We have the opportunity to stay lower for longer. And EB penetration, while we want to get to 50% over the next 5 to 6 years, 100 to 200 basis points increase per year, it's been our experience that sometimes that isn't a straight line kind of growth, and there has been step function jumps in the past. And let's see if this can be one of them, and we don't know how the customer will react to holding these prices. If everything else has gone up and people seem to absorb inflation quite well, as they have overall the last 4, 5 years, it may not be a factor. But if a boot starts with a $200 and ours starts with a $199 or a $189, it may make a difference. But that's why we're running this test, and that's why we're going to decide style-by-style where we hold and where we increase price to preserve margin rate.
I'm curious if you had detailed discussions with various vendors about your current strategies. Did any of the vendors indicate that they would prefer to maintain their prices instead of going through testing, as they might not want to risk losing market share?
No. The vendors are navigating a challenging and ever-changing situation, especially on the eve of tariff day. It is nearly impossible for them to adjust prices on a style-by-style basis. Many vendors have opted for mid-single-digit price increases across the board to protect themselves from heightened costs and tariffs. They had to implement these increases generally rather than product by product, making it difficult for the entire industry to retract those increases. We mentioned this in the last call, and I believe most vendors are aware of our approach if they've listened. However, none have come forward to indicate they will reverse or rescind any of those price increases. That has not occurred.
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