What happened
Shares of Boot Barn Holdings(NYSE: BOOT) were up 12% as of noon ET on Thursday after the company delivered better-than-expected earnings results for the fiscal first quarter of 2024.
Although same-store sales were down 2.9% year over year, Boot Barn reported better total revenue and earnings than analysts were expecting.
So what
Many retailers are still struggling with weak consumer demand, but with stock prices already discounting weak sales trends, investors are just looking for any signs of a recovery. On that note, management said that same-store sales trends turned positive in June and continued to grow in July.
Overall, net sales were up 4.9% year over year, weighed down by a drop in e-commerce sales of 10.8%. But sales and profitability were better than management's guidance. Adjusted earnings of $1.11 per share were down from $1.26 in the year-ago quarter, but well ahead of the consensus analyst estimate calling for $0.84.
Earnings were boosted by improving merchandise margins driven by higher penetration of exclusive brands. These brands accounted for 38% of sales in the quarter.
Now what
The company should be in a good position to return to growth. It is planning to open another 52 stores for fiscal 2024 (which ends in March), with total sales up between 3.5% to 5.5% over fiscal 2023.
The stock is not cheap, trading at a forward price-to-earnings ratio of 21, so the company will have to show solid earnings growth from here. However, Boot Barn has opportunities to further boost margins by increasing penetration of exclusive brands and improving the profitability in e-commerce sales.
This company has a history of growing earnings faster than revenue through higher margins, so investors should expect that to continue over the long term.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Boot Barn. The Motley Fool has a disclosure policy.
