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Bull of the Day: Boot Barn (BOOT)

David Borun

It’s exciting for investors to find a company that’s engaged in what might be an overlooked – or even boring – industry, that’s simply doing a better job than their competitors and eating everyone else’s lunch.


Boot Barn Holdings (BOOT) is just such a company.


High tech stocks, financials, energy companies and other high-flyers tend to get the lion’s share of attention in the financial press, leaving less exciting stories like a successful apparel company to the truly dedicated investors who look for the most important factors, like profits.


Country music and the western lifestyle are among the fastest growing categories in retail. It might seem like a specialized category, but annual revenues of almost a billion dollars would suggest that’s it’s a much bigger business than you might otherwise guess.


Though the name “Boot Barn” might suggest product offerings that are limited to western footwear, the company sells a wide range of apparel items including boots, but also jeans, hats, belts, work clothing and everything else to outfit real cowboys and cowgirls - as well as their urban counterparts who are more likely to wear Boot Barn apparel and accessories to go see their favorite band than to work on the ranch.


Founded in 1978, Boot barn has grown from a single, family run storefront location to a chain of 248 well-stocked retail outlets in 33 states, as well as three internet businesses – bootbarn.com, sheplers.com and countryoutfitters.com. The online presence is especially valuable to customers in more rural areas of the US who might otherwise have to travel many miles to a brick and mortar location.


Headquartered in Irvine, CA, Boot Barn offers customers trusted brands like Wrangler, Justin and Carhartt and fills online orders out of a 120,000 foot warehouse that allows them to offer a huge selection and modern, efficient shipping and return services.


In the most recent quarter, Boot Barn reported an 11.3 increase in net sales, 8% growth in same store retail sales and 7% growth in online sales. Net income of $0.26/share was 62% higher than the year ago period.


The company also increased full-year guidance for the fiscal period ending at the end of March, 2020. They expect to add 25 new retail locations, and increased their estimates for same store sales, net income and income from operations while simultaneously reducing their estimate for net interest paid.


They also raised guidance for full-year earnings from a range of $1.67 – 1.75/share from the previous estimate of $1.57 – 1.65/share.


Four upward revisions in the past 30 days have the Zacks Consensus Earnings Estimate at $1.72 and also own Boot Barn a Zacks Rank #1 (Strong Buy).


Boot barn shares have appreciated more than 300% in the past two years, but thanks to strong earnings performance, they are currently priced at just a 22X P/E ratio. That’s a bit higher than the S&P 500 – which has been averaging closer to 18X – but a significant discount to the Apparel and Shoe industry average of 33.7X.


There are certainly more recognizable names in the footwear and apparel business, but with revenues consistently growing at 11%/year and earnings growth near 20%, few are as consistent and profitable as Boot Barn.


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