Same-Store Sales Acceleration
Q: What drove the recent same-store sales acceleration?
A: James Conroy explained that every department has seen sequential positive improvement, with ladies western boots up 15 points, work boots up 5 points, work apparel up 11 points, and men's western boots up 9 points from Q3 into the current quarter. This improvement is broad-based across all categories, channels, and regions, driven by increased transactions rather than higher prices. The ladies' business has improved slightly more than men's, but both are contributing to the positive momentum. Conroy is cautiously optimistic about sustainability, noting that they are positive comping in May and heading into stronger sales periods like Father's Day and June. Despite embedding some conservatism in their guidance, he sees no reason for numbers to reverse direction.

Margin Outlook
Q: How is the EBIT margin forecast broken down?
A: Jim Watkins stated they are planning for 110 basis points of merchandise margin expansion, driven two-thirds by supply chain efficiencies and one-third by improvements from exclusive brand penetration and better vendor pricing. However, this is offset by an equal amount of deleverage in buying, occupancy, and distribution center costs due to negative same-store sales. Additionally, SG&A is expected to deleverage 70 basis points, partly due to a new corporate headquarters adding about 30 basis points or $6 million in incremental costs this year.

Store Growth Strategy
Q: What is the consistency of new store performance and CapEx spending?
A: James Conroy emphasized that new stores deliver a 60% return on invested capital, including inventory costs, which is higher than their cost of capital. The performance is extremely consistent across the vast majority of stores, with every store in the company being EBITDA positive. They plan to continue opening stores, seeing incredible returns even in non-traditional Western markets like New York and New Jersey. Given the high returns and low risk, they would open more stores if operationally feasible.

Exclusive Brand Penetration
Q: How is exclusive brand penetration impacting margins?
A: Exclusive brand penetration will return to growth, with plans for it to be up 50 to 80 basis points this quarter and to ramp up beyond the 110 basis points guided for the year in Q3 and Q4. The exclusive brand portfolio is performing well; their number one brand is Cody James, an exclusive brand, with exclusive brands making up half of their top eight brands. New brands like Rank 45 are exceeding expectations, targeting core western and younger rodeo customers.

Tariff Exposure and China Sourcing
Q: What is the exposure to tariffs and China sourcing?
A: James Conroy noted that they have reduced their inventory sourced from China from historically 50% to now under 40%, diversifying their risk. Vendors are passing along efficiencies due to reduced freight rates and input costs. They are managing through potential tariff risks and believe they can handle any future increases, possibly even strengthening competitively due to supply chain agility and ability to shift to exclusive brands.

Competitive Landscape
Q: How is Boot Barn performing against smaller competitors?
A: James Conroy stated that they continue to take market share from mom-and-pop stores, with more closures than openings among small retailers. While they face competition from large players like Tractor Supply and online channels, their main direct competitor is a single company in Texas. Boot Barn's sales growth has outpaced industry growth, effectively doubling their business in recent years, indicating significant market share gains.

Comps Guidance Conservatism
Q: Why is there conservatism in comps guidance despite recent improvements?
A: The company is embedding conservatism due to tough comparisons in upcoming months, especially June, which was their toughest comp on a one-year basis, and May and June being the toughest on a two-year stack. Additionally, they anticipate potential headwinds in the second half of the year from macro events like the upcoming presidential election and a shorter holiday shopping period. Hence, despite recent positive trends, they are cautious in their guidance.

E-commerce Improvements
Q: What's driving the improvements in e-commerce?
A: E-commerce growth is primarily driven by increased traffic, up 20% quarter-to-date. The growth is attributed to brand building, marketing efforts, and the presence of new stores in new markets. While conversion is down slightly, revenue is up. They maintain a consistent approach to digital spending, adjusting for cost-per-click fluctuations. Recent efficiencies in pay-per-click advertising, especially through new tools from Google, have contributed to growth.

Supplier Pricing and Sourcing Efficiencies
Q: How are suppliers contributing to pricing and sourcing improvements?
A: Vendors are passing along efficiencies from reduced freight rates and lower input costs. Boot Barn leverages bulk purchases and discounts by buying vendor direct containers for low-fashion-risk products, lowering costs. Improved initial markup (IMU) is expected from both third-party and exclusive brand vendors, contributing to merchandise margin growth.

Managing Fashion vs. Core Business
Q: How is the management of fashion businesses evolving?
A: Fashion categories like ladies' cowboy boots and apparel are managed differently, with tighter inventory control and more regional assortment due to faster turnover. Despite significant negative same-store sales in ladies' businesses, they maintained merchandise margins, showcasing effective management. Basic or staple products are managed with a philosophy of being in-stock by size to avoid lost sales, favoring full shelves over potential markdowns.