Boot Barn (BOOT) Q2 2027 Earnings Call Transcript

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DATE

Oct. 28, 2026

CALL PARTICIPANTS

• Senior Vice President of Investor Relations and Finance - Mark Dedovesh
• Chief Executive Officer - John Hazen
• Chief Financial Officer - Jim Watkins

TAKEAWAYS

• Net Sales -- $581.8 million, growing 15.1% year over year due to new store expansion and positive same store sales performance.
• Consolidated Same Store Sales -- 1.4% increase, driven by a 1.0% rise in retail store sales and 5.2% growth in e-commerce.
• Earnings per Diluted Share -- $1.73, an increase of 26.3% from $1.37 in the prior-year period, which includes a $0.05 benefit from tariff refunds.
• Merchandise Margin -- 37.2%, reflecting a 190 basis-point expansion driven by lower freight expenses and 20 basis points of product margin improvement.
• New Store Openings -- 19 locations opened during the quarter, bringing the total store count to 584 locations across 49 states.
• Fiscal 2027 Revenue Guidance -- $2.565 billion to $2.593 billion, representing projected annual growth of 14% to 15%.
• Fiscal 2027 EPS Guidance -- $8.72 to $9.00, including an estimated $0.45 benefit from tariff refunds.
• Inventory -- $975.3 million, a 14% year-over-year increase to support new store growth and the expansion of exclusive brands.
• Share Repurchases -- $35 million deployed to repurchase 240,937 shares during the quarter, with a new $400 million authorization recently approved.
• New Store Opening Guidance -- 75 to 80 stores for the full fiscal year, representing an increase from the previous target of 70 stores.
• Retail Transaction Volume -- 1.5% decrease in transactions during the second quarter, which was partially offset by a 2.5% increase in average basket size.
• Average Unit Retail -- 2% increase in retail stores, contributing to overall same store sales growth despite a decline in traffic.
• Boot Barn Workforce Sales -- $100 million in sales during the previous fiscal year, with management projecting future growth between 40% and 50% following the platform relaunch.
• Holiday Marketing Impressions -- 1 billion projected television impressions for the holiday season, compared to 175 million impressions in the prior year.
• Fiscal 2027 Capital Expenditure Guidance -- $135 million to $140 million, focused on new store expansion and infrastructure development.
• Third Quarter Same Store Sales Guidance -- -1.0% to 1.0% growth, reflecting recent sales moderation observed during the first four weeks of October.
• New Store Sales Performance -- $3.4 million average first-year sales for the most recent cohort of 126 stores, exceeding original projections by $200,000.
• Buying and Occupancy Costs -- 110 basis points of deleverage, primarily due to the rapid addition of new stores to the portfolio.
• Non-Work Exclusive Brand Penetration -- 80 basis-point increase across western apparel and denim categories, reflecting healthy demand for in-house brands.
• E-commerce Revenue Mix -- 9% of total company sales, with growth moderated by a 650 basis-point headwind from soft ladies' western boot sales.
• Work Category Performance -- Sales trends improved for the sixth consecutive quarter, driven by strong connection with blue-collar customers.
• Cash and Equivalents -- $97.4 million as of the end of the second quarter, providing significant financial flexibility.
• Revolving Credit Facility -- $500 million remains completely undrawn, supporting the company's capital allocation strategy.
• Third Quarter Net Sales Guidance -- $785 million to $802 million, representing 11% to 14% growth over the prior-year period.
• Freight Expense Impact -- 130 basis-point benefit to merchandise margin during the quarter, as the company lapped elevated freight costs from the previous year.

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RISKS

• CEO Hazen stated, "While I am not satisfied with October's comp sales performance, we were lapping strong same store sales growth of 9% last year... while also navigating unseasonably warm weather across several key markets," noting specific headwinds in early third quarter traffic.
• Hazen noted that a recent customer survey identified pricing as a primary challenge, stating that for men's performance boots, "the biggest pressure point was price," indicating potential discretionary spending pressure.
• Hazen warned that e-commerce growth was hindered by segment-specific weakness, stating, "The moderation in ecommerce growth was largely driven by our ladies' western boot business... and created an approximately 650 basis point headwind to online comps."

SUMMARY

Boot Barn Holdings, Inc. (NYSE:BOOT) reported second quarter financial results featuring revenue growth of 15.1% and expanded merchandise margins. Management raised the full-year new store opening target to a range of 75 to 80 units following performance from recent openings that exceeded internal projections. The company is transitioning its regional marketing strategy to a nationwide television campaign while relaunching its business-to-business platform, Boot Barn Workforce, to capture larger scale construction and infrastructure projects. Management reported a moderation in October same store sales and updated its guidance to reflect current consumer traffic patterns and unseasonably warm weather affecting several key markets.

• The company is refreshing its ladies' western boot assortment after identifying a merchandising opportunity. CEO Hazen stated, "We are refreshing our assortment with a broader selection of styles and colors and have selectively promoted slower moving merchandise to make room for substantial new product arrivals."
• The new Boot Barn Workforce platform shifts from manual store-level processes to an integrated digital solution. Hazen noted, "We have transformed what was previously a largely manual process into a fully integrated platform featuring a sales dashboard, lead tracking, a portal for our customers' safety managers, digital vouchers, and a mobile app plan for the future."
• Management is investing in long-term logistics infrastructure to support a nationwide target of 1,200 stores. CFO Watkins stated, "we have approved plans to develop a second distribution center in Kansas City, which we expect to be operational in calendar 2028."
• Holiday marketing efforts will significantly expand brand exposure through a partnership with artist Riley Green. Hazen stated, "This year, we have expanded our reach by shifting from regional television to a nationwide campaign. We expect to generate approximately 1 billion television impressions during the holiday season."
• Store layouts are being adjusted to prioritize premium merchandise, including moving high-end denim to the front of stores to increase average unit retail.
• The company's store network is increasingly integrated with digital sales, as approximately 50% of online orders are currently fulfilled through physical store locations.

INDUSTRY GLOSSARY

• AUR: Average Unit Retail, representing the average price at which an item is sold.
• UPT: Units Per Transaction, the average number of items purchased in a single transaction.
• Exclusive Brands: Boot Barn's private label brands that are designed, sourced, and sold exclusively through its channels.
• Boot Barn Workforce: The company's business-to-business platform focused on safety and workwear sales to corporate customers.
• Same Store Sales: A retail metric comparing sales from locations open for at least 13 full fiscal months.
• Merchandise Margin: Gross profit margin that excludes the impact of buying, occupancy, and distribution center costs.

Full Conference Call Transcript

Operator: Good day, everyone. And welcome to the Boot Barn Holdings Incorporated Second Quarter 27 Earnings Conference Call. As a reminder, this call is being recorded. Now, I would like to turn the conference over to your host, Mr. Mark Dedovesh, Senior Vice President of Investor Relations and Finance. Please go ahead, sir.

Mark Dedovesh: Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's second quarter fiscal 27 earnings results. With me on today's call are John Hazen, chief executive officer and Jim Watkins, chief financial officer. A copy of today's press release along with a supplemental financial presentation is available in 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 to 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 during this call 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 second quarter fiscal 27 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, whether as a result of new information, future events or otherwise. I will now turn the call over to John Hazen. Boot Barn's chief executive officer. John.

John Hazen: Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our second quarter fiscal 27 results, provide an update on current business, and discuss the progress we have made across each of our 4 strategic initiatives. Following my remarks, Jim Watkins will review our financial performance in more detail, and then we will open the call for questions. I am pleased with our second quarter results. Highlighted by a 15% increase in revenue. Supported by continued new store expansion and positive same store sales growth. Consolidated same store sales increased 1.4% on top of 8.4% in the prior year period, while merchandise margin expanded 190 basis points.

Our top line performance combined with strong merchandise margin expansion, and disciplined expense management, drove a 26% increase in second quarter earnings per diluted share to $1.73 exceeding the high end of our guidance range by $0.08. At the midpoint of our fiscal year, revenue has increased 16% to date, and earnings per diluted share have increased 15% excluding the impact of tariff refunds. These results reflect the strength of the Boot Barn brand, the broad appeal of our merchandise assortment, and our ability to resonate with customers across multiple segments. I would now like to provide an update on current business. Through the first 4 weeks of our fiscal third quarter, consolidated same store sales were slightly positive.

While I am not satisfied with October's comp sales performance, we were lapping strong same store sales growth of 9% last year, including 7% in stores and 24% online. While also navigating unseasonably warm weather across several key markets. This year, looking ahead, we have several initiatives underway to drive traffic and improve sales trends during the third quarter, with fiscal December representing over half of the quarter's sales. These include a refresh of our ladies boot assortment, an expanded national marketing campaign to reach more customers in more markets, and the relaunch of our B2B offering, Boot Barn Workforce.

These initiatives combined with the continued strength of our work boot and apparel businesses and the performance of our new stores give us confidence in our outlook for the holiday season and the balance of the fiscal year. Now let me turn to our 4 strategic initiatives beginning with new store growth. During the second quarter, we opened 19 new stores bringing our total store count to 584 locations across 49 states. Year to date, we have opened 46 stores, and over past 18 months, we have added 126 new locations representing approximately 20% of our current store base.

Our new stores have consistently delivered strong results over the past several years, and we are particularly pleased with the performance of our most recent group of 126 stores. These locations are on track to generate approximately $3.4 million in first year sales on average or roughly $200 thousand above our original projections. This performance reflects the growing national recognition of the Boot Barn brand, our connection with the country western lifestyle and blue collar customers, and the breadth and depth of our merchandise assortment. Our new stores continue to perform well across both new and established markets, demonstrating our ability to expand our national footprint and increase total market sales.

Given the strength of our real estate pipeline, we are increasing our fiscal 27 new store opening plans from 70 stores to a range of 75 to 80 stores. While recent results demonstrate the opportunity to outperform our projections, we continue to underwrite new locations to approximately $3.2 million in first year sales consistent with our historical approach. With a long term opportunity to expand to 1.2 thousand locations nationwide, we remain confident in our ability to sustain new store growth for years to come. Moving to our second initiative, same store sales. Second quarter consolidated same store sales increased 1.4% including a 1% increase in brick and mortar comp sales.

Store comp growth was driven by a 2% increase in average unit retail, partially offset by a decline in transactions. From a merchandising perspective, we saw healthy demand across most of our major merchandise categories reflecting the broad appeal of our assortment across multiple customer segments. Our men's and ladies apparel business continued to perform well with denim remaining a standout category. Despite cycling high teen comps in the prior year period, denim continues to deliver positive comp sales, with our assortment remaining heavily weighted towards traditional bootcut styles. Our men's western boot comp sales were slightly negative in the second quarter as we cycled high single digit growth in the prior year period.

And our cowboy hat and ball cap businesses delivered strong growth. Our ladies' western boot business was a modest drag on second quarter comp sales as we lapped mid teen growth in the prior year period. While the category will continue to cycle high single digit growth in the third quarter, we are optimistic about the upcoming holiday season. We are refreshing our assortment with a broader selection of styles and colors and have selectively promoted slower moving merchandise to make room for substantial new product arrivals. We believe these changes will resonate with our customers and help improve sales trends while maintaining overall markdown levels below the prior year.

As part of our efforts to drive sales, we have made several changes to how we present merchandise in our stores. In denim, we have moved our premium assortment to the front of the store, provide a more elevated shopping experience, and create opportunities to increase average unit retail. while repositioning our value offerings on the denim wall towards the back of the store. We are taking a similar approach in cowboy hats, refreshing our visuals and signage, to make the category easier to shop. I have visited many stores recently, and the feedback from our teams has been extremely positive. We are also well prepared from an inventory perspective.

Building on improvements made last year, we have further refined how we flow merchandise to stores, with product arriving earlier and more consistently. Our in stock positions are strong, including ladies' boots, where we are introducing a substantial amount of new merchandise. A store operations perspective, we are preparing for the holiday season by adding seasonal associates and are focused on converting customer traffic into sales. Our strong customer satisfaction scores reflect the dedication of our store teams and their commitment to providing a great shopping experience. On the work side of the business, we continue to see exceptional momentum in work boots and work apparel with sales trends improving for the sixth consecutive quarter.

This performance reflects our strong connection with the hardworking blue-collar customer. During the second quarter, we began the relaunch of our B2B program, now branded Boot Barn Workforce. This initiative began over a year ago and represents a rebuild of our existing platform. Boot Barn workforce generated approximately $100 million in sales last fiscal year, and we see a meaningful opportunity to expand from this base. We have transformed what was previously a largely manual process into a fully integrated platform featuring a sales dashboard, lead tracking, a portal for our customers' safety managers, digital vouchers, and a mobile app plan for the future.

We have also expanded our national sales team to better serve existing customers and pursue new business opportunities. With significant investment underway in data centers, infrastructure, and other large scale construction projects across the country. We believe Boot Barn workforce is well positioned to attract new customers, expand our share of the workwear market. I would also like to recognize our IT and omnichannel teams for their exceptional work developing the Boot Barn workforce platform internally. Their dedication, creativity, and ability to deliver such a comprehensive platform with minimal capital investment are a testament to the talent we have across this organization.

From a marketing perspective, we are particularly excited about our holiday campaign, which celebrates family, tradition, and the special moments that bring people together during the Christmas season. This year, we have expanded our reach by shifting from regional television to a nationwide campaign. We expect to generate approximately 1 billion television impressions during the holiday season. Compared to 175 million last year, representing 6x the exposure. Our holiday TV and radio campaigns will feature the voice of Riley Green, a stagecoach, music festival headliner, and judge on NBC's The Voice. Building on our successful partnership over the past several years.

We are also pleased to announce that Boot Barn will once again serve as presenting sponsor of his concert tour in 2027, further strengthening our connection with country music fans across the nation. Now moving to our third initiative, omnichannel. During the second quarter, e commerce same store sales, which represented approximately 9% of total company sales, increased 5.2% on top of 14% growth in the prior year period. The moderation in ecommerce growth was largely driven by our ladies' western boot business, which represents nearly twice the sales mix online compared to our stores. And created an approximately 650 basis point headwind to online comps.

In the prior year period, online ladies' boot sales increased 25%, supported in part by deeper markdowns on clearance merchandise. This year, we have taken a more disciplined approach to promotions which has also impacted sales in the category. Looking ahead, we expect ecommerce same store sales to be slightly positive in the third quarter as we cycle exceptionally strong prior year growth throughout the period. Another important aspect of our omnichannel strategy is integration of our growing store network with our digital business. With approximately half of our online orders fulfilled through our stores, we are able to provide customers with greater convenience, while supporting growth across the entire business.

Our digital channels also provide an efficient way to sell slower moving merchandise across our store base improving inventory recovery, and creating room for new products while protecting merchandise margins. Now to our fourth strategic initiative. Merchandise margin expansion, and exclusive brands. I am very pleased with our team's ability to consistently expand merchandise margin. Excluding the impact of tariffs, second quarter merchandise margin exceeded our expectations, increasing 150 basis points on top of 80 basis points of expansion in the prior year period. By the end of fiscal 27, we expect to have expanded merchant margin by more than 1 thousand basis points over the past 10 years, averaging over 100 basis points annually.

This consistent progress reflects the strength of our merchandising strategy and our ability to find new ways to improve margins year after year. Building on this track record, we are raising our full year merchandise margin outlook and now expect approximately 70 basis points of expansion excluding tariff refunds. During the second quarter, exclusive brand penetration increased approximately 80 basis points across our merchandise categories, excluding work boots. While the strength of third party work boot sales led to a modest decline in overall penetration, Given the current mix of our business, we now expect full year exclusive brand penetration to be slightly below the prior year level.

Importantly, despite the modest decline in exclusive brand penetration, our sourcing organization is beginning to deliver higher product margins through lower cost and improved efficiencies, enhancing the merchandise margin rate. Of our exclusive brand sales. With a proven track record and multiple opportunities for continued improvement, we remain confident in our ability to expand merchandise margin for years to come. I would like to now turn the call over to Jim.

James Watkins: Thank you. As John mentioned earlier, second quarter net sales increased 15% to $582 million supported by new store growth and positive same store sales. During the second quarter, gross profit rate increased 80 basis points compared to the prior year, reflecting 190 basis points of merchandise margin expansion partially offset by a 110 basis points of buying occupancy and distribution center cost deleverage. Merchandise margin expansion was driven by a 130 basis points of lower freight expense, 40 basis points of tariff refunds, and 20 basis points of product margin improvement. For the first 6 months of fiscal 27, merchandise margin increased 60 basis points compared to the prior year period excluding tariff refunds.

This improvement reflects 40 basis points of product margin expansion and 20 basis points of lower freight expense. Second quarter SG&A expense was $146 million 25.1% of sales, an improvement of 10 basis points from the prior year period. Income from operations was $70 million or 12.1% of sales compared to $56 million or 11.2% of sales in the prior year period. Earnings per diluted share increased 26% to $1.73 compared to $1.37 in the prior year period. On a consolidated basis, inventory increased 14% year over year to $975 million and increased 3% on a same store basis.

The increase in total inventory reflects the growth needed to support new stores, exclusive brands, and inventory purchased at a volume discount. Turning to capital allocation. We continue to accelerate our share repurchase activity during the second quarter, repurchasing approximately 241 thousand shares of common stock for $35 million under our existing $200 million authorization. This momentum has continued into the third quarter with approximately 190 thousand shares repurchased for $23 million through the first 4 weeks and we anticipate repurchasing approximately $40 million of shares in total during the third quarter. Since initiating the program in fiscal 2026, we have repurchased 876 thousand shares for a total of $133 million representing approximately 3% of our outstanding shares.

As announced in today's earnings release, our Board of Directors has approved an additional $400 million share repurchase authorization. Reflecting our confidence in the financial strength of the business and our ability to generate substantial cash flow. Based on our fiscal 27 outlook, we expect operating cash flow to more than adequately fund our new store expansion, other capital investments, and continued share repurchases. This expanded authorization provides additional flexibility to return capital to shareholders while maintaining our commitment to investing in the long term growth of the business. As part of that commitment, we have approved plans to develop a second distribution center in Kansas City, which we expect to be operational in calendar 2028.

This investment will expand our distribution capacity and enhance our ability to support our growing store base. The new facility represents another important step in building the infrastructure necessary to support our long term growth opportunity of 1.2 thousand stores nationwide. We ended the second quarter with $97 million in cash and zero drawn on our $500 million line of credit. Providing us with a strong balance sheet and significant financial flexibility to execute our growth and capital allocation strategy. Now turning to our outlook for fiscal 2027. The supplemental financial presentation we released today outlines both the low and high end of our guidance ranges for the full year and the third quarter.

In my following remarks, I will focus on the high end of those ranges. Our updated outlook reflects recent sales trends and our expectations for the balance of the fiscal year while incorporating the benefits of merchandise margin expansion and new store growth. Our guidance also includes the benefit of tariff refunds. For the full year, at the high end of our guidance, we expect total sales of $2.6 billion representing 15% growth over fiscal 26. We expect same store sales to increase 2% including a 1.7% increase in retail store comps and 4% growth in ecommerce comps.

Merchandise margin rate is now expected to be approximately 52.3% of sales, representing a 140 basis point year over year including 70 basis points from tariff refunds, 50 basis points of product margin expansion, and 20 basis points of freight improvement. We expect gross profit rate to increase by 50 basis points year over year to approximately 38.5% of sales, and we expect to achieve 20 basis points of SG&A leverage. We also expect income from operations of $32 million or 14% of sales, an increase of 70 basis points over last year. Net income is projected to be $272 million with growth in earnings per diluted share of 22% to $9.

We expect net capital expenditures to total $140 million and we anticipate an effective tax rate of 25.7% for the remainder of the fiscal year. Now turning to our third quarter guidance. We expect total sales at the high end of our guidance range to be $802 million and a consolidated same store sales increase of 1%. We expect merchandise margin of approximately 51.5% of sales representing a 90 basis point increase year over year. This guidance reflects 50 basis points of product margin expansion, on top of 70 basis points of product margin expansion in the prior year period, a 30 basis point improvement in freight expense, and a 10 basis point benefit from tariff refunds.

We expect gross profit rate of approximately 39.8% of sales, and we expect SG&A to be approximately 23.6% of sales. We expect income from operations of $130 million or 16.2% of sales and earnings per diluted share of $3.19 compared to $2.79 last year. Now I would like to turn the call back to John for some closing remarks.

John Hazen: Thank you, Jim. I would like to thank the entire Boot Barn team for their continued dedication, hard work, and commitment to our customers. I am extremely proud of what we continue to accomplish together. As we head into the holiday season, I look forward to seeing all of our preparations come together. We are building something truly special at Boot Barn, and I am excited about the long term opportunities ahead for our people and our company. Now I would like to open up the call for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press * then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press * then 2. We ask that you limit yourself to 1 question and 1 follow-up. At this time, we will pause momentarily. to assemble our list. The first on our question queue is Matthew Boss of JPMorgan. Please go ahead.

Matthew Boss: Great. Thanks. So, John, could you help bridge the comp moderation in the second quarter to 1% to 2% and then the drivers of the further step down in October. And larger picture, just given what you have seen, any change in your confidence for low to mid single digits as the baseline algorithm if you bottom-up build the drivers.

John Hazen: Yep. The, yeah. I will. Matthew, I will jump in first with kind of a quick summary of Q2 to give some color on that moderation that we saw in October. When we look at most major merchandise categories, in the quarter in Q2, we saw nice performance, not only in work, which we have we have talked about often, but in men's western apparel, which is our largest merchandise category, women's western apparel, in cowboy hats and western ball caps as well. So the performance in Q2 was broad based outside of men's and women's western boots, which were softer.

As we moved into October, it was the moderation was broad based across all the same categories we saw a step down of a point or 2, you know, across all those major merchandise categories I just mentioned. So there was not something that changed or shifted in a particular category in a in a much more material way. And I think that the, you know, the strength of the men's Western apparel, the women's Western apparel, the cowboy hats, all point to the strength of the Western lifestyle I do not think there is any broad shift in Western lifestyle.

I think we are just seeing a little bit of a different pattern across the assortment, and we can talk more about women's boots and how we are approaching that and the men's business as well. But I think the Western industry and the western lifestyle still is incredibly in strong, and the model is intact.

James Watkins: We have just got a couple of different challenges on the boot side, but I think the best indicator of how strong Western is what we see in men's apparel, which is our largest merchandise category. And we remain confident in the long term algorithm. Do not see any changes to it at this point in time. And while that is too early to guide next year, let me help maybe frame up how we are beginning to think about some of the drivers. I mean, as you know, we typically will start building our budget with a low to mid single digit same store sales. Growth in mind. We will have to see how.

You know, what the sales trend at that point, but that is typically our starting point. We will adjust from there as necessary based off current business. And so while we are guiding slightly below that at a plus 2% for this year, we have historically outperformed that, including the last 2 years when we comp 5.5% 2 years ago and around 7% last year. And something to add to that, John mentioned in his prepared remarks, while it is a small part of the business, the Boot Barn workforce should see some nice acceleration and growth as we move into next year something to keep in mind as well.

And then going down the P&L, I think, was your question a little bit.

We expect to continue to open 12% to 15% new units on the heels of 5 consecutive years of opening around 15% new units Merchandise margin, while we have to keep an eye on freight rates, we are confident in our merchandise margin drivers heading into the next few years as we As a reminder, when modeling next year, we will need to back out the 70 basis points of tariff refund benefit from the current year, but we do expect to continue to see nice buying economies of scale and margin benefits from the sourcing initiatives John just alluded to And so as we typically start guiding a year around the merchandise margin of 30 to 40 basis points, we would expect something similar as we get into next year.

We have grown merch margin about 100 basis points on average for the last 10 years. So on the margin side, we are very confident there. And then we often talk about leverage points at a low to mid single digit comp. We would expect to leverage operating margin. This year was expected to leverage at a 3% comp and due to some outsized nontariff refund merchandise margin benefits, plus the outperformance of our new stores, we now expect to leverage operating margin at 2% for this year. So optimistic there. And then seeing some nice benefit from the EPS from the share repurchases. So I think the algorithm is still in place. We feel confident about it.

Top-line growth will ultimately determine the EPS growth. But it is in that 3% to 4% growth range, we would expect to generate 15% to 20% EPS growth if you exclude the $0.45 of tariff benefit refund this year.

Matthew Boss: that is great. Really helpful color. Thank you. Thanks, Matthew.

Operator: Our next question comes from Steven Zaccone of Citi. Please go ahead.

Steven Zaccone: Great. Good afternoon. I wanted to ask a bit more about the timeline to see improvement in some of the areas of weakness in Western? Workwear was an area where you had seen some weakness and you were focused on driving change. Maybe could you compare and contrast where you are at today in terms of the time line to see improvement in Western You talked about some of the changes you are making to stores. But just help us think through. Is this a you know, a couple of months? Change? Is it a couple quarters? Anything there would be very helpful.

John Hazen: Sure, Steven. Happy to answer that. I am going to break it apart between men's boots and women's boots. On the women's side of the business, we saw a merchandising opportunity. Again, I have been in 20-ish stores over the last couple of months with our ad merchant and looking through the challenges we have been having in women's western boots. And the merchandising team deserve a lot of credit. They have moved very, very quickly, to bring in fresh product, fresh colors, fresh silhouettes, into the stores in time for the holiday season.

So the answer is we are going to have a refreshed women's western boot assortment in place as we come into the Christmas and the holiday season, and we feel great about it. Our merchandising team feels great about it. We look at some of the softness on the men's side of the business, that softness, feels like a little more of some discretionary pressure, some macro pressure, as we look at the price points of the boots that are selling. We have recently done a survey of our customers to ask them, do you still intend to come back and buy men's Western boots? And the answer was unequivocally yes, but the biggest pressure point was price.

So I think there is a little more involved on the men's side, and that softness is much less than what we have seen on the ladies' side. But we feel great about the preparation and the inventory and the type of product that we will have in play for the holiday season. And we are cycling easier comps as we get through the balance of the quarter and weather has been hot and so as that turns and as it is turned in certain markets, we have seen a benefit from whether just cooling off and some precipitation in certain markets. So that is on the horizon also. Okay. Great.

Steven Zaccone: A follow-up I had was on the rebranding of the B2B initiative. Maybe can you help us understand the opportunity there in terms of magnitude I mean, you have had 1 in place already, but maybe just help us understand timeline and sort of magnitude of what this could be.

John Hazen: Yeah. Very excited about what we are doing with Boot Barn Workforce. Again, we were kind of order-takers and it was all tied to each individual store for many years with paper vouchers. And we have had some commercial or b to b business that has developed organically and grown very nicely over the last several years.

And as we looked at the competition and we looked at the opportunity, we realized that taking the ability of what the digital team can build and approaching this, as truly a business where we go out and get leads and drive sales versus being order takers and digitizing the entire process, it can be a great opportunity for us as we go into the back half of this year and into next year. it is been growing in the 20% range for the last couple of years, and we think that can get up to around 40%, 50% growth.

Steven Zaccone: Okay. Thanks very much. Best of luck. Thanks, Steven.

John Hazen: Thanks.

Operator: Our next question comes from Dylan Carden of William Blair. Please go ahead.

Dylan Carden: Thanks. I just want to understand those comments around men's western boots. Is that to say that you are seeing incremental price sensitivity And I guess if you could sort of roll those thoughts up to the overall guide at the lower end, do things have to--things would have to get a lot worse just on a stack basis. And I know, historically, you have kind of guided more as per sort of what is going on right now. Is there anything sort of change out there to give you a different view of the demand environment kind of heading into holiday? It sounds like the comments are net positive.

John Hazen: No. Yeah. The performance in the men's Western Boot category, where we are seeing some of the softness, it is on rubber soled boots. And that can be. You know, we looked at what is selling by price We conducted the survey I mentioned earlier to see what might be going on. In men's performance boots. And at the same time, you know. And we do not do this often. We do have to mention weather.

It has been incredibly hot in the Southwest and the West Coast, just record breaking through October, and I would be remiss if I did not mention, that we believe a portion of that softness is coming from how extraordinarily hot it has been out west. And we see it in the business when we have days that are 100 degrees in October, which is very rare. We see the impact to the business in California in a product like the men's rubber soled boots.

James Watkins: Jim on for the guidance strategy here. As far as the guidance for the balance of the quarter. As we mentioned earlier, half of our business is done in our fiscal December between Thanksgiving and Christmas. And we feel confident in the guide that we put out there. We used the most recent 3 months to develop the guide for the balance of the quarter and the balance of the year. Using historical seasonality based off recent business. And so I think the way we have set that up, in addition to a little bit easier comps and in November, December, feel comfortable where we have got it.

Dylan Carden: And then just to confirm, freight costs, it sounds like there is no real incremental thinking or impact for now. That I would get that right.

James Watkins: Correct. We have seen about 20 basis points of improvement for the first 6 months of the year, and we are guiding another 20 basis points of improvement year over year as we get into the back half of the year. Container costs have gone up as you all know. You know, compared to where they were a year ago or even just a few months ago. But we are also seeing and that gets capitalized and rolled out of our inventory turns but we are also seeing some nice improvement for us on. With some of the rates we have negotiated on our outbound ecommerce domestic shipping which has provided us a nice benefit on freight.

In fact, that was a part of the improvement we saw versus the guide in our second quarter results.

Dylan Carden: Very good. Thank you.

Operator: The next question comes from Peter Keith of Piper Sandler. Please go ahead.

Peter Keith: Thank you. Good afternoon. It sounds like you are taking up the merch margin expectations for the year. I just I did not catch what the drivers to that are. Is that some of the new sourcing team or other factors in play that we should be thinking about?

James Watkins: Yeah. As we look to the full year guidance, the buying economies of scale is still the big driver, the 50 basis points of merch margin expansion on the full year. So continuing with the discounts from the vendors. And you are correct, Peter, the sourcing initiatives we have has been a contribution to that. As we looked at the most recent quarter, the driver of our product margin was more on the exclusive brand side than it was on the third party side. As far as the better margin or better product margin. You know, some of our tried and true product leading to lower markdowns. Compared to last year. And just having some really clean inventory.

So it is just refining that and continue to see these nice margin drivers that we have been experiencing.

Peter Keith: Okay. Great. that is separately, I did wanna ask about, 1 of your key suppliers, seeing a really emerging strength with Ariat both in our survey work and they are showing up with national TV commercials. So generally, think about area growth is good for Boot Barn, but there is some investor concern out there with Ariat growing their own stores. Do you see any impact from that dynamic? Or do you like, you know, bigger area is good for you?

John Hazen: Yeah. Ariat is a great partner for us. We. You know, I was excited to see they recently got the Arena in Fort Worth. it is going be the Ariat Arena Dickies Arena, which I thought was very cool for them. And they are always willing to work with us. Try out new product, new ideas, and, they have always opened a few stores here and there. They have 1 on the Boulevard in Los Angeles. They opened somewhat recently. But, overall, they are a great partner, and we are excited to work with them season in and season out. So, no, I am not concerned in any way.

Peter Keith: Very good. Thanks so much.

Operator: Our next question comes from Janine Stichter of U. S. Bancorp. Please go ahead.

Janine Stichter: First, just to follow-up a bit on the last question. As you think about product margins over the next few quarters and into next year, should we think about exclusive brands continuing to be down or normalize a bit after the strong growth you have had? As we go into next year? And then as you benchmark your exclusive brands, and their margin profiles versus other private label brands, like, where do you think you are in this journey? How much room is there to go there? And then also just wanted to ask about the occupancy leverage point. Is anything changing there with acceleration of new stores? And I think you also mentioned a new DC opening. Thank you.

James Watkins: Sure. So as far as far as the product margin, as we look forward into next year, as I mentioned, earlier, we continue to see the drivers intact. And as we I think we are still in the early innings on driving margin despite the strong growth we have seen over the last you know, decade or so. And so buying economies of scale as we continue to grow and buy more volume with our vendors, that is. That expectation continues to be with us. As far as the exclusive brand goes, the sourcing initiatives that we have had on around exclusive brand purchases, those are still really early innings.

And so we expect to see some continued traction there as we move into next year. As far as the exclusive brand penetration as we move into next year, I mean, this year, it is it was projected to be flattish. it is a little early to say what it is going to do next year. But as we look kind of zoom out a little bit and look what we have done over the last several years, We are thrilled with where exclusive brands have come and the and the progress that they have made and designing and getting the product out to the stores. And so there is always a little bit of rebalancing.

We will see what that looks like as we move into next year. But right now, we are pretty happy with that. And the fact that if the penetration is not growing like it is in this year, we are able to get the margin improvement within the penetration we do have, we are thrilled with that because it really is the focus of growing merchandise margin. And as far as the buying and the occupancy, leverage points, little early to say what it is going to be next year The timing of some of the store openings that we had this year pushed that leverage point up a little bit. To 10%.

I think it probably comes down a little bit. We will have some more store openings as we get into next year, and that will continue to pressure it. As far as the new Kansas City distribution center, we will start having some rent expense late in the next year, probably 4 or 5 months of rent expense. You know, somewhere in the 3 or $400 thousand a month or so. So a little bit of pressure in the next year but not anything meaningful that I think would drive the leverage points up higher than what we saw this year.

Janine Stichter: Thanks very much. Thanks, Janine.

Operator: The next question comes from Christopher Nardone of Bank of America. Please go ahead.

Christmas Nardone: Thanks, guys. Good afternoon. I want to clarify how you are thinking about volume versus price in your new full year comp guidance. And I know you touched on some of this in your prepared remarks, but it would be great to get more information on what you are seeing from a promotional perspective. Both your own business and then what you are seeing in the industry broadly.

John Hazen: Yeah. We. We have run a full price business for many, many years. We have worked hard to get that business, and, we are going to continue to do so. When we when we need to move through some merchandise, as with some of these women's boots to make space for what we are very excited for this holiday season with the with the new assortment and new styles coming in. Will be promotional, but in a in a very pinpoint way. The nice thing about this industry is it continues to be very rational. We look at all of our competition. We adhere to a map policy in the Western space.

Everyone is very good about adhering to that policy. And so, even though there is. You know, there may be other retailers seeing some of the softness that we have seen in particular categories, We are not seeing anyone being irrational in any way from a pricing standpoint. So we are going to continue to run a full price business. Manage our clearance, which is at historical levels. We are in a great place from a from a markdown inventory standpoint. And we will run this holiday season very similar to how we ran it last year. From a pricing standpoint with some exciting new things coming on the marketing side.

Christmas Nardone: Thanks. And then just a quick follow-up I understand the changes you are making on the merchandise side of boots and then the strength you are articulating in the work business. what is giving you confidence that the softness in boots does not seep into the rest of the business if it is in fact weather macro driven for the most part.

John Hazen: Yeah. 1 of the things that gives me great confidence is if we look at the October business, which, again, moderated, we saw growth, nice growth in our biggest merchandise category, which is men's and we saw it in the apparel as well as the denim. We also saw the women's western apparel business hold up very well. And, you know, if there was something shifting in the trend of Western or the trend that people believe is there, you would see the cowboy hat business, of course, having a tough time. And we are just not seeing it there.

The expertise and the experience of our chief merchant and her team and her view on the opportunity in women's western boots also gives me great confidence that this is something we can get after and get that business back on track. The 1 that is a little bit more puzzling, and I have said it a couple times already, is what is going on with rubber soled men's boots. it is not, you know, as soft as the women's business was. But that 1 feels slightly more macro or perhaps weather. And, we feel like we have the right assortment in our men's rubber soled western boots.

And then so we are keeping a close eye on it and surveying customers and, and not doing anything from a price standpoint. But we feel like we are in a good spot from a merchandising and a assortment standpoint. And again, we are not going to buy the business and get heavily promotional on that merchandise category just because it is a little soft.

Christmas Nardone: Okay. Understood. Thank you, guys. Good luck. Thanks.

Operator: Our next question comes from Maksim Rakhlenko of TD Cowen. Please go ahead.

Maksim Rakhlenko: Great. Thanks a lot, guys. So first, you called out some really strong guide, new store growth. So I am just curious what do you attribute that to as that seems to be stepping up and new stores are starting out of the gate? Even better than in the past? And then just how do you square that away with softer comps? Could there potentially be some cannibalization that is picking up a little bit or just anything else that potentially could be going on there?

James Watkins: Sure. So we are really pleased with the new stores. I think the team is really gelling well and really has hit their stride as far as identifying the stores, building those stores. We have talked at length about the flexibility of our model, being able to go into a bigger box, or a smaller box, depending on what is available and which market they are in, And just given the geographies we have gone in into and where we have built those stores, we are seeing some nice performance. And so confident that as we move forward, we will to see nice performance in those in those new stores.

We have we have also talked over the you know, over the years that when we go into our real estate committee meeting here internally and we look at these deals and go to approve those deals, you know, depending on where the market is, I guess stepping back, if you look at our map, our road map of how we get to 1.2 thousand stores, there are multiple stores in certain more mature markets or bigger, more urban markets and fewer stores in more rural markets.

And so as we go into some of the bigger markets and we approve a store that is already or we already have stores in that existing market, we will look at what impact a new store could have on an existing store and the new store has to overcome the sales that it might take from that store and cover it. And so as we build stores across the country, there is some of that where we are you know, adding multiple stores to some of our higher populated markets. But not to the extent to where we feel it is having a meaningful impact on our comps.

We really look at it as growing the total when we when we fill out these markets.

Maksim Rakhlenko: Okay. Got it. that is helpful. And then when you guys lay out some of the initiatives centered around product and store layouts, to reaccelerate comps. It does feel a little bit different than sort of what we have heard in the past. So just I am curious, as you step back, how do you think either the customer profile or the product assortment has evolved? I just do not seem to recall more of these full-scale changes. That you seem to be making to the stores now.

John Hazen: Yeah. I do not think there is been a change in the customer. We have the penetration of apparel, Western apparel for men's and women's has increased over the last few years. And I have said on prior calls that I think we have become a little bit more of a lifestyle retailer, and people can get their everyday denim, but these are tweaks to how we merchandise in a lot of categories to your point. So this is this is in denim, in western hats in outerwear. And I think it is really just a function of how much time I spend in stores.

I am in stores constantly and with the merchant, the merchant team and the store operations team. And, I have got a strong opinion on how we can always merchandise better in stores, and we work together. And so we have been a little more nimble on some of these changes but they really are tweaks. We are not moving whole departments around inside the store. This is--hey, it is hard to figure out the sizing and the brand of cowboy hats. Let's change how we visually merchandise cowboy hats. Or, you know, should we have all of the Sherpa outerwear together versus having it separated by brand in stores as we go into the holiday season?

Those are the sorts of tweaks we are making here. The biggest 1, the big 1, if you remember, a couple years ago, was remerchandising the work boots by size versus by style. That was a massive undertaking for the stores, and I think it is a piece of why the work boot business has been doing so well alongside the new third brands and some of the marketing the teams put together.

Maksim Rakhlenko: Got it. Thanks a lot, guys. Good luck. Thank you.

Operator: Our next question comes from Jonathan Komp of Baird. Please go ahead.

Jonathan Komp: Yeah. Hi. Good afternoon. I wanted to just follow-up to understand the guidance changes. Does not--yeah, it does not appear consistent with your past or at least not frequently that you have had periods of comp slowdowns and have to lower guidance. So you think about the changes to the year, would you say the approach is lower once and not have to lower again as we think about comparisons easing from October and some of the different explanations that you offered, why we maybe should not expect the current trend going forward?

James Watkins: Yes. I think that is a fair way to look at that. I mean, the goal is to put out a guidance that we think is achievable and that we feel confident in hitting, and we do not like to change our guidance. Unless we are changing it up. And so it is unusual for us to lower this, but we feel like we have got something that is based off of recent sales trends and it kinda flies a little bit in the face of maybe easier comps. Having to lower the guidance. But we wanted to put something out there that heading into our busiest time of the year, we felt good about.

Jonathan Komp: that is really helpful. And then if I could circle back to e-commerce. The changes there, are more significant relative to your initial expectations. Not entirely clear why that is trending lower. You could share a little more insight. And for a while, it seemed like you had a lot of success pulling different levers on different social channels. Expanding the reach with some of your stand alone exclusive brands, marketing those in a different way Do you think there is you know, a broader set of initiatives you need to sort of refill the bucket and reenergize growth there? Any perspective on some of the e commerce specific initiatives looking forward here?

John Hazen: Yes, absolutely. The e commerce business in Q3 of last year just had an exceptional quarter. We had our new Chief Digital Officer on board, and he came in with a lot of new ideas. You know, whether it be some of the viral TikTok products that took off, the way he went about some of the digital marketing. We had the codyjames.com launch, which contributed to the ecomm comp. And so, in October, was up 24%, as well as in November, and then a 7. A plus 17 last December. So it is up against some very tough comps.

But at the same time, you know, we are not satisfied with a with a flat comp in ecommerce, and the team is, using your term kinda refilling that bucket. I was with them yesterday working on some new ways to attract new customers to the different sites. They feel great about the approach on bootbarn.com for the holiday season and what that digital marketing looks like and how we can achieve the best ROAS possible. But they had such a standout year last year that I think a portion of this is being up against a stronger comp.

But I have full confidence in the new ideas they have been walking me through over the last couple weeks and very excited for what they have coming for the holiday season.

Jonathan Komp: Okay. Great. Thanks a lot. Thank you. Thanks.

Operator: The next question comes from Jay Sole of UBS. Please go ahead.

Jay Sole: Great. Thank you so much. Maybe can you. could you give a breakdown of the comp trend in stores? Can you tell us traffic and maybe transactions? Give us a little idea about those metrics. Thank you.

James Watkins: Yes. So, second quarter, the transactions were down about 1.5%. The basket was up about 2.5 percent. Comprised of AUR being up about 2%, and UPT, units per transaction are actually up about a half a percent And as we got into October, that looks almost identical with the exception of transactions being down 2 instead of a point and a half. So it is really the AUR is holding in there.

UPT, the team is doing a really nice job of growing units per transaction, growing the basket. it is just the transactions which we see as a as a indicator of traffic we are down, and we do have traffic counters and traffic would the traffic counters would say that the traffic is also down. On the positive side, the team is also been able to improve the conversion year over year. And so the sales teams are doing really a nice job of growing the basket and converting the traffic that does come into the store.

John Hazen: Yeah. With, you know, having the benefit of traffic counters, we can see that there is not something we have missed in terms of merchandising or the store experience or the customer service that is an issue inside the 4 walls. Right? It is a traffic issue. The stores are doing an incredible job converting and driving up units per transaction, and their customer satisfaction scores are up materially year over year. So I could not be happier with the execution of the stores teams across, across everything from the traffic that they get inside of those 4 walls. But to Jim's point, it is a traffic issue, not an internal store operations issue.

Jay Sole: Got it. that is helpful. Maybe can I ask you 2 more? 1 is just how do you think your market share changed in the quarter in men's and ladies Western boots? And then if you just think back over the last 5 to 10 years of history at Boot Barn, like, what does this current period remind you of, if there is 1, and sort of where you have had this sort of slowdown in a particular category and you know, steps in initiatives you have taken on to change it and then, see it get back to where you expect it to be.

John Hazen: Yeah. Sure. Yeah, I have been with Boot Barn close to 10 years at this point, and the 1 it reminds me most of is there was a large slowdown right when we had the acquisition of Country Outfitters where when women's boots really slowed down, and it happened very quickly. So we quickly got out of those boots, you know, over a 6 month period and reassorted the women's category, and, we were back on track. So you do see occasionally a set of silhouettes or a color pattern change quickly in women's.

And as I have said a couple times on this call, I could not be more impressed with the merchandising team and how quickly they have gone after this inventory, and it will be here for the holiday season.

Jay Sole: Got it. And then the market share thing?

John Hazen: On the market share, that. that is a tough 1 to answer. I do not think we have lost significant market share. I think if we are facing into a shift in taste You know, the third party vendors will always have the inventory before us. So perhaps there is some business that is with the third party vendors that we buy from since they will have the product up first and get the earliest read throughs. If we think about the rest of retail, whether it be, you know, the larger Western retailers, farm and ranch, the independents that are out there, my sense is we have not lost market share to those folks.

If it is anywhere, it would be, you know, with the third party vendors as they get the product first.

Jay Sole: Got it. Thank you so much. Thanks, Jay.

Operator: The next question comes from John Kippur of Goldman Sachs. Please go ahead.

Jonathan Keypour: Hey, guys. Good afternoon. Thank you for the question. So I am just I am trying to square some of the 4Q implied performance. It sounds to me like, I mean, if I did my math right, that same store sales for 4Q were sort of implied to be around the same as in 3Q. But there was mention about heavier discounting on boots to clear inventory so that there would be kind of a more impactful, 4Q launch I am just wondering how to square that. If it does not, if the new launch does not kind of imply, acceleration.

And then if you have any sense of you know, how much of the women's boots price sensitivity is maybe a category issue versus a macro issue. And if you could tell us how women's and men's boots are performing in non comp stores just to get a sense of, like, the overall health of those categories. Thanks.

James Watkins: Yeah. So this John, just to clarify, so the fourth quarter is the holiday quarter that you are asking about? Right. Okay. Yeah. You are right. The fourth quarter is we have guided very similar, the same really as we did the third quarter. And, you know, we you mentioned the discounting. The discounting we are talking about was really what is happened over the last couple of months to clear through certain styles within that ladies' western boot category. So that is all happened or happening as these new boots and new styles are coming in advance of the holiday season. So this is all kinda current in next few months.

And so we expect to see a very heavy full price selling holiday shopping season in our stores. And Q4 as well. And this is not something new that we are just starting. This is something that we have done. That we are always doing if a style is not working, we will we will mark it down in any And most of the emails that folks get around sales are, you know, a sale on clearance goods or on markdown product And so it is really just more of the same as we have always done.

We just wanted to kinda illustrate what is happening and what we are doing within that ladies western boot category to get ready for holiday and we are going up against a little bit easier comps, and we have a nice strategy that the team has developed. To give a product to our customers that they want. And then just in terms of in non comp stores, how you see the boot categories performing versus maybe a year ago in those new stores? Yeah. it is interesting.

So we have often talked about some of the stereotypes when we open a new store that the lady shoppers typically will find those stores first and men's business is kind of slower to follow. And so what we are seeing is better results in the ladies business in the new stores compared to what we are seeing in comp stores. And on the work side of things, you see quite the opposite where the that worker--the men's works customer is slower to go to those new stores. So it is kind of playing into the stereotypes and what we have seen over the last several years with the new stores.

And so that could--that could be having-- Or that is having a little bit. Tiny bit of impact on the on the comp, on the ladies' boots if they are going to the new stores. in markets where there happens to be another store.

Jonathan Keypour: Okay. Thank you. Thank you.

Operator: Our next question comes from Jeremy Hamblin of Craig Hallum Capital Group. Please go ahead.

Jeremy Hamblin: Thanks for taking the question. So just wanted to go back over a couple of points here on the same store sales expectations, it looks like you maybe in October have seen like, on a 2 year stack basis, a step up from September maybe by about a 100 basis points. Just in terms of understanding the remainder of the quarter compares do get a little bit easier. From here maybe by a few 100 basis points. Just in terms of understanding for the rest of the quarter, Could you just remind me of the color on that? And then just secondly, on the EPS guide, for the year, some noise, I think $0.45 related to tariffs.

But I think net, it looks like you are still guiding to about a mid teens EPS growth rate this year. And then I think what you said, I just wanna clarify, Jim, If you had, let's say, a 3% comp next year, you would be looking at kind of mid teens growth again.

James Watkins: Yes. So maybe I will start from the last and go back to the first. So yes, you are right on just talking through back to the leverage point for a second. I mean, at a 2% same store sales this year, excluding the tariffs, we are going to be about flat on the EBIT rate year over year. And so kind of that leverage point at a 2% same store sales this year. As we look to next year, it is probably similar to what we saw the last couple of years at a 3% comp needed to leverage EBIT. And the growth rate on EPS this year excluding the $0.45 is about 16%.

So your math is perfect on that. As we look to next year, a of components. We have not fully you know, rolled up a budget yet. But yes, having a 3% comp next year should get us to something in that mid to high teens EPS growth. Next year. Great.

Jeremy Hamblin: And then on the on the comp question? And I should mention that is excluding the tariffs, right? So it is taking the $9 and making it $8.55, building off of that to a high teens EPS growth. And then sorry, what was your last question, Jeremy? Yeah. Just on the comps. Right? So it looks like maybe October has seen a little bit of a step up in 2 year stacks. But then in terms of. Your compares get a little bit easier. I think maybe a few 100 basis points. Between, you know, November, December versus October. So just understanding in terms of expectations, it does not look like you are expecting you know, any improvement.

I think that is probably related to the portion of business that happens between, let's say, mid-November and December, but just. and Christmas, can you just clarify for us?

James Watkins: Yeah. So we use the similar methodology of taking recent business and rolling that out. And you are right, that would imply kind of a deceleration on the 2 year comp. The message we have tried to get out on this call is that we feel great about what we have done positioning ourselves into holiday and the fact that we do have easier comps coming up in fiscal December, which is really Thanksgiving through just past Christmas. And so we think we are well positioned there. Optimistic about what our comps, and we do have easier comps.

But we did not want to stray from how we have been guiding, which is based off the more recent volume of business. And how that plays out historically over the next couple of months.

Jeremy Hamblin: Thank you so much. Thanks, Jeremy.

Operator: The next question comes from Ashley Owens of KeyBanc Capital Markets. Please go ahead.

Ashley Owens: Hi. Great. Good afternoon. Thanks for fitting me in here. Maybe just to start, since, you know, we just talked about it a little bit here, but you. You have mentioned a few times now that EBIT leverage point has come down to 2% for the year. You mentioned that outperformance of the new stores is 1 of the reasons for that. Could you just help us understand if that is predominantly stemming from that better first-year sales outperformance that you are seeing, or is the new cohort also coming in at better 4 wall margins than you originally planned for? And then just maybe on the holiday television with that impression number ticking up 6 times.

Could you just maybe help us quantify any incremental marketing expense that will be associated with that step up? Thank you.

James Watkins: Hi, Ashley. it is really on the on the EBIT leverage point for this year, would be the non comp stores driving a higher sales volume out the gate or in the first year, that if they can generate more sales, then it takes pressure off the comp stores to drive sales dollars and so that. that is helping the leverage point this year in addition to the merchandise margin coming in a little higher than what we had at anticipated. So those 2 things in tandem are helping with that. Help us get leverage at a 2% comp this year.

John Hazen: And then going back to the TV campaign for holiday, we had a pretty major shift in how we bought the TV media for holiday. We had traditionally gone to different dedicated regional buys and markets that made sense fiscally to us. And as an example, we would not go to a New York or a Los Angeles. It just did not make sense And so we have moved to programmatic buying this year, and that is where we are able to get such an increase in impressions. With not a material increase in marketing Our marketing spend will continue to be 3% of sales.

If there was anything outsized to call out in this quarter, we would have, but we have made no cutbacks. We have increased radio this year. We have increased our direct mail this year as well. So we feel great about everything we are doing this holiday season from a marketing standpoint. But a real Christmas campaign, with a billion impressions featuring Riley Green is something I am very excited about. I have seen the spot several times already. I think it is 1 of our best, holiday or Christmas spots we have put together, so very, very excited.

Ashley Owens: Great. Appreciate the color, and best of luck for the holiday. Thank you.

Operator: And our next question comes from Samuel Poser of William Trading. Please go ahead.

Samuel Poser: Good evening. Thanks for taking my questions. I want to just follow up on sort of the buckets of stores. You have your noncomp stores. You have your newer comp stores, and then you have sort of more mature comp stores. Can you give us sort of like how the newer comp stores are comping versus the older ones? Because there is a lot more older ones now. And is that dragging down the comp And then if so, what are you doing from, like, merchandise mix in those stores and all the other stuff you are doing to correct it?

James Watkins: Yeah. So I will I will I will jump in there. I think we said on maybe a couple calls ago that last year, the stores opened in the previous 5 years added about 150 basis points to our comp last year. So our plus 7.2% last year, 150 basis points of that was from stores opened including comp stores, right? Or the comp stores that were not brand new stores. Added 150 basis points. that is probably a little bit lower this year. it is probably adding about a point of comp that same group of stores.

And so as far as the new stores, we have talked about how they have been outperforming our expectations and are on track to do $3.4 million instead of $3.2 million And so that is I guess, a nice healthy cohort of stores. And then as far as the mature stores, the stores that were opened, I guess half of the base that was not opened in the last 5 or 6 years, if those are--if the if the ones over the last 5 years are adding about a point of comp, then those are probably flat just in this most recent quarter So I do not know if that helps answer that question, Samuel.

Samuel Poser: Yeah and then thank you. And then secondly, you talked about the. You think the weather impact on the Western Boots, And You Called Out The Southwest and the South. I believe that is what you said. Can you give us some idea of the comps of the. Of Western Boots by region, maybe for October or I mean, or September so we can sort of see maybe we can actually see the weather impact on that.

James Watkins: Yeah. We are not prepared to share that on this call. What we have seen is really like over a weekend where you get rain where it is been really hot. We have seen comps, not just in boots but in, yeah, All categories or most categories spike up. And that is that is always been the case with this business. And we bring that up just as we are heading into El Nino, which typically means that in, you know, California and you know, parts of the Southwest, it should see more rain that is a positive that should be coming our way as far as driving comp traffic.

We do not have that by region available to share at this point. Part of that is competitive in nature also.

Samuel Poser: I have 2 last questions. 1, what is the exclusive brand penetration? You may have said that is excluding work? And secondly, with. You called out the men's Western--rubber-soled western dress business. What is the percent of what percent is rubber-soled of men's pure western versus leather sole.

James Watkins: Yeah, so excluding the work boots, our exclusive brand penetration was up about 80 basis points. And on the performance side, rubber-soled is slightly less than half.

John Hazen: Call it 40%. So the leather soled boots are holding in? And the rubber soled boots are They are outperforming the rubber soled boots. Yes.

Samuel Poser: And is that true in women's as well? Or is it generally true in women's?

John Hazen: Because we do not have as many rubber--it is actually the reverse in women, and I talked about this on the last call.

Samuel Poser: Okay. So the men's rubber soled boots are really being used for people to go to work in. And when it is hot, they are not wearing them out as fast. Is that sort of the way to think about it conceptually?

John Hazen: I think that is a good way to think about it, Samuel.

Samuel Poser: Thanks very much. Good luck. Thank you.

Operator: This concludes our question and answer session and is the end of our call. Thank you for attending today's presentation. You may now disconnect.

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