Clothing and footwear retailer Boot Barn (NYSE:BOOT) reported Q1 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 4.88% year on year to $383.7 million. Guidance for next quarter's revenue was also optimistic $375.5 million at the midpoint, 2.76% above analysts' estimates. Boot Barn made a GAAP profit of $34.3 million, down from its profit of $39.3 million in the same quarter last year.

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Jim Conroy, President and Chief Executive Officer, commented “I am quite pleased with the results of the quarter as we exceeded our quarterly guidance across nearly every measure. Total revenue continued to grow, driven by the performance of new stores. From a same store sales growth perspective, we saw a modest 2.9% decline despite cycling outsized comp sales growth in the first quarter for each of the past two years. Once again, we were able to expand our merchandise margin through a significant increase in the penetration of our margin enhancing exclusive brands which reached 38% of sales for the quarter. Earnings also surpassed our expectations, driven by a steadily improving retail store same store sales trend which turned positive in June and remained positive in July. While uncertainty in the macro environment persists, we are pleased with the positive momentum we have seen in the business.”

With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.

Footwear sales–like their apparel counterparts–are driven by seasons, trends, and innovation more so than absolute need and similarly face the bigger-picture secular trend of e-commerce penetration. Footwear plays a part in societal belonging, personal expression, and occasion, and retailers selling shoes recognize this. They therefore aim to balance selection, competitive prices, and the latest trends to attract consumers. Unlike their apparel counterparts, footwear retailers most sell popular third-party brands (as opposed to their own exclusive brands), which could mean less exclusivity of product but more nimbleness to pivot to what’s hot.

Sales Growth

Boot Barn is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.

As you can see below, the company's annualized revenue growth rate of 20.3% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) has been exceptional as it's added more brick-and-mortar locations and increased sales at existing, established stores.

This quarter, Boot Barn reported decent year-on-year revenue growth of 4.88% and its revenue of $383.7 million topped Wall Street's expectations by 5.79%. Next quarter's guidance suggests that Boot Barn is expecting revenue to grow 6.81% year on year to $375.5 million, slowing from the 12.4% year-on-year increase it recorded in the same quarter last year.

Looking ahead, the Wall Street analysts covering the company expect revenue to remain relatively flat over the next 12 months.

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Number of Stores

A retailer's store count plays a big influence on how much revenue it can generate.

When a retailer like Boot Barn is opening new stores, it usually means that demand is greater than supply and it's investing for growth. Boot Barn's store count increased by 50 locations, or by 16.1%, over the last 12 months to 361 total retail locations in the most recently reported quarter.

Taking a step back, the company has opened new stores rapidly over the last eight quarters, averaging 12.2% annual growth in its physical footprint. This store growth is much higher than other retailers. With a growing store base and demand, revenue growth can come from multiple vectors: sales from new stores, sales from e-commerce, or increased foot traffic and higher sales per customer at existing stores.

Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.

Boot Barn's demand has outpaced the broader consumer retail sector over the last eight quarters. On average, the company has grown its same-store sales by a robust 18.2% year on year. This performance gives it the confidence to rapidly expand its store count. When a company has strong demand, more locations should help it reach more customers seeking its products, boosting total revenue growth.

In the latest quarter, Boot Barn's same-store sales fell 2.9% year on year. This decline was a reversal from the 10% year-on-year increase it had posted 12 months ago. A one quarter hiccup isn't material for the long-term prospects of a business, but we'll keep a close eye on the company to see if any unfavorable trends emerge.

Key Takeaways from Boot Barn's Q1 Results

Sporting a market capitalization of $2.77 billion, Boot Barn is among smaller companies, but its more than $17.1 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

We were impressed by how significantly Boot Barn blew past analysts' EPS expectations this quarter. We were also excited that its revenue growth outperformed Wall Street's expectations. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is up 5.67% after reporting and currently trades at $95.03 per share.

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The author has no position in any of the stocks mentioned in this report.