Boot Barn Holdings, Inc. Price & Performance (BOOT)

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 Q3 fiscal 2025 earnings release as well as our filings with the SEC referenced in that disclaimer. 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 John Hazen, Buparn's Interim Chief Executive Officer. [indiscernible] Thank you, Mark. Good afternoon. Thank you everyone for joining us. On this call, I will review our Q3 fiscal 2025 results 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 are very pleased with our 3rd quarter results. Which reflect broad based growth across all major merchandise categories in stores and online. And across all geographies. During the quarter, revenue increased by 17% including consolidated same store sales growth of 8.6% Same store sales in both the stores and e commerce channels were positive with stores increasing 8.2% and e commerce increasing 11.1%. We also opened 13 new stores in the quarter, bringing our year to date total to 39 new units. From a margin perspective, 3rd quarter merchandise margin expanded 130 basis points driven by supply chain efficiencies, better buying economies of scale and growth in exclusive brand penetration. The strength in sales and margin combined with solid expense control resulted in earnings per diluted share of $2.43 during the quarter, which was $0.36 above the high end of our guidance range and compares to $1.81 of earnings per diluted share in the prior year period.

Included in our 3rd quarter earnings per diluted diluted share is an approximately $0.22 benefit related to the CEO transition. I am extremely pleased with our 3rd quarter results and I am very proud of the entire team's and dedicated effort during the critical holiday season I will now spend some time discussing each of our 4 strategic initiatives. Let's begin with expanding our store base.

We opened 13 stores in the 3rd quarter ending the period with 38 stores in 46 states. Our new store engine continues to meet our sales, earnings and payback expectations, throughout all regions of the country. A reminder, we model new store performance at $3,000,000 of revenue with a cash on cash return on capital of approximately 60% in the 1st year of operation. We have 21 planned store openings in the 4th quarter which would bring the fiscal year total to 16 new stores opened meeting our commitment of 15% new store growth annually. We continue to expand our store footprint across the country we expect to open stores this quarter in Alaska, Vermont and Rhode Island, which would bring our total store presence to 49 states, Given the consistent success of our new store openings across all geographies, we believe that we have the market potential to double our store count in the U. S. Alone over the next several years. Moving to our 2nd initiative, driving same store sales. 3rd quarter consolidated same store sales grew 8.6% with brick and mortar same store sales increasing 8.2% Store comp growth was driven by a 6% increase in transactions, plus a 2% increase in UPT, which drove a large a larger average transaction.

From a merchandise category perspective, the 3rd quarter comp sales were positive across all major merchandise categories. Led by the combined Ladies Western Boots and Apparel businesses, which comp positive low double digits.

This was followed by the combined men's western boots and apparel business which comp positive high single digits.

Our denim business, which is included in the figures just mentioned, comped low double digit positive and our combined work boots and apparel business comped low single digit positive in the quarter. From a store operations perspective, I am very proud of our field organization across country for contributing to another successful holiday season. Continue to provide best in class customer service while driving record sales volume and hiring over 5,000 seasonal store associates. From both a supply chain and merchandising perspective, we were extremely pleased with the smooth flow of inventory through our distribution centers and stores, and our overall preparation for the holiday season, which we believe contributed to the strength of our 3rd quarter During store visits leading up to Black Friday and throughout the entire holiday season, we consistently received positive feedback from our store associates, Many of them highlighted how the earlier preparation, particularly advanced floor sets and inventory availability enabled them to better prepare for the anticipated holiday shopping surge. Ultimately enhancing their ability to meet customer demand and maximize sales. From a marketing perspective, the team continues to expand our brand awareness, carefully tailor communication to each of our customer segments. We believe the use of radio, direct mail, artist collaborations, These efforts have also increased the number of active customers in our program to 9,400,000 dollars a 15% increase over the prior year period.

Moving to our 3rd initiative, E commerce comp sales grew 11.1% in the 3rd quarter, We are very pleased with the consistent strength of our online business and the team's partnership with the field During the critical weeks between Black Friday and Christmas, we were able to ship approximately half of our [indiscernible] From an organizational perspective, we are happy to announce that John Kosov has been hired as our new Chief Digital Officer. John was previously the Chief Digital Officer at Tilly's and prior to that was the Vice President of E Commerce and Marketing at Taco Bell. John brings a wealth of experience to our team and his leadership will allow me to focus on my efforts on my current role.

Now to our 4th strategic initiative, merchandise margin expansion and exclusive brands. [indiscernible] During the Q3, merchandise margin increased by 130 basis points compared to the prior year period, driven by supply chain efficiencies and better buying economies of scale. Exclusive brand penetration increased by 180 basis points, which was on top of 3 10 basis points of expansion in the prior year period. We continue to believe we can achieve merchandise margin expansion through a combination of supply chain efficiencies, better buying economies of scale and growth in exclusive brand penetration. Turning to current business. Through the 4 weeks of our fiscal January, we have continued to see broad based growth in same store sales. On a consolidated basis, fiscal January same store sales have increased 8.3% with our store comp increasing 7.2 percent and our e commerce business increasing 17.1%. We feel very good about the current tone of the business and the start to our 4th quarter. I'd like now to turn the call over to Jim Watkins. Thank you, John. In the 3rd quarter, net sales increased 16.9 percent to $608,000,000 The increase in net sales was the result of the incremental sales from new stores and the increase in consolidated same store sales.

The 8.6% increase in same store sales is comprised of an increase in retail store same store sales of 8.2% and an increase in the e commerce same store sales of 11.1%.

Gross profit increased 20% to $239,000,000 compared to gross profit of 199,000,000 dollars in the prior year period.

Gross profit rate increased 100 basis points to 39.3 percent when compared to the prior year period as a result of a 130 basis point increase in merchandise margin rate, partially offset by 30 basis points of deleverage in buying occupancy and distribution center costs. The increase in merchandise margin rate was primarily the result of supply chain efficiencies better buying economies of scale and growth in exclusive brand penetration, while the deleverage in buying, occupancy and distribution center costs was driven by the occupancy Boot of new stores.

Selling, general and administrative expenses for the quarter were $139,000,000 or 22.9 percent of sales compared to $124,000,000 or 23.8 percent of sales in the prior year period. SG and A expense as a percentage of net sales decreased by 90 basis points primarily as a result of the forfeiture of incentive based compensation related to the CEO transition. Income from operations was $99,000,000 or 16.4 percent of sales in the quarter compared to $75,000,000 or 14.4 percent of sales in the prior year period. [indiscernible] Net income was $75,000,000 or $2.43 per diluted share compared to 56,000,000 dollars of net income or $1.81 per diluted share in the prior year period. Turning to the balance sheet. On a consolidated basis, inventory increased 23% over the prior year period to $690,000,000 and increased approximately 1% on a same store basis. We finished the quarter with 153,000,000 dollars in cash and 0 drawn on our $250,000,000 revolving line of credit. Turning to our raised outlook for fiscal 2025.

The supplemental financial presentation that we released today, I'll I will be speaking to the high end of the range for both periods in my following remarks.

As we look to the Q4, we expect total total sales at the high end of our guidance range to be $460,000,000 We expect consolidated same store sales to increase 7.8% with a retail store same store sales increase of 7.2% and then e commerce same store sales increase of 12.1% We expect gross profit to be $168,000,000 or approximately 36.5 percent of sales. Gross profit reflects an estimated 120 basis basis point increase in merchandise margin, partially offset by 60 basis points of deleverage in Our income from operations is expected to be $51,000,000 or 11.2 percent of sales. We expect earnings per diluted share in the 4th quarter to be $1.26 and our effective tax rate is estimated to be 25.4 percent. Based on our Q3 performance and 4th quarter outlook, we are raising our full year guidance. For the full fiscal year, we now expect total sales at the high end of our guidance range to be $1,920,000,000 representing growth of 15% over fiscal 'twenty 4. [indiscernible] now expect same store sales to increase 5.9% with a retail store same store sales increase of 5.4% and e commerce same store sales growth of 10.2% We now expect gross profit to be $716,000,000 or approximately 37.4 percent of sales.

Gross profit reflects an estimated 110 basis point increase in merchandise margin driven by supply chain efficiencies Boot buying economies of scale and growth in our exclusive brand penetration of 100 basis [indiscernible] Our income from operations is expected to be $241,000,000 or 12.6 percent of sales.

We expect net income for fiscal 'twenty 5 to be a $182,000,000 representing growth of 24% over fiscal 'twenty 4. We now expect earnings per diluted share to be $5.90 a $0.30 increase from our prior guidance of $5.60 We continue to expect our capital expenditures to be $120,000,000 We expect to open 21 stores in the 4th quarter and 60 new stores this fiscal year or 15% new unit growth. Now I would like to turn the call back to John for some closing remarks.

Thank you, Jim. We are very pleased with our Q3 results. And we believe we are well positioned for a strong finish to our fiscal year. I would like to thank the entire team across the country for their dedication to Boot Barn and our customers. I would like to open the call for questions. We'll now begin the question and answer session. And your first question today will come from Matthew Boss with JPMorgan. Great, thanks and congrats on another Nice quarter. Thank you, Matt. So John, maybe to start off, could you elaborate on traffic and demand that you're seeing across categories in January or [indiscernible] any areas of continued momentum post holiday And then as we think about moving forward, any change in the business you're thinking about it relative to the historical low to mid single digit comp algorithm?

Yes, Matt, I'll start with the first part and then get to the second question. So as we got into January and we of course have to start with January is the [indiscernible] holiday and then we get into February and of course our 5 week March. But looking at the specific departments in January, we saw an acceleration in both men's and women's western categories. Specifically Boot and apparel.

So we saw nice business in those 4 major merchandise categories. As we look forward to the remainder of the quarter, there's nothing that we're seeing makes us feel any different about the business. It was a strong start to our 4th quarter and we think that will continue Easter, of course, has pushed out into our next fiscal year. But that's a very, very small piece of our business. So we're not expecting any major impact from that.

And then as we look to next year, again, too early to guide, but we always say we like to start with the low to mid single digit algorithm and start to build our budgets there. But again, we're too early to guide or talk about next fiscal year.

Great. And then maybe Jim, just as we think about merchandise margin and multiyear drivers, of merchandise margin. Could you help break down what remains whether it's private label, and just by basically how to think about some of the remaining levers in the merchandise margin?

Sure.

As we look to Q4 and I'll start there and then go bigger picture, we expect to see the merch margin driven by the same drivers we've seen in Q3 and much of this year we're guiding that 4th quarter merch margin up 100 and 20 basis points with a little more than half of that increase driven by supply chain efficiencies and the balance coming from better buying economies of scale, vendor discounts and 200 basis points of exclusive brand penetration. As we get to next year, the supply chain efficiencies really started about a year ago. And so we've seen the benefit of those throughout this year roughly 70 basis points of improvement on this year.

Those will stay with us, but we're not planning those to continue with us in improving in any significant manner. So right now, I'd strip those out As we look to merchandise margin drivers outside of those as we get into next year, the baseline as being 30 or 40 basis points of merchandise margin expansion. We expect that over the next 5 years or so, we'll average roughly 200 basis points of exclusive brand penetration growth, so maybe half of that 30 basis points to 40 basis point comes from continued exclusive brand penetration.

Growth and then the other half coming from better buying economies of scale that we've we've seen this year. It's really partnering with vendors and and continuing to see the volume discount that they've given us, whether that's us taking possession of a full container loader product and getting a better discount or the scale that we've been growing at and the growth our vendors have seen has allowed us to go back and get some discounts from our vendor partner and they've been really cooperative in that and we expect to continue to see those discounts increase as we move over the next 5 years.

Great. Congrats again.

Thank you, Your next question today will come from Peter Keith with Piper Sandler. Please go ahead.

Thank you. Good afternoon. So John, at ICR a couple of weeks ago, when you were describing fiscal Q3, you talked about it wasn't really any fashion trend or anything. I think you're attributing a lot of strength to just execution and and bringing in more inventory So I guess the heart of the question is [indiscernible] Those elements now continue with January and and the rest of this fiscal Q4 and maybe even in the coming quarters? Did note inventory does remain elevated, not thinking about it as a markdown risk, but is this an investment that you think will continue to drive same store sales growth?

Yes, Peter, I do. Looking at January as we came out of Q3, from an quarter and began our Q4. Our markdown inventory is [indiscernible] without a fashion risk. As I talked about when we were at ICR, I took another peek at the top 200 products selling, which make up a disproportionate amount of our sales and nothing stood out as high fashion. So we feel that it's not a fashion business. We are in a good position inventory wise, not seeing any supply chain disruptions. So feel quite good about the inventory position and the type of inventory as we go into this Q4 into next year.

Okay, very good. And And maybe just following up on the last question with the merch margin expansion remaining quite impressive.

The supply chain efficiencies, Jim, could you speak to that? It seems like there's both a combination of lower rates And then you're leveraging a more centralized distribution center deliveries to the store Are those dynamics going to get lapped? Or is that something that you'll continue to try to leverage for several years?

Yes. We will continue focus on finding efficiencies and leveraging those. I just don't want people to put in their models another year like we had this year as far as efficiencies. As we get to May, we'll fine tune that as we build those up from really the bottom Boot bottoms up will really be able to give you a better number on Boot. But it's probably going to be in that 10 basis points, maybe increase next year, not 70 or 60 basis points. And just to give you some more detail on that, as you call that, it wasn't negotiated rates or renegotiated rates with the shipping logistics partners. And we'll continue to work with them. And as we get scale, we expect to see better rates with them. The Kansas City distribution center that went live over a year ago, we really have been seeing some nice efficiencies there. Our folks in Fontana have continued to operate at a very high level and helped with efficiencies. And so we don't expect those to top out at this point. And expect to see some more efficiency there. Boot it's not going to be in the same tune what we saw this year.

Okay.

Very helpful. Thanks so much guys.

Thanks, Peter. Thanks, Peter.

Your next question today will come from Steven Zaccone with Citi. Please go ahead.

Great.

Good afternoon. Very much for taking my question.

First question was on the top line. Clearly, the business is seeing a lot of [indiscernible] are there areas where you'd like to see incremental improvement over the course of calendar 2025, whether that's by channel or product category, And then along those same lines, what gives you confidence you can comp the comp in some of these categories where you've seen improvement already like ladies and men's western?

Yes. I'll jump in with where we'd like to see some improvement. As we talked about this sequential improvement in January over Q3, in Men's Western Boot and Apparel Women's western boots and apparel, of course, something had to have a little more of a struggle and that was work boots. So, there's no crisis work boots by any means, but we'd like to see our work boots perform better and we're doing some work around each brand, lace up versus pull on to figure out what more we could do on the work Boot side. So Work Boot is the one place I'd like to some improvement in the business.

And while not guiding next year by category or guiding next Boot, at all at this point. The strength we have seen in denim, we expect that to continue be with us. We also have some easier comps in the ladies business early on in the year and we have some really nice momentum in that business so we would expect to see that carry forward. And the men's business has been really strong all year and really for longer than a year, we expect that momentum to continue with us. But the ladies has a little bit easier path to comping the comp.

Okay. That's very helpful. And then I hate to be the guy that asked the tariff question, but just given some of the headlines, can you just help us understand your current exposure to Mexico?

Maybe how you're reacting to some of these headlines? And then remind us what happened the last time when tariffs were put into place How did you go about negotiating some of that pricing with vendors versus passing it on to the consumer?

Yes.

We're as a reminder, we're 30 percent on order with China, 25% on order with Mexico. China is more rubber soled performance Boot and apparel of course. And then Mexico is where we make our leather sold cowboy boots and where the some of the best leather sold cowboy boots or most of the leather sold cowboy boots are made We are testing other countries, but we're not going to overreact right now. There are great boots made in Mexico and there's supply chain efficiencies we're looking at in terms of how we bring those boots up and how we go about manufacturing those boots and then putting some pressure on our vendors. And then we will maintain margin. So we'll have to pass If there is a significant tariff, we're going to have to work on getting better pricing. Some economies of scale on the supply chain and perhaps passing some of that price increase on to the customer to maintain our margin profile.

Okay. And then I'll just add it.

It really kind of depends, Steve, what what the tariff number is, right? The first 10% or so is a little easier to navigate through than the second 10% it goes up higher than that. And our last time we were able to get some concessions on pricing from our our 3rd party vendors as well as our factories on the exclusive brands. We would expect to see that again. And there were some price increases that we did pass through last time and that's as John mentioned that's what we'd be looking at as well.

Okay.

Thanks for that detail. Best of luck during rodeo season.

Thank you.

Your next question today will come from Max Rucklinko with TD Cowen. Please go ahead.

Hey, thanks a lot guys and congrats on the continued momentum.

Thank you. First question is are you guys thinking about density and cannibalization How close can you get some stores near one another? And what do you see happening with mature stores when a new store does open nearby? And then separately, do you think about taking share from peers versus growing the entire market? When you continue to grow penetration in various cities?

Sure. I'll jump in on that one, Max. As far as the density and cannibalization, it really depends on the market. If it's a more rural or even a suburban market, we tend to put those stores farther apart obviously than if we're in a densely populated area. Think Houston and Dallas Southern California, Phoenix area, we've been able to put stores within 10 miles of each other and still see some really nice success. As we go into our approval meetings and looking at real estate, we'll factor in any cannibalization into the payback So we've got to clear the new store that's being proposed has to clear the hurdle of the cannibalization from the store that it has. We have not seen as much cannibalization as we would have thought we would have seen going back several years. We are approving deals that have some level of cannibalization and we factor that in and they're paying back nicely. And so long answer to the first part of your question, Max, but it really depends on the market and how rural it is. In determining the density. Your second question was around or second part of the question was around mature stores and what we're seeing around mature stores.

The new stores are on a nice path to get up to that mature store level. The waterfall we've talked about over the last couple of quarters is starting to play and for everybody's benefit on this call. Stores used to open at Yes, $1,700,000 when we first went public was our target Boot 75% of what a mature store does. And waterfall up to maturity over the course of 5 or 6 or 7 years. It looks like we're seeing that since the stores that we've opened over the last 3 years or so have been opening at $3,000,000 or north of $3,000,000 we're seeing that 2nd year of comp outperformed the chain average by about 5 points. And while still a little bit early that 3rd year of comp is also outperforming Boot as much as that 2nd year comp, but outperforming the chain average. One interesting thing that came up This morning when we're going through some reports, we went back and looked at stores that had opened 6 to 8 years ago [indiscernible] in year 1, those stores averaged 1,900,000 dollars in sales. And today, on average, those 3 years of stores are doing $3,800,000 So they've doubled their sales volume over the last since they've opened in that 6 to 8 year period.

And then as far as the third part of your question taking share from local competitors We've put out some surveys in the past and some of our slide decks and talked about how we're taking share from others in the trade area. And we're also seeing some nice improvement from existing customers that have been with us for quite a while and growth in what they're purchasing. And so whether that's them purchasing more of the product, is probably taking some share from where they used to purchase these additional items years ago.

Got it. And then John, are there any changes or pivots that you'd like to see made to the product assortment either on the western or work side including fashion versus function And just any other areas where the business could evolve on the product side now?

No. I mean, no, we're very happy with our assortment. We're not going to lean in, of course, more fashion I talked about some of the small challenges we're facing on the work boots side. So those are worth calling out.

Probably the and this isn't a large change at all, but small tweak might be the as we open this aperture to the Just Country customer and increase the TAM by $15,000,000,000 as part of that.

We could go after that Just Country customer a little more. That's perhaps more folks who weren't going to wear a cowboy hat, now they're wearing a baseball hat. Maybe it's some different denim shirts that don't always have a traditional West yoke, those sorts of things. But in general, we're quite happy with the 4 segments and the product assortment we have for those 4 segments. Got it. Thanks a lot guys and best of luck in Q4. Thanks, Max. And your next question today will come from Janine Stitcheter with BTIG.

You've got Ethan Sagi on for Janine. Thanks for taking my questions. Could you provide some more detail on the opportunities you see going forward in private label, particularly for men's and work? [indiscernible] We have our Hawx exclusive brand and Cody James. Cody James has always leaned a little more Western think oil workers, pull on work Boot, And then we've had Hawx, which has been more competitive with what you what most folks probably think of as traditional Western brands with lace up work boots. The lace up work Boot is probably the one we see more work side. Hawx has turned into a really nice business for us and we think there's more upside in Hawx as it's a newer business in the Boot Barn portfolio. Cody James is not mature by any means, Boot that kind of more traditional work assortment when you think work that Hawx is, I think has some nice potential for us. Got it. That's helpful. And then just one more for me. You previously talked about some of the temporary factors impacting expense leverage this year.

And I know you laid out some of the the groundwork for merch margin expansion next year, but could you talk about some of the other margin drivers you see for next year? And where you see some of the leverage points shaping up for certain line items?

Yes. It's a little early to talk too much about the detail of next year and how the things are going to roll up, different expense line items and and SG and A, but a couple of things I'll point you to. This year, we had some outsized increases in our lease expense related to our new corporate headquarters. And so we saw a step up in that and that should be flat in [indiscernible] the call. So that should be a help to SG and A. This year, we also were up against pretty low incentive based compensation given the performance of the company a year [indiscernible] the growth level anyway. And so this year, as we've built back some of that incentive based compensation, that's been a drag on the business even with the reversal that we talked about with Jim leaving last quarter and some of the expense reversal we have with that, it's still a headwind this year compared to Last year, despite the tailwinds of Jim's departure. And so next year as we get into the planning around the incentive based comp, that should be a little bit of a positive for us. Other line items in there around insurance and that sort of thing was have to work through the renewals and see where those are coming and build that up.

We also had a legal settlement charge this year that shouldn't repeat with us next year that was pretty sizable. So those are some of the things that we're starting to think about as we look into next year, but not anything significant or meaningful that we see on our radar that we'll need to expense besides just a normal growth in the business, adding some additional headcount to support 60 to 70 stores that will open next year. So 65 to 70, I should say, that we plan to open next year. New regional Vice President, District Manager, some of the support team that will need to support that growth. But nothing in that I think would be meaningful on the P and L, SG and A. Got it.

Really appreciate all the color. I'll pass it on. Yes. Thanks, Ethan.

And your next question today will come from Cory Tarlow with Jefferies. Please go ahead.

Great. Thanks and good afternoon.

John, I just wanted to ask on the increase in transactions that you've seen obviously speaks to the really continued health of the business in my view. Could you just talk about if there's any sort of behaviors that you're seeing that are changing? I think your customer visits you twice a year on average, but is that new customers? Is it existing customer visiting more frequent Would just be curious to get a little bit more flavor around the health of the transactions that you've seen? Yes. So yes, the plus 8% and change for the quarter, so 6 points of that coming from transactions, which is our proxy for traffic. I hate to give a boring answer, but we spend a lot of time looking at our customers by income demographic. By customer segments, and the health of our customer and the frequency that our customer is shopping is very consistent It's also very consistent between the penetration of Western works Wonder Westfashion and Just Countries. We haven't seen any real swings. We have reassorted over the last [indiscernible] are kind of good, better, best and feel that we are we are nicely positioned and at the best level with exotic boots and and 7 for all mankind jeans.

And then at the good level, we've got some new Western shirts that are performing very well and we feel good about level of product and inventory we have in our stores for the customer that might be at that lower income bracket. So all that to say, it's been incredibly consistent. And I think part of that is full credit to the merchandising team for having the product at each level of good, better and best to meet those customers' needs.

Understood. Very helpful.

And then I guess for Jim, You talked about in response to a prior question, I think it was 30 to 40 basis points of merchandise margin expansion long term.

Is there any way to also think about as you continue to add these new doors, what [indiscernible] B and O deleverage component would be And theoretically, I would think that should lessen over time as you continue to scale and build out the infrastructure. So I'm curious what that aspect might look like over time, if you have any color on that?

On the buying and occupancy deleverage, it's really a function of growing 15% new units a year. And in the The next 2 years or so, we'll have the hurdle on rate of having increased our store openings from 10% new units a year to 15% new units a year. And so that puts some pressure on that. I'm not going to provide a guide on what the leverage points will be for the next few years. We talked about roughly 6% same store sales growth in order to leverage buying and occupancy was the number we put out there this year. It's probably a good baseline for next year to put in your model. But we'll give you an update on that when we get to the May call. As we start to cycle the 15% new units, opening and we're seeing the new stores that we've opened at these higher volumes at a higher flip waterfall over the next couple of years. That does help that leverage point a little bit I don't think that comes down to a 3 or a 4 comp. It maybe comes down [indiscernible] point as far as the comp needed to leverage that.

The fastest thing we could do to leverage buying an occupancy and distribution center Boot would be to stop opening new [indiscernible] that would help the rate. It would hurt the earnings dollars. And so that's something that we're not looking at. So it's something that will be with us for a while as we continue So that's how we're looking at Got it. Thank you very much. Very helpful. [indiscernible] Your next question today will come from Jeremy Hamblin with Craig Hallum Capital Group.

Thanks and congrats on the strong results. I first wanted to just come back to making sure I understood some puts and takes here in thinking about SG and A on a go forward basis. So think just the math on a pretax basis on the CEO transition benefit in the quarter I think works out to about $9,000,000 pretax. Wanted to just get confirmation on that and also just confirmation that all of that falls just in the Q3?

The $6,700,000 Is the SG and A number, it's not a $9,000,000 number Jeremy. And it's really a function that those costs or those reversal of expenses were not tax deductible And so they flow completely to the bottom line and to to net income. So it was a $6,700,000 reversal of that expense in the quarter. And yes, that was a one time was with us that you reversed the multiyear incentive based stock comp and then any annual incentive award that was being accrued thus far this year. So that will not be a benefit as we go forward as far as there won't be any more to reverse out of the P and L. Great. Thanks for the color. And then just switching gears here to thinking about merchandising product assortment as as we look forward, you've had a tremendous amount of success here. And a lot of momentum recently. You mentioned what you're seeing in men's and women's and the western side. But as we look ahead, I wanted to get a sense John, what you were thinking in terms of specific categories that you feel there's real opportunities here as we get into FY 'twenty six.

Where do you see kind of the best opportunities, maybe something that you didn't execute as well on in FY 'twenty five or other specific categories where you feel like maybe there's opportunities Yes. I think that the biggest one that comes to mind is Continuing what we accomplished in the Q3, there but it was very eye opening to see the commentary from the store partners or associates as we visited 20 plus stores during the holiday season, about the level of inventory, the freshness of the inventory, being in stock in denim, Those things weren't necessarily true the entire year. So I think the holiday season and how well the merchandising and planning teams and the store operations teams executed that holiday season is something that has reenergized how we're going to approach inventory in assortment planning as we get into as we get into next fiscal year.

So in terms of trends, if that's where you're going, we're not seeing any big shifts in trends We're not seeing a move much deeper into flannels or western yolks, anything of that sort. Our denim continues to be mostly boot cut. We're not seeing contemporary silhouettes like barrel jeans and things of that selling in our store. We've tested a couple So I think it's pretty steady in terms of the aesthetic and what we sell. It's really how we prepare for the for some of the larger selling seasons like rodeo season as we get into it? We feel the very energized by the performance from the holiday season.

Great. Thanks for taking the questions and best wishes.

Thank you.

Your next question today will come from Ash Lee Owens with KeyBanc Capital Markets. Please go ahead.

Thanks for taking the question. Just one quick for me here. But kind of wanted to talk about the ATV and maybe some of the decline you're seeing there quarter to date in the 4th quarter.

Just any big change in trend that you're noticing, maybe pricing or just a mix shift, any color you could provide there would be helpful? [indiscernible] I don't know if you cut out or what. You're asking if the average transaction value was that what you're asking if that declined during the quarter? Sorry, if I missed that.

Yes. And more so on quarter to date in 4Q.

Yes. So looking at the The comps for the 3rd quarter we comped up 8.6% We've guided the 4th quarter 7.8%. So far in January, we're up 8.3%. So we've seen some really nice continued growth and those are all transaction based numbers. And if you look at the basket size or the which is a mix between the units per transaction that was up 2% during this last quarter and AUR was kind of flat for us in the 3rd quarter. We would expect to see the growth that we're seeing in January. I guess January has followed a consistent pattern as far as the The AUR being flattish, UPT being up a little bit and really being led by transactions. As we get through the rest of quarter, we expect that trend to continue. As far as the maybe where you're going with this question is on the the same store sales and that the 4th quarter guide is a little bit below the Q3 guide despite January still being a plus 8. We've looked at the trends over the last 4 months. Q3 and January and we looked at historical seasonality and how that rolls out into February March, And that's really how we've guided that quarter, which while down just a little bit from a deceleration from a plus 8.6%, a plus 7.8% is we feel a very strong guide and reflective of what the recent trends on the businesses, Part of that in March, we do have a little bit tougher comp than we have in January February.

Boot didn't feel like guiding something above a 7, 8 was appropriate.

Great. Thank you.

Thanks, Ashley.

And your next question today will come from Jonathan Komp with Baird. Please go ahead.

Yes. Hi, good afternoon. Thank you. Sorry if you've touched on this already, but I'm curious if you could share more light on the e commerce acceleration, the performance looks very good there and I'm wondering if there's anything specific that you'd highlight in terms of the execution or other drivers? Yes. The e com business is driven, of course, mostly by Boot Barn dotcom, more than seventy 5% of our e commerce business is from bootbarn.com, Sheplers, Sheplers Amazon Business and Country Outfit are nice businesses, but all those together make up the remainder of the business. The e commerce business is driven by transactions and of course we know traffic on site. So it is a traffic driven business, which is the best answer. In Q3, for example, we had over 1,000,000 people visit our store locator page on bar.com. Our goal is always to take a e commerce customer and turn them into a stores customer But we're seeing nice business on e commerce driven by traffic. And so of the gains we're seeing on the the Google paid side, it's called PMACs for those who care. Boot Google has a tool that has been very good at finding us new customers and will we'll never chase an unprofitable transaction from an e commerce standpoint.

We hold ourselves above a 4 on return on advertising spend and we've been able to find more customers that match that gate that we put on ourselves. So we've had better luck finding new customers and prospecting customers online. It's driven a lot of traffic to the site and conversion has been relatively steady. Of course, it came down in January versus the holiday quarter, but it is flat in January year over year and it really is a traffic story.

Yes, that sounds encouraging. And then just as we think about the stores, I know you're not a promotional driven business, but just a few of the your typical campaigns and things that run during the year. Any you thinking any differently as you look ahead the next few quarters about any of the plans there? Thanks again.

I think one of the only small tweaks we'd make is we've been happy with how connected TV has performed. And we've been very happy with some of our artist collaborators. We had Gelli Roll, Morgan Wallen, Corinne Leone, last year and we feel good about continuing to look for opportunities with different artists and of we have the long term relationships with Miranda and Brad that have been incredibly successful. So we will continue to lean into artist collaborations sponsoring Morgan's Festival, down in Gulf Shores of Alabama coming up this spring Send in my boots, it will be the Boot Barn Stage. That is going very well. And and continue to use traditional radio. So we're not big fan of connected radio. We're a bigger fan of connected TV, allows to get allows us to get into markets that would otherwise be too expensive for some of our media buys. So that's a Yes, that's great, Steph. Thanks, Ken.

Thanks, John.

This concludes our question and answer session. Would like to turn the conference back over to John Hazen for any closing remarks.

Thank you everyone for joining the call today. We look forward to speaking with you on our 4th quarter earnings call. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.