Boot Barn Holdings, Inc. (NYSE:BOOT) Q1 2024 Earnings Call Transcript

Boot Barn Holdings, Inc. (NYSE:BOOT) Q1 2024 Earnings Call Transcript August 3, 2023

Operator: Good day, everybody, and welcome to Boot Barn Holdings First Quarter 2024 Earnings 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 Financial Planning. Please go ahead, sir.

Mark Dedovesh: Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn’s first quarter fiscal 2024 earnings results. With me on today’s call are Jim Conroy, President and 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 in this presentation 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 2024 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 Jim Conroy, Boot Barn’s President and Chief Executive Officer. Jim?

Jim Conroy: Thank you, Mark, and good afternoon. Thank you everyone for joining us. On this call, I’ll review our first quarter fiscal 2024 results, discuss the progress we have made across each of our four 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 the call up for questions. We’re very pleased with our start to the fiscal 2024 year and our first quarter results. During the quarter, total sales increased 4.9%, driven primarily by sales from new stores added over the last 12 months, partially offset by a low-single digit decline, a negative 2.9% and consolidated same-store sales. We feel great about this performance given that the business was cycling plus 10% and plus 79% growth and consolidated same-store sales in the prior year and two-year ago periods.

Additionally, we are quite pleased with the sales results both in stores and online with both businesses outperforming our guidance for the quarter. In addition to strong sales performance during the quarter, we achieved 80 basis points of product margin expansion driven primarily by more than 600 basis points of growth and exclusive brand penetration. The strength in sales and margin combined with solid expense control drove earnings per diluted share of $1.13 during the quarter compared to our guidance of $0.85. I’m extremely pleased with our start to the year with the team’s execution continues to deliver both top and bottom line results. I’ll now spend some time discussing each of our four strategic initiatives. Let’s begin with expanding our store base.

New stores continue to add to our top line growth and outperform our expectations. With our acceleration of new store openings, we have been able to open 86 stores over the last two years. With opening of 16 new stores in the first quarter, we ended the quarter with 361 stores across 44 states. I’d like to thank the real estate construction built digital merchandising and store operations teams for their collaboration and persistence in getting these new stores up and running successfully. Our new stores continue to pay back in fewer than 18 months with strong average unit volumes in the first year and remain confident in our ability to achieve our long-term stated goal of 900 or more stores across the United States. Moving to our second initiative driving same-store sales growth, first quarter consolidated same-store sales declined 2.9% with retail store same-store sales declining 1.8% and e-commerce same-store sales declining 10.8%.

Notably, comps improved sequentially by month throughout the quarter in bulk channels. And while still negative, the sequential improvement in store comps was driven by a sequential improvement in average transactions per store. From a merchandise department perspective, nearly all major merchandise categories showed sequential improvement in the first quarter from our fiscal year end. Men’s western boots and apparel achieve low-single digit positive comps. Ladies boots and apparel declined in the quarter, but showed sequential improvement from year-end while cycling strong double-digit comps in a year ago and two-year ago periods. From a geographic standpoint, stores in the North and East regions showed a slight decline in same-store sales both performed better than chain average.

The South lagged the chain average with a mid-single digit decline and the West performed in line with chain average. From a customer perspective, we are very pleased with the growth we continue to see in our customer base with 7.5 million active members and our B Rewarded loyalty program as of the end of our first quarter. This represents growth of 23% from 6.1 million members as of the end of our first quarter of fiscal 2023. Over the past few years, we have used our customer segmentation as a foundation to strategically extend the reach of the brand and attract a broader range of consumers. Historically, Boot Barn was more narrowly focused on the western and work customers. Over the past few years, we added a country lifestyle segment as well as a somewhat smaller segment targeting women seeking western inspired fashion.

The [indiscernible] customer count is quite encouraging as we’re seeing both the ongoing development of the newly added segments while we are also expanding the size of the core western and work customer groups. Similarly, we are seeing healthy growth in customer count in our legacy stores, while also capturing a considerable number of new customers as the store portfolio builds across the country. In order to provide more in-depth understanding of the strength of the brand with our customer base, I would like to spend a minute highlighting a recent customer survey we performed. First, the survey results further confirmed that the elevated average store volumes we have seen over the last couple of years were not driven by a transitory fashion trend as more than 75% of customers are purchasing with us because western and work product is part of their everyday lifestyle and wardrobe.

Second, the Yellowstone television show does not seem to be a factor behind the significant acceleration we saw in sales over the last several years with only 4% of customer responses citing Yellowstone as a reason for wearing our product. Lastly, our customer’s propensity to shop with us continues to be very high with over 90% of customers either very likely or extremely likely to shop at Boot Barn again over the next 12 months. While we acknowledge that there is a sample bias in the server responses that we receive, we are pleased to see that the results are consistent with our CRM data regarding new customers and their shopping preferences. For more details on the survey results, please refer to the supplemental financial presentation that we released today.

Moving to our third initiative strengthening our omni-channel leadership. In the first quarter, our e-commerce same-store sales declined 10.8%, which was an improvement from a decline of over 18% in our fourth fiscal quarter. Notably, the Boot Barn brand did see positive sales growth for the quarter, but not big enough to offset the weakness in the Sheplers and Country Outfitter brands. We continue to believe that our e-commerce business back to a positive growth trajectory beginning in late September or early October when the last year comparisons become easier. Despite the slowness in e-commerce sales, we are quite pleased with the many achievements we have seen from an omni-channel perspective. First, the team has greatly expanded the digital influence in our stores.

We have rolled out Bandit, which adds artificial intelligence to our customer facing shopping tablet, helping customers to get expert styling advice in store. In addition, we have equipped our store associates and call center operators with the same artificial intelligence capabilities to enable all of them to provide much richer product knowledge and shopping recommendations. We’ve also made great progress from an e-commerce fulfillment perspective. Today, we have the ability to ship most e-commerce orders from nearly every store or any distribution center. This will enable us to maximize selling margin by moving through the limited amount of clearance that we have system-wide at a less aggressive markdown. It’ll also help us to minimize shipping time and cost by shipping orders geographically closer to customer demand.

Now to our fourth strategic initiative, exclusive brands. During the first quarter, our exclusive brand penetration increased over 600 basis points to 38%. This is our third consecutive quarter of greater than 500 basis points of year-over-year growth compared to our historical stated goal of 250 basis points to 300 basis points of growth. We now expect to grow exclusive brand penetration for the fiscal year by 500 basis points to 39% of sales. With exclusive brands providing an incremental 1,000 basis points of margin compared to third-party brands. This penetration growth has added meaningfully to our margin profile. To support the substantial growth we have seen in store count and in our exclusive brand business over the last couple of years, we recently expanded our supply chain capability by adding an additional distribution center in Kansas City, Missouri.

As a reminder, most third-party inventory is fulfilled directly by our vendors to our stores and does not pass through a Boot Barn distribution center. However, when it comes to our exclusive brand product, we warehouse that merchandise in our DCs and replenish the store demand ourselves. We are pleased to report that the new DC facility opened on time and is operating smoothly as we begin to ramp up the throughput of goods over the next few months. I want to thank our entire supply chain and IT teams for their world-class execution and getting the new DC up and running without any major disruptions. Turning to current business. On a consolidated basis, our July business declined 0.5%, which was an improvement on our first quarter, but a slight deceleration from June.

Our retail store same-store sales performance remained positive in the month of July, while e-commerce sales declined 11.4% for the month. While it is exciting to see the tone of business begin to improve, it has also proven to be somewhat unpredictable with weekly comp performance ranging from negative 7% to positive 6% over the past four months. Accordingly, we have attempted to capture this volatility in our sales guide for the balance of the second quarter, which Jim Watkins will provide later on this call. Looking beyond the comp sales growth, we continue to feel great about the new store performance and the pipeline of new locations for the balance of the year. We’re also quite pleased with our exclusive brands, which saw an extremely strong growth in penetration for July that has contributed to a solid product margin for the month.

In summary, while macro uncertainty persists, we feel we are well positioned to navigate through nearly any environment that comes our way. I’d like to now turn the call over to Jim.

Jim Watkins: Thank you, Jim. In the first quarter, net sales increased 4.9% to $384 million. As Jim mentioned, our sales performance benefited from new stores open during the past 12 months, partially offset by a consolidated same-store sales decline of 2.9%, comprised of a decrease in retail store same-store sales of 1.8% and a decrease in e-commerce same-store sales of 10.8%. Gross profit increased 3% to $142 million, or 37.0% of sales compared to gross profit of $138 million or 37.7% of sales in the prior year period. The 70 basis point decrease in gross profit rate resulted from 160 basis points of deleverage in buying occupancy and distribution center costs, partially offset by a 90 basis point increase in merchandise margin rate.

The increase in merchandise margin rate was driven by 80 basis points of product margin expansion, resulting primarily from a 630 basis point increase in exclusive brand penetration and a 10 basis point tailwind from lower freight expense as a percentage of sales. Selling, general, administrative expenses for the quarter were $96 million or 24.9% of sales compared to $85 million or 23.3% of sales in the prior year period. The increase in SG&A expenses compared to the prior year period was primarily a result of higher store payroll and store related expenses associated with operating an additional 50 stores over the prior year period and corporate overhead costs in the current year. Income from operations was $46 million or 12.1% of sales in the quarter compared to $52 million or 14.3% of sales in the prior year period.

Net income was $34 million or a $1.13 per diluted share compared to $39 million or $1.29 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory increased 6% over the prior year period to $566 million. This increase was primarily driven by new store inventory and exclusive brand growth partially offset by an approximately 9% decrease in average comp store inventory. We finished the quarter with $17 million in cash and $26 million drawn on our $250 million revolving line of credit. Turning to our outlook for fiscal 2024. As outlined in our supplemental financial presentation, we’re raising our guidance for both the second quarter and full year. As the presentation lays out the low and high end of our guidance range for both periods, I will only speak to the high end of the range in my following remarks.

As we look to the second quarter, we expect total sales at the high end of our guidance range to be $379 million. We expect the same-store sales decline of 3.5% with a retail store same-store sales decline of 2.5% and an e-commerce same-store sales decline of 9%. We expect gross profit to be $134 million or approximately 35.4% of sales. Gross profit reflects an estimated 50 basis point increase in merchandise margin, including flat freight expense year-over-year. We anticipate 180 basis points of deleverage in buying occupancy and distribution center costs. Our income from operations is expected to be $38 million or 10% of sales. We expect earnings per diluted share to be $0.90. As a result of our first quarter performance and our updated estimate for the second quarter, we are raising our full year guidance.

Our guidance for the second half of the year remains unchanged. For the full fiscal year, we now expect total sales at the high end of our guidance range to be $1.75 billion, representing growth of 5.5% over fiscal 2023, which as a reminder was a 53-week year. This compares our previous guidance of $1.72 billion. We expect same-store sales to decline 3% with a retail store same-store sales decline of 3.5% and flat e-commerce sales. This compares to our previous guidance of a same-store sales decline of 4.5% with a retail store same-store sales decline of 5.2% and e-commerce same-store sales growth of 1%. We now expect gross profit to be $646 million or approximately 36.9% of sales. Gross profit reflects an estimated 160 basis point increase in merchandise margin, including a 100 basis point improvement from freight expense.

We anticipate 150 basis points of deleverage in buying occupancy and distribution center costs. Our income from operations is expected to be $223 million or 12.7% of sales. We expect net income for fiscal 2024 to be $163 million and earnings per diluted share to be $5.35. We also expect our interest expense to be $3.2 million and capital expenditures to be $95 million. Now I would like to turn the call back to Jim for some closing remarks.

Jim Conroy: Thank you, Jim. We’re quite pleased with our financial performance during the first quarter and are looking forward to the balance of the year. I do want to thank the entire Boot Barn team for their hard work and briefly acknowledge some well-deserved third-party recognition. Every year, Newsweek conducts an independent consumer survey and assembles a list of America’s best retailers. The assessment measures the customer’s view on product assortment, in-store service, store design and merchandising, as well as a few other factors. For 2023, Boot Barn topped that list with the highest score of any company across 39 different categories of retailing. A heartfelt thank you to the entire team nationwide for working so hard and forgetting the accolades that you all deserve. Congratulations. Now, I would like to open the call to take your questions, Sherry?

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is from Matthew Boss with JPMorgan. Please proceed.

Matthew Boss: Great, thanks and congrats on another nice quarter.

Jim Conroy: Thanks Matt.

Matthew Boss: So Jim, could you just maybe help break down drivers of the sequential traffic acceleration that you saw through the quarter, notably as you cited the return to positive store comps in both June and July. And then just how best to think about your forward comp assumptions that you’ve embedded, which obviously do embed a level of deceleration?

Jim Conroy: Sure. Matt, you did a nice job of clarifying that you wanted Jim to answer that one. So this will be Jim Conroy will take a – I’ll takea first crack. The progression from Q4 to Q1, a few different things improved depending on, if you want to look at it by channel or by merchandise category, et cetera. First, our e-commerce business, while still negative improved sequentially by about 8 points. Our store business improved notably our west division, our west region improved by about two full points. Within the merchandise hierarchy, men’s western boots had some nice sequential improvement, men’s western apparel had some nice sequential improvement, both of those turning positive. And ladies’ western boots also negative, the trend improved by about 700 basis points.

So there was a number of different factors, whether you’re looking at it by merchandise category or by channel or by geography within the stores business. In terms of looking forward on the guidance piece, I’ll turn that over to the other Jim.

Jim Watkins: Hey, Matt. So the sales assumptions for the second half of the year are unchanged and we’ve left – largely left August and September unchanged as well. We did increase the store sales a little bit and decreased e-commerce sales a little bit just based off of what we’ve been seeing in the business over the last four weeks. So August and September are planned a minus 4% in stores and e-commerce for August looks similar to July with September improving to negative single digits. And then just as a reminder, kind of recapping from the last call, we were really using the sales volume from February, March and April and projecting the sales for the balance of year using historical weekly sales curves. And when we were contemplating the guide for this quarter, we took a similar approach looking at the – again, the most recent four weeks for the balance of this quarter and also looked at it at varying time periods and we got to a similar spot regardless of which of those time periods we used.

Matthew Boss: Okay, that’s great color. And then maybe just to follow-up on new stores that you cited. So can you touch on recent productivity that you’re seeing from some of your newer store builds maybe across regions? And just could you elaborate on any key structural changes that you’ve made to the business that support now the higher mid-teen store growth?

Jim Conroy: Sure. The new store productivity is in line with the $3.5 million new store sales that we’ve been calling out recently. And Matt, as you fully recognize, that is nearly double what we originally had thought in our original long-term algorithm. In terms of sort of the infrastructure changes, what we do tend to run pretty lean, we have added one real estate deal maker that sits on the east coast to help develop that part of the country. We continue to use an extensive broker network. We’ve added a couple of project managers of course. And then within the field organization, we have some a few more people working in visual merchandising that help with the in-store setup, et cetera. And I think maybe even more than ads to the organization, we’ve changed our process quite a bit, where we have a really solid onboarding and training program for new store managers and new teams within a new store.

As soon as it became apparent that we weren’t always going to be able to transfer an assistant manager to promote them to be a store manager to another part of the country, we really relied on the HR team and the store ops team to figure out a way to bring in external talent and sort of teach them the Boot Barn methods and the Boot Barn culture. And that has worked extremely well. We continue to feel very optimistic about our new store openings, their performance, our pipeline, our top side target of at least 900. And we’ll just continue to kind of stamp out what is proven to be a working model.

Matthew Boss: Really helpful color, best of luck.

Jim Conroy: Thanks, Matt.

Operator: Our next question is from Steven Zaccone with Citi. Please proceed.

Steven Zaccone: Great. Good afternoon guys. Thanks for taking my question. I wanted to follow-up about your commentary regarding some volatility in the comps by week over the last two months. How much of that is just weather? We know it’s been hot in the south, so I’m curious for your perspective on that. And I guess, has there been anything changing from a consumer purchase activity, whether it’s potential trade down or anything of that nature that’d be helpful.

Jim Conroy: Steve, I would submit that it’s just been difficult to pin it down to a particular external factor. We’ve had extremely hot weather as you’ve pointed out, that didn’t necessarily always correlate to tougher business. We’ve had some great concerts come into town in some parts of our – of the country that have spiked business. Conversely, we’ve – conversely big concerts in the LOI period that have brought that business down. So we felt it was important to call out, because we do feel good about the present tone of the business, but it has been a word that’s been used by other public companies reporting recently is choppy. It’s been a little choppy and when we were trying to lay out guidance for the second quarter, we wanted to just kind of take note of the fact that, June and July were great, the last week in July wasn’t so great.

So let’s just kind of build all of that or hope to build that uncertainty into the guide for the balance of a quarter and for that matter for the year.

Steven Zaccone: Okay, I appreciate that detail. Then a question for Jim Watkins, just on the gross margin outlook, it doesn’t sound like much has changed, but I noticed in the second quarter, I guess freight still expected to be flat year-over-year. So it sounds like that freight benefit is largely going to be back half weighted. Is that fair?

Jim Watkins: That that’s right. Yes. The freight and again, this is consistent with what we were seeing the last quarter we reported the first half of this year would be kind of flat and then we’d really see that benefit pick up as we get into Q3 and Q4 and pretty significantly to get us to a 100 basis points of tailwind on the full year.

Steven Zaccone: Okay, thanks. Thanks very much.

Jim Watkins: Thanks, Steve.

Operator: Our next question is from Max Rakhlenko with TD Cowen. Please proceed.

Bradley Jamison: Hi, this is Bradley Jamison on for Max. So first sticking with gross margin. Jim Watkins, can you speak to where your markdown percentage of goods is today compared to pre-pandemic? And then how do you expect that to trend ahead? Is this sort of a more normalized state now or could they fluctuate higher or lower ahead?

Jim Watkins: Yes, great question. The markdown percentage of sales is very much in line with where it was pre-pandemic. And again, the last couple of years, we saw a historically low markdown percentage, but it’s back to where we’ve seen it historically over the years pre-pandemic and we expect that to stay in a similar place as we move throughout the year and going forward.

Bradley Jamison: Great. And then Jim Conroy, your footwear mix over the past few years has declined to 47% in the last fiscal year from 52% to 53% in a few years prior to the pandemic. What do you attribute that decline to and what do you think the implications of that mix shift could be? And do you think footwear will continue to trend lower over time? Thanks guys.

Jim Conroy: Sure. Great question. I guess, I tend to be more glass is half full. It’s – I would view it more as, because it’s a percent to a 100. We’ve had some businesses, most notably ladies apparel grow considerably. And while ladies apparel has been under pressure recently, we had a year plus where that business grew roughly a 100%. And of course, when one category grows so much, it just pushes the share of the remaining businesses that need to add to a 100 down a little bit. I think we’ll see ebbs and flows over the next few years, I don’t think this is a ongoing trend one way or the other that five years from now, footwear will be 40%, five years from now, we’ll probably roughly 50-50, again, on either side of 50-50.

In terms of margin profile, there’s almost nothing to read into that. I mean, the margins across the businesses are pretty similar between footwear and apparel. There are some less meaningful differences once you get further into the merchandise hierarchy, but if you’re just looking at the split between footwear and apparel, it doesn’t really change the margin profile of the business. I think I’ve already give you one or two more sentences on that, more anecdotally, as we have broadened the definition of what Boot Barn means, looking a little bit outside of the core work in western customers. And reaching out to customers that might be tangentially interested in a brand like Boot Barn, I think it’s an easier first purchase for them to enter the brand with apparel.

And then over time, they may invest more into the higher ticket categories like footwear.

Bradley Jamison: Great. Thanks guys. Best of luck.

Jim Conroy: Thanks, Bradley.

Jim Watkins: Thank you.

Operator: Our next question is from Jason Haas with Bank of America. Please proceed.

Jason Haas: Hey, good afternoon and thanks for taking my questions. So I wanted to follow up on the e-commerce business. I was just curious if you could provide a little bit more color on what is going on with the Sheplers business. It sounds like that’s been the biggest drag, at least for a couple quarters now. So just curious why that business has been softer and I know the compares will start to get easy, you’ll start to lap this, but I’m just curious what you’re doing, if anything to try to lessen those declines.

Jim Conroy: Sure, great question. The Sheplers business has two dimensions that have challenged their top line, both traffic and conversion have come down. So we are trying to work on anything we can internally to stem the tide on conversion for sure is there’s something about the site, the setup, et cetera. From a traffic perspective, about half of the traffic to Sheplers is paid traffic. So – and we have a very algorithmic view of how we go out and drive top of funnel traffic to our sites, which is we hold ourselves to a profitable return on ad spend metric. So once we lock in that return on ad spend, if traffic is down while we could spend more and improve traffic, it would be EBIT eroding. So we just don’t do it. I mean, we behave – we really look at the bottom line contribution and if the next customer is going to be an unprofitable purchase, we won’t go after them.

So we are certainly looking to try to find ways to improve that business. I think the other dimension, of course, is bootbarn.com has 360 plus billboards around the country. We’re – we think that business will grow over time. There are other players that play in the e-commerce business that are always taking share, whether they’re new entrants or vendors, et cetera. But when we look at the full portfolio of the company with while we’re an omnichannel business, we clearly prioritize the 90% of the sales that come through the stores. And that strategy has worked for us and as we start to now see e-commerce traffic more difficult to get for us and for others. Yes, I think when I look at the strategy over the last several years, while somewhat unconventional is starting to pay off for us that people are now coming back to stores, digital native brands starting to open stores, and we’ve got a five-year head start on all of them.

Jason Haas: That’s great, thank you. And then as a follow-up, you mentioned concerts in response to an earlier comment on some of the volatility. We’re continuing to get questions about this Taylor Swift’s tour. I don’t know if that’s what you’re referring to or other ones, but yes, maybe you could help clarify that. Thank you.

Jim Conroy: Sure. While she is an amazing performer, we actually don’t see massive swings in our business from Taylor Swift. The – for the sake of everybody out there who will now freak out when one of these artists comes to town or leaves town. The names that drive our business for the most part are George Strait, Garth Brooks, Morgan Wallen, sort of the more traditional western artists. And so Morgan Wallen was in Phoenix a few weeks ago, we saw the Phoenix business spike tremendously. We’re cycling a Garth Brooks concert in the last year period in Houston, I think this upcoming week. So what we can look at that volatility week-to-week and try to normalize it for ourselves over the period of months and certainly over the year. And we’ve called this out in the past, the overall concert events business is a low single digit piece of our business. It just – in a quarter or in a month or in a market, if you shrink the denominator enough, it becomes impactful.

Jason Haas: Got it. That’s helpful. Thank you.

Jim Conroy: Of course.

Operator: Our next question is from Jonathan Komp with Baird. Please proceed.

Jonathan Komp: Yes. Hi, good afternoon, Jim. I want to ask, when you look back at March and April, just what do you make of the comp softness that you saw and then the recovery from those lows. And could you just share a little bit more, I believe your full year guidance was based on those volumes back then, and it sounds like you haven’t changed your second half guidance. So just how should we think about that second half and how you’ve contemplated it and kind of the degree of conservatism, if you will?

Jim Conroy: Yes. So starting with the question around what we’re seeing for the guidance for the balance of the year. Those – from a pure comp perspective, those months were our softer months of the year and we’ve got a slide in the deck on Page 10 that kind of goes through those store comps by month. And so as we’ve looked at the back half of the year in the more recent business, there is probably a little bit of conservatism embedded in the sales trends for the back half of the year. But again, given the volatility that we’ve seen over the last few months, and again, it’s kind of depicted there on Slide 10, leaving the back half of the year where it is, at least for right now made a lot of sense. And again, we did take different cuts as I mentioned earlier, looking at the most recent 13 weeks and the most recent 26 weeks and the most recent four weeks, and at least getting through Q2, leaving that guidance where it was made some sense and again, the back half of the year, probably a little bit of conservatism in there, but leaving it where it was it seemed like a good approach.

Jonathan Komp: And just to follow-up, did you have any sort of diagnostic looking back at March and April, maybe what happened and more insight on what changed and turned pretty quickly there?

Jim Conroy: No. I don’t know that we have any one thing that we can point to. I know there was a lot of noise in the market around whether there were tax refunds or weather or heavy rain or coming out of heavy rain or just going up against the prior years where we had a lot of noise around the onset of COVID and then omicron and tax stimulus and child tax credits and volatility back there. So maybe there’s something in the two-year or three-year or four-year ago comp that was creating a little bit of noise. Particularly is March and April is where we saw that in the prior years.

Jonathan Komp: That makes sense. And then Jim, if I can follow-up on SG&A, it looks like this year obviously you’ve maintained a healthy pace of investment in initiatives plus cost to support the growing store base. As we look forward on SG&A, how should we think about the growth rate and the level of comps and really timeline to get back to showing leverage on SG&A overall?

Jim Watkins: Yes. I think it is a great question. We’ve talked about leverage points on the last call around SG&A, being around a 2.5% comp. And so again, we’ll have to get through this year and look into fiscal 2025 and what our sales guidance is. But if we’ve returned a positive comp growth, then to the tune of 2%, 2.5%, then I think that’s something where we can get some leverage. We have seen some pressure over the last several years just an wage rate and some of the inflationary costs around supplies and insurance and utilities and that sort of thing. And so also as an inflationary pressures subside, that’s something that would help around the SG&A line.

Jonathan Komp: Perfect. That’s really helpful. Best of luck. Thanks.

Jim Watkins: Thanks, Jon.

Jim Conroy: Thanks, Jon.

Operator: Our next question is from Dylan Carden with William Blair. Please proceed.

Dylan Carden: Thank you. Just curious the new distribution capacity that you’ve added for private label out of Kansas City, what level of business can that support even sort of broadly and how you’re kind of thinking of that business? It’s still growing sort of higher levels and I think we’d even thought a couple years ago.

Jim Conroy: Yes, sure. Well, absolutely it has been – the way we have modeled it is – it should take care of our needs. If we stay on a 15% store growth trajectory and 300 basis points of exclusive brand penetration increase each year. We probably have about six or seven more years of capacity before we’d have to add an additional facility, which would likely be on the east coast.

Dylan Carden: Got you. And the online guidance, I’m just trying to understand it, and you’ve kind of been asked a couple times here about sort of the level of conservatism. But I guess, part of that business is also related to what you’re seeing in the brand channel, the own brand channel or your sort of partner brand channel. Can you help us understand the inflection? I get that it’s easier comparisons, but not necessarily on a stack basis. Does part of it have to do with sort of the behavior some of your partners, and I guess maybe what are you seeing there as you look to the back half?

Jim Conroy: Sure. I think there are a couple – if you’re talking about our vendor partners, yes. I think there are vendors that in certain instances are encroaching on our digital business. They are of course seeking out the higher margins that they can get from going direct to consumer. But that’s kind of always been in our DNA, right, at least for the last few years. I’m not sure there’s been a step up maybe other than perhaps an increase in their digital marketing spend. I think – so I think there is probably some competitive pressure there. I also – I have just a gut feel when you think about just the channel split. It does – and there’s other examples of this, where the store’s business for some retailers is starting to come back where e-commerce is under pressure.

And this morning Steve Madden reported a negative – the decline in their direct to consumer, e-commerce business, which is – they’re a great company and a great brand and theoretically could be getting ongoing growth on e-commerce. So I can’t really put a finger on it, specifically, but it could be some competitive pressure. It could be the [indiscernible] against, it could be the fact that we won’t chase the business with more ad spend, because it’s just EBIT dilutive for us. But we’ll – we’re going to continue to try to improve the business sort of operationally, change the merchandising on the site as many different ways as we can and look for other novel ways to grow either traffic or conversion.

Jim Watkins: And Dylan, just as far as the guidance goes similar to what we talked about with the stores, we did look at the weekly sales volume of the e-commerce sites and, and that business and how that builds throughout the year, week over week and month over month. And so as we updated the guide for the rest of this quarter, we were looking at those weekly sales volumes in the build there. And so – and its relation as a percentage of sales on the year and how it’s seasonally impacted. And so that gives us the confidence to put that e-commerce guide there and to leave the back half of the year where we had it.

Dylan Carden: And that, again, the back half is really just lapping the promotional activity from the brand partners as they sort of reflush their own inventory balances, right?

Jim Conroy: Yes. And there’s a little bit of that in Q2. Yes. Again, if you look at the chart on Page 14, which it sounds like you’re looking at, you’ll see some of that as we get into September at the end of this quarter. And that’s where we talked about end of Q2 or early Q3 that business returning to positive.

Dylan Carden: Awesome. Thanks a lot guys.

Jim Conroy: Thanks, Dylan.

Jim Watkins: Thanks, Dylan.

Operator: Our next question is from Janine Stichter with BTIG. Please proceed.

Janine Stichter: Hi, everyone. Congrats on momentum. Wanted to ask a bit about the private label business. It’s growing really nicely. It sounds like better than you expected. And maybe elaborate a bit more on what’s working there. And then it looks like we’ll be at close to 40% penetration by the end of the year, I think 38%. So we’d love some updated thoughts on what the ceiling is for that business. How big could it ultimately become? Thanks.

Jim Conroy: Sure. We’ve seen I think broad-based success there, our biggest brands Cody James and Shyanne continue to gain ground. Cody James is now the biggest brand in the company, which is remarkable for exclusive brands – for one of our exclusive brands that doesn’t compete in every single category. It’s only a men’s brand. We’ve seen some really terrific growth from idle wind. That brand only started five years ago, and that partnership continues to be incredibly strong. And that business is just growing very, very solidly. And then our new brands, right? We’ve had some new brands just come out of the gate extremely quickly. Others maybe a little slower, but we haven’t had any new brand that has just been a complete dog.

And that’s all sort of added business and adding to our penetration In terms of our top side target, we will always be a house of brands. We know that there – that our customer is going to want to always find certainly the big iconic national brands in our space. They want to be able to find those in our store. But I don’t see any reason why we can’t continue to grow three points a year for the next five years or so, and we’ll get to 50% or 55% over time. It’s just what we’ve learned, I think is the consumer trusts us as the authoritative source in the industry. So what we put on the shelf, how we assort the store, we’ve built the credibility that, we’re the curator of the assortment and as a customer comes in, what we believe in and what we’ve bought and put on the shelf, they’re going to gravitate towards.

It also – as you well know, is provides their very attractive margin profile, where third party brands typically can’t compete. But we have had instances though where third-party brands have stepped up and improved their IMU and we’ve sort of really invested in their product and their assortment and they’ve gotten some really, really nice outsized growth. So it’s – to some degree it’ll depend on the reactions from the vendor partners as to how they want to partner with us. But regardless for the big brands out there, they’ll always have a home in our store and in our hearts. Thanks, Jim. Jim putting his hand over his heart.

Janine Stichter: No, that’s helpful. And I guess, I would be curious to know if you had any perspective or maybe survey work you’ve done just on how your consumers view your exclusive brands. Do they view them as national brands or are they aware of their Boot Barn brands?

Jim Conroy: It’s a great question. It’s a mixed bag. We track – this isn’t specifically answering your question, because I don’t think we’ve done that research head on. It’s a good suggestion, perhaps we should. But we do track social media and Reddit posts for all of our brands and because we’re trying to get unfettered customer feedback and if you were to pour through that, you would see that sometimes they’re complaining, sometimes they’re quite happy and sometimes they know it’s a Boot Barn brand and sometimes they have no idea. So I think – I do think it’s a mixed bag. I think the bigger more legacy brands Cody James and Cheyenne have built more independence in their name and aren’t as anchored to the store brand.

I would probably put Idyllwind in that same camp. I mean, Miranda Lambert is a great advocate for us and for the Idyllwind brand. And then the others, they probably have some indication that they’re “store brands”. And one more sentence and then I’ll pause. We do position them just as regular brands, right? They’re priced in line with national brands. They’re – every bit is good quality. They’re – we try not to promote them in any higher frequency than other brands. So they feel, they kind of look and feel and act like a national brand.

Janine Stichter: Perfect. Thanks so much.

Jim Conroy: Thank you.

Operator: Our next question is from Corey Tarlowe with Jefferies. Please proceed.

Corey Tarlowe: Great. Thanks for taking my question. I’m curious how you’re thinking about pricing throughout the rest of this year. Obviously inflation’s receded some and it felt like for quite some time, inventory was a really significant topic of conversation. But now it seems like inventories are well in control. So could you maybe also talk a little bit about your expectation for inventory throughout the rest of the year?

Jim Conroy: Sure. On the pricing piece, what – we did have a reset over the last 24 months where there was some inflationary pressure across the entire supply chain, national brands, our brands, inbound freight, et cetera. And while we tried to hold our pricing as much as we could, inevitably we had to push some of that through to retail pricing. And if you do all the arithmetic on our transactions in our comp, you could – you’d recognize that we’ve – and we’ve called this out that our AORs [ph] have gone up. I think where we stand now, there’s no obvious places where we’ll be raising retails. We have had a couple of vendors lower their wholesale cost us and we’ve lowered the retail price in the store maintaining that same markup percent.

And candidly, the strategy has worked for those – they’ve seen a higher velocity at a slightly lower price point. So I think we have somewhat reached a more stable equilibrium where there’s not going to be a gyration in pricing up or down in a meaningful way.

Jim Watkins: Yes. We’re back to where we’re seeing just the regular price increases that we would [indiscernible] which is nice. And then Corey as far as your question around inventory, where we see that going, we’re really pleased to see that number come down just a little bit $23 million down from where we were three months ago. Despite the addition of the new stores during the quarter and the continued growth and exclusive brands. So the teams doing a really nice job of managing through the inventory and making sure we’ve got the right inventory to support the sales level. And so while we’re not guiding inventory through the balance of the year, we’re happy with where that is and how that’s being managed. And I think a lot of that too is with the supply chain being more fixed than it was, the last couple of years we’re able to get the product more in line with when we want it and where we want it.

Corey Tarlowe: Great. Thank you very much. And then just another question on the men’s business, it sounds like you have some pretty decent momentum there. Are there any specific call outs within the men’s business that you would say are really driving momentum there?

Jim Conroy: It’s been pretty broad based. We’ve seen maybe outsized growth in within the boots category in exotic skin boots, which is the notable piece of that is that’s our higher price points and frankly the highest price points in the store. So with a lot of discussion around our people trading down, et cetera, we – that hasn’t played out in within men’s boots, within men’s apparel, the stronger at the highest level, we split men’s apparel into denim and non-denim, and the denim business has been better than the non-denim business. I think those are the kind of the two big call outs.

Corey Tarlowe: Great. Very helpful. Thank you very much and best of luck.

Jim Conroy: Thank you.

Jim Watkins: Thanks.

Operator: Our next question is from Jay Sole with UBS. Please proceed.

Jay Sole: Great. Thank you so much. I just wanted to follow-up on some of the commentary on the new stores. Is it possible to talk about the new – some of the new stores and some of the markets where people don’t traditionally think of Boot Barn from like a – from the investor side like Manchester, Connecticut as a store that opened recently. Can you talk about a store like that? Not to get too specific compared to like Texas, Southwest California, where traditionally most people think the stores work. Can you just talk about how the stores are doing in some of the newer markets?

Jim Conroy: Sure. Sure. The quick answer is, they’re doing quite well. When we open a new store in Texas or California, particularly if there’s not a store nearby, those two states notably stand out. Those store – those two states are our higher, our highest average unit volumes for a retail store. But if you exclude those two and you say, well, let’s just look at the rest of the country, a new store in Connecticut or in outside of Philadelphia or in Niagara Falls or outside of Albany, looks a lot like a new store in most of the rest of the country that they sell western oriented product in roughly the same proportion. They sell men’s cowboy boots and ladies cowboy boots and men’s cowboy hats. We open them with our traditional brand footprint.

We don’t contort the look and feel of the store or the product assortment. And strategically what that does for us is it emboldens us to just continue to roll out the concept because we haven’t had to make significant changes to the model. And I don’t want to minimize all the hard work that happens at the product by product level by the merchants and the merchandise planners and the allocation team because we do tweak a little bit, but most of the big brands are in all the stores, the major categories in terms of percent to total are roughly in line with the rest of the country. And the tweaks that we’re making are sort of below the skin a little bit.

Jay Sole: Got it. Jim, that’s interesting. If I can just follow-up on one more, just because you talked a lot about the success of brands like Cody James and Cheyenne and Idyllwind, and then the question is, how much – when you see the success, do you think bigger in terms of like turning these brands into more than just Boot Barn brands, like maybe creating their own websites, creating like Pinnacle product, maybe trying to place them in super premium boutiques or things like that and really building them out in their own right to sort of enhance what they are and then by in turn enhance what Boot Barn is doing.

Jim Conroy: It’s an ongoing battle and perhaps one that we will kind of pull on that string a bit more in the future. We have done some things, right? We now have rodeo athletes that wear our exclusive brands up and – not really an up and coming, a pretty established saddle bronc rider and Rocker Steiner wears RANK 45, one of our newer brands. So we have done a bit of that. And we do treat them as at least quasi brands, but perhaps over time, we will put them even further on a pedestal and really invest in them more to build that brand equity further than just the positioning and the inventory in the stores.

Jay Sole: Got it. Okay. Thank you so much.

Jim Conroy: Thank you.

Operator: Our next question is from Sam Poser with Williams Trading. Please proceed.

Sam Poser: Well, thank you for taking my questions. I have a couple here. One as you grow the exclusive brand business and you’ve mentioned, you’re committed to the – to having national brands as well. How is your assortment changing? I mean, sort of what gets squeezed out because you can’t get everything into the store all the time. So as that penetration grows, how do you manage sort of what falls to the side?

Jim Conroy: Sure. Great question. Typically what happens is the third or fourth player in a particular product category gets either minimized or eliminated and the exclusive brand takes that spy. And then because you’re a merchant at heart, Sam, the exclusive brands then earn their keep, right? We do look at sales to stock ratios for exclusive brands versus third-party brands, they have to turn roughly in line or in line with the rest of the store or we’ll make some changes. But if you think of the bigger most iconic names in our arena, whether that’s work brands or western brands, we tend to not squeeze them out. They’re – they – we want people to – we want customers to come to the store because we have the brands they expect us to have. But the smaller brands, the ones that do less marketing, the ones that are less well known, tend to seed market share to the exclusive brands.

Sam Poser: Thank you. And then secondly, on the talk about e-commerce, rather than talk about the revenue, what percent of your sales are – like does the consumer touch your mobile app, touch your website and then maybe comes to the store? I mean, is your digital presence a traffic driver or doing more than just – more than what the comps than the sales trend may actually show?

Jim Conroy: Yes, absolutely. Absolutely, of course, and the digital team here does an awful lot to help drive store traffic. So which is why we built the app, which is why we continue to invest in mobile. And that, that that omni-channel view, even if they’re just buying in the stores and not online, I certainly believe that they many shopping journeys start digitally and particularly on a handheld.

Sam Poser: And do you have – is there a measurement you have of that or are you polling customers? How did you hear about us when they come in or sign up for the – sign up for your membership and so on?

Jim Conroy: I don’t have a great answer for that. Perhaps that’s something we’ll add to our next round of customer research though.

Sam Poser: And then I mean, this was asked at the beginning of the call, I’m going to ask it one more time or try to follow-up, your – you came in significantly better than what you anticipated in the prior guidance. And so one, can you at – is there anything you guys did that that, that you could attribute to making that happen? And secondly, within there appears to me to be a change in the way you are guiding, you’re doing a lot more – versus let’s say a year or two ago, you’re guiding the upcoming quarters and the balance of the year. Could – if there it has been a change in the way you approach giving guidance, can you give us some color on that, please?

Jim Watkins: Yes, I’ll start with that second question, Sam. I think the way we’re providing guidance, I think we’re explaining it maybe a little bit more around the weekly sales trend that we’re seeing and how that plays out for the rest of the year. Historically, again, going back to pre-COVID because we did stop guiding for a couple years during COVID and after. The weekly sales trend or the monthly sales trend and what percent of the year that that made up was, we use that as methodology. And what’s different to now is that lined up more with the prior year comp looking at the one year comp and what we’re up against and whether it’s easier comps or harder comps, our two-year stack and I think with some of the variability that we saw coming out of COVID and is the looking at a one year or a two-year stack or a two-year comp to provide guidance fell apart a little bit.

And we saw that on display last year with our guidance. We’ve leaned more into the more scientific approach of looking at the build during the year and how that compares to historical penetrations each month as a percent of the year or whatever it is.

Sam Poser: Thank you.

Jim Conroy: Thanks, Sam.

Operator: Our next question is from Jeremy Hamblin with Craig-Hallum Capital Group. Please proceed.

Jeremy Hamblin: Thanks, and congrats on the strong results. I wanted to ask another question on the exclusive brands and just as we flash back to five years ago, your – when your penetration was a little less than 20% and now it’s going to be roughly double that. You expected I think at the time kind of 200 basis points to 300 basis points of exclusive brand penetration. But you’ve gotten roughly double that really with the exception of the kind of COVID 2020 calendar year. I wanted to just as we’ve gone from like a 10,000 square foot store to 12,000 square foot store, how much of the change is really to the dedicated floor space to exclusives. So is that kind of been in lockstep or we really seeing just velocities of exclusives really outpacing a lot of these other national brands?

Jim Conroy: It’s a great question and a very good hypothesis. I would tell you that the increase in the size of the store and the increase in the penetration of exclusive brands while correlated, I don’t think it’s causal. They – we got to those two decisions through completely different logic flows, if you will. On the exclusive brand penetration, one of the things that happened coming out of COVID was well, widespread spread news around how difficult supply chains were. Our third-party vendors honestly did everything that they could to try to help get their product to us, but our business was taking off that year after COVID in a pretty meaningful way. And even the best vendors that we have despite their best efforts were shipping us short.

And the one supply chain that we got 100% of what we ordered and could control it even better was our exclusive brands. So it set up an experiment that we didn’t think we were doing, which was a sales takeoff and we have to put more exclusive brand product into a store. What will happen? And the answer came back a resounding, well, consumers will respond to those brands in most if not all cases and in many cases. And I think that helped build our confidence. So we came out of a very difficult time, a terrible pandemic, a challenging supply chain, but we did learn some really valuable lessons that the Boot Barn brand may be first. And then our associate brands have more strength and brand equity and consumer awareness and recognition than we had originally thought.

And then we’ve upgraded the exclusive brand team. We’ve added some great new designers there. We have a relatively new leader there has been there for a couple of years now. I think we work really well between the buying organization and the design organization and throw stores in there. So I think it’s been an ongoing initiative to get that part of the business going. In terms of the store size, the store size increased just because sales started to increase and we started to realize that it may have been a chicken and an egg as we built bigger stores, we had more sales or had we – as we had more sales, we needed a bigger store. So we just made a decision one day to increase the size of the store and also increase the opening inventory levels of a store.

And we were actually trying to track what store was the first to do it. We think it was the Erie, Pennsylvania store, but it was around that time, about 2.5 years ago where we decided to play more offense with the new store, larger store, more inventory, and we started to see the average volumes of new store and new stores come in higher. So we just continued with that strategy, but it was separate and distinct really from the investment in inventory and our exclusive brands.

Jeremy Hamblin: Thanks. That’s a great point, I guess, of why you’ve been able to sustain these higher volumes as well. So I – the other question was just really quick here from a kind of markdown competitor promotion standpoint. Any noticeable changes that you’ve seen within the industry?

Jim Conroy: Not really. I mean, some on the margin, some of our competitors are running a typical promotion that they’ve run in the past, but they’re running it one week longer or starting it at a different time. And as you well know though, most of the people that we compete against on a store by store basis tend to have one store. And – but we don’t really track what they do and we wouldn’t change anything that we are doing based on what the market or the industry is doing. We have our plan. We’re going to kind of stick to our plan and if companies raise prices, lower prices become more promotional, it just – it’s not going to impact us.

Jeremy Hamblin: Great. Thanks for the color. Best wishes.

Jim Conroy: Thank you.

Jim Watkins: Thanks.

Operator: Our next question is from Mitch Kummetz with Seaport Research. Please proceed.

Mitch Kummetz: Yes. Thanks for taking my questions. Drill down a little bit more on ladies boots and apparel. So last quarter, you mentioned that ladies boots and apparel were down 11% and down 13% respectively, and that was against a 80 – more than an 80% two-year stack. I believe, Jim, you said that ladies boots and apparel improved like 7 points this quarter from last. So can you just kind of maybe give us those comps for the quarter and can you say what the two-year compare was?

Jim Conroy: Sure. The – I – the 7 point sequential improvement was boots and not apparel. The apparel business between Q4 and Q1 was roughly in line. The Q1 comps last year for those businesses were also quite strong. And this is one of those crazy things where you have to start looking at year after year after year, but both boots and apparel last year Q1 were 20%-plus comps. And in the prior year, Q1 were both over 100% comps. And of course, they’re recycling the April and May of 2020, which was a COVID thing. So you can drive yourself mad, but they – we always want all our businesses to grow, but – and I’ve said this on prior calls, I think all of the merchants in the business are doing a really nice job of maximizing their business.

Some of them are just up against monster numbers and others are up against very strong numbers. So we certainly love to see the businesses get sequentially better. We love to see the fact that ladies boots as an example in July was positive and that was a great thing to see. But I – what we – more than anything, what’s nice to see is sort of this steady progression of a strengthening piece of that part of the business and not giving it all back, right? That’s been, as you know, speaking with investors, that’s been sort of a potential narrative out there is well, the average time of store has gone up so much, or the ladies business has doubled and it’s all going to be given back and it’s with each passing quarter that eventuality seems more remote.

Mitch Kummetz: And then I know that looking at the multi-year gets tricky just depending on all the noise over the last few years, but maybe just thinking about it on a year-over-year basis is that – when did the – when does the ladies business get easier? Is it starting in 2Q or is it 3Q?

Jim Conroy: In 3Q is where we start to cycle easier.

Mitch Kummetz: The negative?

Jim Conroy: Yeah.

Mitch Kummetz: All right. Thanks. Good luck.

Jim Conroy: Thanks, Mitch.

Jim Watkins: Thanks.

Operator: And our final question is from John Lawrence with the Benchmark Company. Please proceed.

John Lawrence: Hi guys, congrats.

Jim Conroy: Thank you, John.

Jim Watkins: Thanks, John.

John Lawrence: Yes. Jim Conroy, would you comment just a little bit, when you look at the store fleet and some of the older stores obviously neighborhoods change, traffic patterns change a little bit. Are there any of those older stores that either slated for productivity improvements, playing expansion to get a little, and then if you do that, do you get a little higher return on some of those stores if that construction or expansion takes place?

Jim Conroy: Sure. Absolutely. Well, we have an ongoing program of really three different buckets. One is in some cases just a full on relocation. So moving the store across town, making it bigger, putting it in the latest and growing part of a particular city or taking a store that’s doing reasonably well, we still like the location and doing a full on remodel rebrand. And typically, when we do that, we see a nice pickup in sales or maybe said differently, we tend to not do a full remodel unless we expect a nice pickup in sales. And then we have kind of a third tranche. We are, if you look at the brand aesthetic for Boot Barn over the last five or so years, we’ve made a strategic decision to make the brand more aspirational, to elevate, the creative, to change the way we go-to-market from a marketing perspective.

I mean, our creative director basically completely changed the brand trajectory and got away from price and promotion and went to sort of Americana, western legacy and heritage view of Boot Barn. And the stores need to kind of match that. So the new store design certainly does, but we did have some 20, 30-year old stores that needed to be upgraded. So we will probably touch 25 stores this year and pull out old carpeting and change lighting and change some fixtures. They won’t necessarily get a full on remodel, but they’ll get some capital investment perhaps we’ll see a return on that in some cases we know we’re doing it just to get the store at brand, right?

John Lawrence: And last thing for me is, when you look at that exclusive brand pipeline going forward, I mean, you’ve done so much there over the last five years or six years. I that pipeline for new products still adjacencies and different categories still just as strong?

Jim Conroy: Yes. I think at some point we’ll probably see growth in exclusive brands, but maybe not 5 or 6 points of growth. Maybe we’ll come back to 250 basis points or 300 basis points of penetration growth in a year. You called it out. Well, typically what happens is the brand launches and then sort of spreads within a store to include some new categories. So what we found new market in kind of western styled sports jackets for men that have a Cody James brand in it now and that was wasn’t a business a few years ago. So they’ll find different subcategories or we’ll take a brand and extend it into the sizes or extended sizes or wide sizes in boots and they’ll get a little bit more penetration. So it’s not always the launch of a brand – new brand, sometimes it’s just expanding the working ones, finding out what’s working and doubling down and maybe cutting the losses on some of the stuff that isn’t working as well.

John Lawrence: Great. Thanks. Thanks for squeezing me in. Good luck.

Jim Conroy: No problem. Thank you.

Jim Watkins: Thanks, John.

Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to Jim Conroy for closing comments.

Jim Conroy: Well, thank you, everyone for joining the call today, and we look forward to speaking with you on our second quarter earnings call. Take care.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.