A 200-store base might be too much of a bet for a lot of retailers these days.
It’s an opening bid for Boot Barn Holdings Inc., which plans to double down on brick and mortar.
The Irvine-based western and workwear retail chain is bucking the industry trend that has seen a number of national retailers grapple with a market increasingly driven by digital sales and home deliveries. Several chains based in Orange County are particularly severe examples, falling into bankruptcy and shedding bricks-and-mortar stores in some cases: Pacific Sunwear of California Inc. in Anaheim, Quiksilver Inc. in Huntington Beach. Others have shut down altogether—the recent fate of Wet Seal LLC in Irvine and Costa Mesa-based home goods retailer Anna’s Linens.
Boot Barn is close to $600 million in annual revenue on sales of brands that can be found elsewhere—including Wrangler, Ariat, Justin, Carhartt, Miss Me, Corral, Timberland and Lucchese—along with a growing assortment of boots, apparel and accessories under private labels, such as Cody James, Shyanne, and Moonshine Spirit by Brad Paisley.
The company had 162 stores in 24 states when it went public in 2014 and set a course to increase its retail portfolio by about 10% each year.
That seemed contrarian to begin with, and it looks more so now, with the store count up to 219.
“We’re kind of ahead of that growth curve,” said Chief Executive James Conroy, adding that the 2015 acquisition of Wichita, Kan.-based Sheplers Inc. has sped up the process. “The whole [working Western industry] is $20 billion—so if we ever get to a billion (in revenue) we’ll be 5% of the whole market. So there’s this enormous amount of growth” potential.
California
The retailer sees “a lot of opportunity to continue to build California,” where Ken Meany founded the chain in 1978, and now it has 47 stores in the state. It will also “continue to develop a few of the new markets,” including the southeastern part of the country.
“We just added a store in the Atlanta area and Alabama, and those stores are kind of one-offs, so they need more support so we can leverage the media spend in those markets before we go to Virginia, Pennsylvania, Ohio—or Times Square,” Conroy said.
Acquisitions will continue to supplement organic growth, according to Chief Financial Officer Gregory Hackman. Potential targets are much smaller chains and “mom and pop” retailers with a couple of stores in markets Boot Barn is exploring. The retailer is also using its “e-commerce channel to get a read on demand in local markets” and decide where to go next, added Conroy, but plans to stay away from malls.
Its biggest competitor is Cavender’s, a Tyler, Texas-based family-owned operation that has about 74 stores.
“Cavender’s would be one that would have been appealing to us four years ago because we weren’t in Texas,” Hackman said. “But after we acquired the Baskins chain (in 2013) and the Sheplers chain, we kind of are in the same markets with them anyway.”
Boot Barn has been “working hard to reduce the capital requirements” necessary to open a new store to “help further accelerate” a typical three-year payback period. It spends about $300,000 on the store interior “build out,” and another $500,000 goes to inventory. Hackman sees the total going down to about $750,000 by skipping what he described as unnecessary decor, shelving or light fixtures.
“What we’re looking at doing is how we can make the same impression but maybe a little cheaper,” he said.
Boot Barn also is investing roughly $18 million in upgrades to “three to four dozen” older stores in California and Arizona—its legacy markets—and expanding some to about 10,000 square feet to “get more of our products and better representation.”
About half of the retailer’s sales come from boots that often need to be tried on in-store to get the best fit. Footwear also draws in workers who can’t wait for two-day shipping—their boots may be leaking or they are starting a job tomorrow, Conroy said.
The push for bricks-and-mortar doesn’t mean Boot Barn is immune or oblivious to consumers’ growing inclination to shop online.
E-commerce accounted for $111 million—or 18%—of last year’s sales, and its “omni-channel” approach calls for continued investment in the division.
Boot Barn hired Dana Point-based Moku Collective to migrate its bootbarn.com and sheplers.com websites to a common Demandware platform. It has “many tools to create unique promotions, to manage content on the site, to control the merchandising, and create unique experiences for groups of customers,” said Moku founder and Chief Executive Ben Noonan.
Boot Barn also combined fulfillment operations for both websites to an e-commerce distribution center in Wichita, Kan., which will enable it to “more efficiently fulfill all e-commerce sales in the middle of the country” and reduce the shipping cost. Orders on bootbarn.com are currently filled from a 20,000-square-foot facility in Fontana that also supports its stores.
Touch Screen
The retailer recently launched “We Have It Promised” touch-screen devices that customers in stores can use to access “millions of items” in its e-commerce warehouse inventory, as well as the inventory of its larger third-party vendors. WHIP accounted for 2% of store sales in December, and Boot Barn continues “to see a positive customer response to this enhanced shopping service in January.”
“We don’t have a lot of bureaucracy, and if someone has an idea we think could work, we just kind of move immediately to execute,” Conroy said. “We thought that it was something that we should get out before Christmas, and in very short order we took our website, reskinned it, developed a logo, put the marketing materials and sent that out. I don’t think the big are going to eat the small—I think the fast are going to eat the slow.”
