Boot Barn Inc.’s share price has a history of riding the price of oil like one of the bronco-riding cowboys at the annual rodeo it sponsors.
Last year the Irvine-based retailer added new tricks, including improving same-store sales and steadying margins, an amazing feat at a time when retailers are citing Amazon Inc. for declining sales.
A year ago, a share of Boot Barn traded around $10 before plummeting 40% in June to $6 as both oil prices and same-store sales fell. Then the turnaround began. The share price had tripled by February, at one point topping $20.
The increase resulted from “a combination of macro factors and things we continue to improve on,” Chief Executive Jim Conroy said in a recent interview.
One of those is a big segment of people who wear its duds. “A large portion of our business is connected to states in the oil industry. As the price of oil improved, so did the lot of our customers and then our business.
“Internally, we’ve done some nice things across multiple functions.”
Boot Barn (NYSE: BOOT) is bucking industry trends with 226 stores, almost triple that of five years ago, and plans to double to 500 outlets, a startling goal for a retailer nowadays.
“BOOT is the #1 player (over 2.5x as many stores as its closest competitor) in a highly fragmented $20B western/work wear market that is seeing improved trends,” JPMorgan analyst Matthew Boss wrote in a March 12 note to investors.
Boss boosted his target price to $22 a share with an overweight rating.
Boot Barn climbed seven spots to No. 33 on the Business Journal’s latest list of the biggest publicly traded companies as ranked by market cap. Its $480.9 million market cap is up 83% over last year (see separate article, page 1).
$20 Billion TAM
Boot Barn was founded in 1978 by Ken Meany with a Huntington Beach store. He expanded to more than 30 retail units before selling the company in 2007 to Marwit Capital Partners II LP, a Newport Beach-based private investment firm.
Marwit sold Boot Barn in 2011 to Freeman Spogli & Co., a Los Angeles-based private equity firm specializing in middle-market companies. Freeman has invested more than $4 billion in 58 companies, including Costa Mesa-based El Pollo Loco Inc. and Floor & Decor Outlets of America Inc. in Atlanta.
Conroy, who was chief operating officer and interim chief executive at the Claire’s retail chain targeting teen girls, took the Boot Barn chief executive role in 2012. He continued to boost Boot Barn’s store count through acquisitions and new builds and took the company public in 2014 at $16 a share.
Boot Barn plays in an estimated $20 billion industry.
“I grew up in New York, and I didn’t fully understand how big this market is,” said Conroy, 48. “It’s an incredible retail opportunity that’s been hidden in plain sight for more than a century.”
Blue-Collar Customers
Boot Barn estimates about 60% of the industry is workwear, such as for construction and oil and gas workers and other blue-collar roles. The other 40% is for Western wear that includes apparel and shoes for ranchers, horse owners and country music fans. About 52% is footwear, followed by 32% apparel and 16% hats and other accessories.
“Our core customer feeds America, builds America and protects America—that’s a lot of people,” Conroy said. “We do well where there is blue-collar employment, horse ownership and farms.”
Most competitors are one-store “mom and pop shops” with limited inventory. Conroy said it differentiates itself from Amazon with a wide assortment, same-day availability and customer service.
“Our product lends itself to an in-store experience,” Conroy said. “We really cater to our customer when they walk into the store looking for an authentic Western lifestyle. They come to us for product expertise.”
It’s not just the improving oil market that has driven the stock.
Boot Barn’s same-store sales showed improvement for the past three quarters, climbing 5.2% in the fiscal third quarter that ended Dec. 30. JPMorgan analyst Boss said the company is selling more private-label brands with better margins than national ones, is improving its e-commerce sales by consolidating operations, and saving costs by shipping from a Kansas facility rather than a California warehouse.
Charge!
Its sales growth is charging ahead, climbing from $233 million in fiscal 2013 to an estimated $669 million in fiscal 2018. Boss forecasts that revenue will grow 10% to $739 million in fiscal 2019 and another 10% to $813 million in fiscal 2020.
The company plans to expand to other states and to Canada, Australia and South American countries, including Brazil and Argentina, where bull-riding is popular, Conroy said.
He said it intends to keep its headquarters in Irvine, which “has been a great place to grow” and where 275 of its 3,000 employees are based. In fact, Conroy said the company is reversing a trend of companies leaving California with its plans to move some functions from out of state to its Irvine office in order to improve efficiencies.
One indication of support for the stock came in January when Freeman Spogli reduced its stake from approximately 50% to 25% by selling about 6 million shares at $17.25 each. The share price actually rose after the sale to as high as $20.20 in February. In recent weeks, it fell below $17 after a recent decline in oil prices.
The current price doesn’t freak out employees, especially after hitting $6 last year.
“We didn’t panic when times were tougher,” Conroy said. “Every person on our team was rowing in the same direction.”
