BOOT - NYSE

Good day, everyone, and welcome to the Boot Barn Holdings, Inc., First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Mr. Mark Dedovesh, Senior Vice President of Investor Relations and Finance. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's First Quarter Fiscal 2026 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 on the Investor Relations section of Boot Barn's website at bootbarn.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days on the Investor Relations section of the company's website. I would like to remind you that certain statements we will make 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 first quarter fiscal 2026 earnings release as well as our filings with the SEC referenced in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. I will now turn the call over to John Hazen, Boot Barn's Chief Executive Officer. John?

Thank you, Mark, and good afternoon. Thank you, everyone, for joining us. On this call, I will review our first quarter fiscal '26 results, discuss the progress we have made across each of our 4 strategic initiatives and provide an update on current business. Following my remarks, Jim Watkins will review our financial performance in more detail, and then, we will open up the call for questions. We are very pleased with our start to fiscal '26 as first quarter results significantly increased compared to the prior year and exceeded our expectations. First quarter revenue increased 19% to $504 million, and consolidated same-store sales increased 9.4%. In addition to strong sales growth, merchandise margin rate increased to 180 basis points compared to the prior year period. The strength in sales and margin, combined with solid expense control, resulted in earnings per diluted share of $1.74 during the quarter, which equates to 38% growth compared to the prior year period of $1.26. The team's ability to deliver strong top and bottom line results reflect the execution of our 4 strategic initiatives, which I'll now spend some time discussing. Let's begin with new store growth. We opened 14 stores in the first quarter, ending the period with 473 stores across 49 states. Our new stores continue to exceed expectations across all geographies and are projected to generate approximately $3.2 million in annual revenue and payback in less than 2 years. We are on track to open 65 to 70 new stores this year in both legacy and new markets. In addition to strong revenue in their first year of operation, new stores are also helping drive same-store sales growth once they turn comp. New stores opened over the last 6 years currently comprise approximately 40% of our comp store count and have outperformed stores opened prior to 2019 by approximately 350 basis points over the last year, resulting in more than a 100 basis point tailwind to consolidated comps. We are very pleased that our new stores are continuing to attract new customers and grow sales after their initial opening, which couples nicely with our sales and customer growth in legacy stores. This underscores the growth potential of our new store initiative, as we believe we have the market potential to double our store count in the U.S. alone over the next several years. Moving to our second initiative, same-store sales, first quarter consolidated same-store sales grew 9.4% with brick-and-mortar same-store sales increasing 9.5%. Store comp growth was driven by an 8.5% increase in transactions and a 1% increase in units per transaction and flat average unit retail. From a merchandising perspective, we saw broad-based growth across all major merchandise categories in the first quarter, led by the combined ladies' western boots and apparel businesses, which comped positive mid-teens. This was followed by the combined men's western boots and apparel businesses, which comped positive high single digits. Our denim business, which is included in the figures just mentioned, comped positive high teens. Our work boots business comped low single- digit positive, and our work apparel business comped high single-digit positive. We are extremely pleased to see the broad-based growth across categories continue through the first quarter. From a store operations perspective, I am proud of the team's performance, delivering strong results and best-in-class customer service during an especially busy quarter. In the first quarter, the team was able to open 14 new stores, navigate the complexity of several large-scale remodels and work through labor-intensive re-ticketing on third-party goods. I would like to extend a heartfelt thank you to the entire field organization for their hard work and dedication. Moving to our third initiative, omnichannel. In the first quarter, e-commerce comp sales grew 9.3%, and bootbarn.com, which is approximately 75% of our online sales, comped low double-digit profit. We are very pleased with the momentum in our online business and the continued innovation from our omnichannel team. The team is actively advancing its AI initiatives, including the rollout of our new AI-powered search functionality on our websites. Boot Barn now leverages AI to enhance product copy, support store associates through our Cassidy assistant, develop multimedia training modules and power the new search experience. In addition to improving our technical abilities, the team's focus on being a store's first organization continues to generate benefits. More than half of our online orders are being fulfilled by the stores, which helps increase merchandise margin and provides the customer with a broader assortment of merchandise to shop. Buy online pick up in store and ship to store have both reached record levels, which will drive increased traffic to our stores, help to reduce shipping costs and improve customer loyalty as we encourage them to shop both in-store and online. Now to our fourth strategic initiative, merchandise margin expansion and exclusive brands. During the first quarter, merchandise margin increased 180 basis points compared to the prior year period. Remarkably, merchandise margin rate has increased approximately 630 basis points over the last 6 years or over 100 basis points per year on average. First quarter exclusive brand penetration increased 250 basis points to 40.6% of sales. I am proud of the team's commitment to drive sales growth while increasing merchandise margin and growing exclusive brands. From a marketing perspective, we are using the creative team's outstanding content to further support our own exclusive brands, starting with our leading work brand, Hawx. In the first quarter, we launched a new website and marketing campaign for Hawx that focuses on work boots and clothing for blue collar workers across industries. We are encouraged by the early returns, and the positive results give us confidence to move forward with our strategy to market our exclusive brands directly, and we expect to launch a direct marketing campaign later this year to support our leading men's brand, Cody James. I'd now like to provide a recap on our pricing strategy as it relates to tariffs, which remains consistent with what we shared on our call in mid-May. We have received third-party cost increases from our vendor partners, and our field organization has begun re-ticketing these items to reflect the new MSRP. We expect the re-ticketing of third-party items to be completed by the end of August, resulting in maintaining merchandise margin rate. For exclusive brands, we are planning on hold -- we plan to hold off on price increases until the fall in order to gauge price elasticity. We will then review exclusive brands by individual style to determine if we should raise or hold price on certain items, which could result in giving up margin rate in order to maintain or gain market share. Now turning to current business. We are 4 weeks into the second quarter of fiscal '26, and we have continued to see broad-based growth as consolidated same-store sales increased 11.7%, driven by an 11% increase in transactions and a 1% increase in average unit retail. While we are pleased with the start to our second quarter, we are mindful that July was the softest month of the second quarter last year. We remain cautious of overall consumer sentiment and macro uncertainty, and we'll continue to manage our business prudently. I would like now to turn the call over to Jim.

Thank you, John. In the first quarter, net sales increased 19% to $504 million. The increase in net sales was the result of the incremental sales from new stores and the increase in consolidated same-store sales. The 9.4% increase in same-store sales is comprised of a 9.5% increase in retail store same-store sales and a 9.3% increase in e-commerce same-store sales. Gross profit increased 26% to $197 million compared to gross profit of $157 million in the prior year period. Gross profit rate increased 210 basis points to 39.1% when compared to the prior year period as a result of a 180 basis point increase in merchandise margin rate and 30 basis points of leverage in buying, occupancy and distribution center costs. The increase in merchandise margin rate was primarily the result of better buying economies of scale, lower freight expense and growth in exclusive brand penetration. The leverage in buying, occupancy and distribution center costs was driven by lower incentive- based compensation and lower distribution center labor cost in the current year period, partially offset by the occupancy cost of new stores. SG&A expenses for the quarter were at $127 million or 25.1% of sales compared to $107 million or 25.2% of sales in the prior year period. SG&A expense as a percentage of net sales decreased by 10 basis points, primarily as a result of lower incentive-based compensation in the current year period, partially offset by higher marketing expenses due to timing. Income from operations was $71 million or 14.0% of sales in the quarter compared to $50 million or 11.9% of sales in the prior year period. Net income per diluted share increased 38% to $1.74, which compares to $1.26 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 $774 million and increased approximately 2.7% on a same-store basis. Total inventory increased as a result of adding 15% new stores and growth in exclusive brands. We feel good about the health of our inventory, and our markdowns as a percentage of inventory are below last year and below historical levels. During the quarter, we purchased approximately 78,000 shares of our common stock for an aggregate purchase price of $12.5 million as part of our authorized $200 million share repurchase program. We finished the quarter with $95 million in cash and 0 drawn on our $250 million revolving line of credit. Now turning to our raised outlook for fiscal '26. We are increasing full year guidance due to our first quarter results and the strong start to our second quarter. We are maintaining our original guidance for the second half of the fiscal year, which assumes that the uncertainty around tariffs and the resulting impact on consumer spend will result in flat comps in the second half of the year, and unmitigated tariff expenses will increase our cost of goods sold, resulting in a merchandise margin decline in the second half of the fiscal year. The supplemental financial presentation that we released today outlines the low and high end of our guidance range for both the full year and second quarter. I will only be speaking to the high end of the range for both periods in my following remarks. For the full year, we expect total sales to be $2.18 billion, representing growth of 14% over fiscal '25. We expect same-store sales to increase 3.5% with a retail store same-store sales increase of 3.0% and e-commerce same-store sales growth of 8.5%. We expect merchandise margin to be $1.10 billion or approximately 50.3% of sales, a 20 basis point increase over the prior year period, which includes exclusive brand penetration growth of 160 basis points. We expect gross profit to be $812 million or approximately 37.2% of sales. We anticipate 50 basis points of deleverage in buying, occupancy and distribution center costs due to the occupancy of new stores and 50 basis points of leverage in SG&A. Our income from operations is expected to be $277 million or 12.7% of sales. We expect net income for fiscal '26 to be $206 million and earnings per diluted share to be $6.70. We plan to grow new units by 15%, adding between 65 and 70 new stores during fiscal '26. We expect our capital expenditures to be between $115 million to $120 million, which is net of estimated tenant allowances of $35 million. And for the balance of the year, we expect our effective tax rate to be 26%. As we look to the second quarter of fiscal '26, we expect total sales at the high end of our guidance range to be $495 million and a consolidated same-store sales increase of 6.5%. We expect the merchandise margin to be $249 million or approximately 50.3% of sales, a 70 basis point increase over the prior year period, which includes a 250 basis point increase in exclusive brand penetration. We expect the gross profit to be $178 million or approximately 36.0% of sales, which includes 60 basis points of deleverage in buying, occupancy and distribution center costs. Our income from operations is expected to be $53 million or 10.7% of sales, a 130 basis point increase over the prior year period. We expect earnings per diluted share to increase 34% to $1.27. Now I would like to turn the call back to John for some closing remarks.

Thank you, Jim. We are very pleased with our first quarter results and the positive momentum that has continued into the current quarter. We continue to be confident in our ability to execute on our 4 strategic initiatives and drive growth in the current fiscal year and over the long term. I would now like to open the call for questions. Operator?

[Operator Instructions] The first question comes from the line of Matthew Boss with JPMorgan.

Great. And congrats on the next quarter.

Thanks, Matt.

So, John, could you speak to drivers of demand strength in the first quarter and elaborate on the acceleration in July, notably the double-digit transactions? And then, if you could just walk through the bridge math to flat comps in the back half of the year.

Yes, absolutely. Yes, as you said, Matt, we went from -- the transactions went from 8.3% in Q1 to double digit in July, so almost all of that comp growth in July was driven by transactions. AUR was up 1% in July as some of those price increases have started. The performance was really broad-based. It was strength across all of our regions. We saw positive comp trends throughout July across all major merchandise categories, but the one worth calling out is denim. We continue to believe that denim is going to be -- we're going to be a denim destination. It's a standout category for us, especially on the women's side, across both third-party brands that we carry and our own exclusive brands. And we delivered double-digit growth in both men's and women's denim during the quarter. But that transaction growth, I have to give credit to our team, both from a store operations side and how they convert those customers in store as well as the marketing team that continues to lean into cultural moments that really resonate with our customer. Looking to the back half of the year, as we said on our first call, we had applied a haircut to Q3 and Q4 to those flat comps, and we still believe, given all the noise around the macro environment that there will be -- could be some softening of consumer demand during that time. That flat comp in Q3 and Q4 is not a result of solely mid-single-digit price increases on our third-party brands, but rather the macro environment continued to be somewhat at risk.

Great. And then maybe, Jim, as a follow-up, could you speak to what you saw on markdown levels relative to a year ago in the first quarter and then here in July? And what's embedded in your merchandise margin outlook as it relates to promotional activity and pricing in the second quarter and back half of the year?

Sure. The markdowns have continued to be low, pretty low or very low, I should say, when compared to last year and also historical levels, pre-COVID. They're very low. And so we're expecting that to continue with us, the markdowns to be low. We feel that our inventory is in a very healthy position. It's fresh. We've got the inventory that we want, as we head into the back half of the year and this most upcoming quarter.

Next question comes from the line of Peter Keith with Piper Sandler.

John, you had mentioned around Hawx that you're starting to do some marketing and branding around Hawx. And I know -- I think you did some marketing with Cody James, had some concert activity earlier in the year. So I'm wondering if this is a new initiative around exclusive brand marketing. And could that sort of be an early indicator of distribution of these brands outside of Boot Barn over time?

Yes. Peter, it's -- when I took the permanent role, we kind of talked about the adjustments I was going to make under the 4 strategic initiatives, which were the sourcing initiative, our exclusive brands and reinvigorating the work business. And the one that we've made the most progress on thus far is the exclusive brands piece. It's easier to move quickly on some of these marketing initiatives. We've been very pleased with the early results around Hawx and our ability to advertise the brand using Meta's tools to target blue collar customers we weren't, otherwise, be able to target and find. And it's been a pretty material spend over the quarter that's resulted in millions of impressions and over 1 million sessions as well to the Hawx site that we launched, a bilingual site in both English and Spanish. Cody James at the Morgan Wallen Festival in Gulf Shores, Alabama was a great success. We got a lot of coverage, again, millions of impressions and reels views around that concert. And it was the first time we sponsored a stage at a concert with one of our exclusive brands. So that was exciting as well. We're going to -- I've directed the team to take Cody James and mimic or copy paste what we have done with Hawx and launch a dedicated site for Cody as well and implement many of the same marketing techniques that we used with Meta's tools, along with some other initiatives, specifically for Cody James. So I'm very encouraged by the early results. There are no plans currently to sell the brands at wholesale to other companies and other retailers, not to say it couldn't happen 1 day. But for now, we're going to focus on driving these brands at Boot Barn.

Okay. Very good. And on the tariff-related price increases, are the supplier price increases kind of the same as when you updated us 3 months ago? I think China and various tariffs have moved around quite a bit. Is it still kind of at that mid-single-digit level. And then it's probably early, but any read on products where prices have gone up, if there's been any demand shifts?

Yes, it is still that mid-single-digit price increase. We're roughly halfway through the ticket -- the re-tickets in stores. We will be completed by the end of August. And so all the third-party price increases will be completed, as I said, at the end of August, and we're going to hold lower for longer on exclusive brands and see what that price elasticity looks like. It's too early to see if there's been -- we haven't seen any slowdown in any particular brand because of price increases. You can see that the July we had was quite nice. And while excessive brands performed nicely in Q1, that was prior to any of the price increases. So it's still too early to see the impact of those price increases.

Next question comes from the line of Steven

I want to stick on the exclusive brand questions for a moment. So could you talk a little bit more about the strategy for that lower for longer pricing? Will you kind of take it month by month to measure elasticity? And then just bigger picture, right, how much bigger can exclusive brand penetration be? It seems like a year where there's a lot of disruption from tariffs. Could we start to see exclusive brand penetration stay above this 40% threshold for some time?

Yes, it was above 40% for Q1, and we expect it to stay in that range throughout the rest and slightly higher than that for the remainder of this fiscal year. We've said publicly that we'd like to get -- I'd like to get exclusive brands to 50% penetration over the next 5 to 6 years, so 100 to 200 basis points of improvement a year. There may be a larger increase this year with some of the lower-for-longer strategy that we are testing. That window is October pre- holiday, or those re-tickets or price increases on exclusive brands would have to happen post-holiday. So if you think of the windows where we either hold or increase prices on some items or many items on the exclusive brand side, it's really October or January, are the 2 windows for those price increases.

Okay. Understood. And then I guess the follow-up I had, just as we think, maybe, Jim, on the cost side of the business, focusing on SG&A, has anything changed in your thinking around the year in terms of hurdle rate for SG&A through the balance of the year?

No. The hurdle rates still remain where they were when we guided them a couple of months ago. Just a reminder, that we could leverage this year SG&A at a flat comp. And so we've got some leverage modeled in for the year. And at the margin side of things on the EBIT, we expect to leverage that at a 3% comp for the year. And maybe that comes down just slightly because the merchandise margin guide for the year has gone up just slightly.

Next question comes from the line of Jay Sole with UBS.

It was an interesting stat you gave on the prepared remarks about how the newer stores are comping better as they mature. And I guess the consumers in those local markets get more aware of them. I think you talked about the stores opened in the last 6 years, but do you see any nuances between, say, stores opened like last year or the year before versus stores that are open maybe 4 or 5, 6 years ago? And if you do, can you talk about those?

Sure. We haven't seen significant differences between the different class years and kind of talked about that a little bit on the most recent call or the last call about how the early opened stores in that 6-year period are outperforming the stores in the more recent periods and so that they continue to gain momentum as they age. And as we look at each of those class years, it's a very consistent behavior and improving and really driving comp waterfall, but then also looking at those legacy stores and seeing that those older stores are still adding good volume despite all the new stores that we're adding.

Got it. And I guess just thinking about what the productivity per store should be given just a huge growth during the post-COVID period and then sort of normalization and then now where we are today. I mean, do you feel like it's sort of smoothed out to where you're seeing consistent trends. And if so, what should the average store, like a mature store deliver in terms of sales per store in a given year?

Yes. We haven't put a target number out there. We've talked about it in the past that the new stores open at 75% of a mature store. And so if you do the math, you'd get to roughly $3.2 million as the sales volume in year 1 for a new store. It's roughly $4.2 million for a more mature store or legacy store. But we plan on growing the comps in those legacy stores into the future. And so that number will continue to go up in the way we're thinking about the business.

Next question comes from the line of Max Rakhlenko with TD Cowen.

Nice job on all the momentum. So first question is on exclusive brands. Can you walk us through the journey of how you're thinking about where product margins can go over time? I think previous comments make it sound like you think that the opportunity to drive upside is quite large. And I think that you do have a new VP of Sourcing. So just curious how we should think about that on a multiyear basis?

Yes. The new Head of Sourcing is on board. Jennifer started a few months back. She's been amazing and a great add to the team, and she's in the process of hiring a full sourcing team here, 10 to 12 folks that we're going to be hiring on the sourcing team. That being said, the gains from sourcing are going to be into mid-'27. And for a full year, it's going to be fiscal '28 by the time we see the gains on the sourcing side. We do think it's going to be over 100 or 200 bps. We think there's an opportunity there, but we are -- but that is -- could be multiyear to get there. She's meeting with all the factories. The team is going through re-costing exercises with many of the factories. So we're not ready to guide nor commit to what those sourcing margin gains will be, but we still believe that there is opportunity there, and that's why we're building out this team.

Got it. That's helpful. And then, on the work side, so with that now flipping positive on both sides of that business, do you think that you can maintain that? And do you think some of the challenges are now behind? Or is it more about just easier compares? And then how do you dissect what happened to that business as it used to be pretty steady pre-pandemic?

Yes. If we look at all the way back to Q1 of last year, we were a negative 1 in work boots. And in this particular quarter, we were a plus 1 in work boots. It has been very steady. Admittedly, Q4 of last year was the toughest comp at a negative 3.1%. But in general, it's a steady business. I'm not ready to declare victory on work boots by any means yet. It is still comping well below the rest of the business. It traditionally does. It doesn't go up or down as much as some of the other merchandise categories. But I still think there's work to be done on -- no pun intended, on the work boot side. And again, early days of the Hawx's initiative. The Cody James marketing will be around the work, the western and the 1978. So there'll be another hit of Boot Barn work marketing coming as we get into September. And hope to have another good update for you guys next quarter. But I don't think it's going to -- there's nothing to indicate that it's going to fall off, but I'm not ready to declare victory that we've gotten work boots back to where they should be in a low single-digit comp for the quarter.

Next question comes from the line of Janine Stichter with BTIG.

Question first for John. Just want to hear your thoughts on the competitive landscape. I know when we were initially going through all this tariff volatility, it seemed like there was going to be a lot of disruption with some of the independents in the market. I'm curious anecdotally what you're seeing in a broader market and if you still see a share gain opportunity from some of this volatility?

Yes. I think we're not uniquely disadvantaged as we look at what's happening with tariffs in the market. Everyone will be facing into the same MSRP increases, and I think our exclusive brands and the inventory position that we are in heading into our Q3 or the holiday season, puts us in a nice place relative to the competition. Again, this industry, one of the great things about it is it's very rational from a promotional standpoint. And I respect all of our competitors greatly, but you do see some of the smaller mom and pops kind of regress and take less risk when they run into these disruptive situation. So I do think we are in a better position than most, if not all, as we head into the holiday season, given our exclusive brands and given how we've approached the last few months.

Great. And then maybe for Jim, on the gross margin, I just want to clarify when does tariff inventory actually start to hit the gross margin? I'm wondering if we have a period here in Q2 when you have ticket increases, but you're not yet flowing through the higher tariffs then.

Yes, that's a correct assumption. So as the price increases go into place on the cost side of things, we're purchasing those goods, but we'll have goods that are in the store that are still purchased at the lower price. And so as we're raising the MSRP that we've been given by the third-party vendors that come along with those cost increases, there is a period of time that kind of in the middle of the second quarter here, where we will have a little bit better of a margin opportunity. And you're seeing that in our guide for the quarter, as we've got our merchandise margin up 70 basis points. That stays with us, maybe to a lesser degree, in the third quarter, but a little bit as we head into the third quarter.

Next question comes from the line of Jonathan Komp with Baird.

I want to ask about inventory. It looks like quarter end, it was up less than 3% on a comp store basis. And just given that you're guiding to flat comps in the back half, is there a risk that you could actually run to lean or run out of goods that you need based on how you're aligning your buying plans?

It's a great question, John. We feel very good about the inventory flow that we've got. If you think about the positive comps that we've got guided here in the second quarter, you're right. Normally, you would see a little bit higher inventory heading into that period, but we've looked at the inventory that we've got, the inventory that's in transit and on order and feel that we've got enough inventory to handle the guide that we've put out there, but also some upside if we needed to -- yes, if we have the good fortune of beating the guide that we put out there, we think that we'll be in a good spot.

Okay. That's very helpful. And then, John, maybe a bigger picture question. You're clearly putting your own stamp on the 4 strategic priorities. Just as you approach in a few months 1 year your interim leadership and permanent leadership, are there any new entirely -- kind of entirely new initiatives or new priorities that you're considering? Or just any other thoughts you have on sort of next frontier of growth opportunities?

Yes, absolutely. No, I'm comfortable with the big 3 adjustments that we are making now; the sourcing, the exclusive brand marketing and really treating those brands truly as real brands and then reinvigorating the work, both how we merchandise the work boots in stores, how we talk about work in general and approach the blue collar customer and the tradesmen. So I catch myself. I think often about different things that we might want to do over time, but it's a lot harder to maintain simplicity and focus than a complexity trap. So I'm sticking with these 3 for the foreseeable future. And yes, there's other things that I think about perhaps as we go into next year. But I think sourcing the marketing piece and work are enough adjustments for the team at this point in time.

Next question comes from the line of Chris Nardone with Bank of America.

So just looking at the 2Q guide, can you just remind us what drove the inflection last August in your business? And just whether you're comfortable with the category mix that's driving the momentum as it relates to fashion product versus your core products?

Yes. So as we went back to -- go back to last year, we saw a kind of a steady increase as we started the year, and really, if you look at May, things turned positive in May, and then, we -- June was positive again, July was general softness in retail. And if you go back and look at our last year transcript, we talked about some toughness in the business from hurricanes and some hot weather out west and different things. And then the business strengthened in August, and we were seeing some broad-based category growth as we look back a year ago in August. And so since August, the business has been in that mid- to high single-digit range really for 12 months now. We had a couple of exceptions, February being the most notable. And so as we head into the month of August, we've got the business guided. And we think accordingly, it's more in that mid-single digit or low to mid-single-digit comp range for August and September to reflect some of the stronger comps that we had beginning a year ago, but we like where the business is positioned. We think the consumer is pretty healthy. They're shopping with us well. And I think we can carry this momentum at least for the next couple of months. And then, John talked earlier about how we're thinking about the back half of the year beyond that and with some of the pressure that tariffs and consumer sentiment may pose for us.

As we look at -- and I'll just add in, as we look at the fashion side of the business, as you mentioned, the penetration of women's apparel is up slightly versus Q1 of last year, but that's entirely driven by our denim business. And I do believe we're becoming a jeans destination. And so it's not anything kind of truly fashion or apparel that -- driven outside of jeans or denim that is driving that business.

Got it. That's very clear. And I was just looking to follow-up. I was curious how big your denim business is today? And then, is that pretty well rounded across men's, women's different styles? If you can just elaborate on the denim strength, that would be really helpful.

Yes. The denim businesses -- sorry, as we look at the penetration of denim, it's roughly half the men's apparel business and less than that on the women's side. I don't think we share the total penetration of denim typically here, but it's, call it, half of the men's apparel business and slightly less than that on the women's side.

Next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group.

And congrats on the strength of the business. I wanted to come to the store openings. You've seen some of the best kind of new unit productivity, opened 14 in the quarter. I wanted to get a sense for the cadence of the 65 to 70 guidance for the remainder of the year. Do you expect that to be evenly split? Or any color you might be able to share on that here for the last 3 quarters?

Yes, absolutely. We -- yes, so we opened 14 stores in Q1. We plan on opening 16 in Q2, which would get us to 30. And the remaining of the stores, the remaining stores will open over the back half, and we haven't mapped out exactly how many in Q3 and Q4. So call it the 35 to 40 stores will open in the back half of the year.

Great. And just to dig in a little bit deeper on where you're opening the new stores in that kind of outsized AUV, you're getting at $3.2 million. Is this going to inform how you're thinking about where to put stores in FY '27 and beyond? And have you considered at all even potentially taking a slightly higher unit growth opportunity given how well the business is performing.

Yes. Great question, Jeremy. We're thrilled with how well the new units are opening. I think the 15% growth -- or new unit openings that we've been doing in the last 3 or 4 years now, it seems to be working pretty well for us. As you know, that number continue -- that results in a higher number of stores we have to open each year. And so I don't see us expanding that beyond what we've already got stated, the 15% new units, just to make sure that we're getting the right locations, we're being patient and not trying to rush those new units. And then also operationally, making sure that we're not taxing the field team too much, the distribution center folks and just we're doing it prudently. So I think that, that probably stays where it is for right now and doesn't expand beyond 15%.

But just to clarify, as you look into FY '27 and beyond, you feel comfortable with that roughly 15% unit growth even as the base gets larger.

Yes. I think we're comfortable with that. It's something that we're always looking at. We haven't guided next year yet. And so we can't give you an exact number of the stores that we're going to put out there, but the 15% is something that we've stated and we've done that for 4 years and feel good about for right now.

Next question comes from the line of Sam Poser with Williams Trading.

One, how much -- have you narrowed the assortment within the stores? And if so, how much is a narrow and deeper assortments, may be helping you? Or how do you foresee that driving sales and margins going forward?

It's -- yes, I think we have gone deeper for sure in denim. We -- I've been in many stores over the last several months, and I've heard from store partners and managers across the country how much happier they are with the depth of our denim inventory, and people can come in and buy -- make multi-unit purchases in the same size at once, which they struggled with in the past. So I think the place that, that has happened the most really is denim. I think we're pretty steady state as we look at men's and women's apparel. We do have our tried and true, our top styles, that drive a disproportionate amount of business that we're always focusing on the top 3% of styles that drive almost 40%, 50% of the business depending on the quarter. So we are always focusing on those tried and trues, but I think the biggest difference is on the denim side and how well inventoried we are, both in third-party denim and in our own exclusive brands.

And then, within the flat comps in the back half of the year, is that flat in Q3 and Q4? Or do you foresee -- how would you flow that?

Yes. We have it flat in both Q3 and Q4. We stated on the last call that if not for tariffs and macro uncertainty, those would have been plus 3% in Q3 and Q4. And given everything that's going on in the macro environment, we are holding that guidance, and we'll update it as we get to the next call.

Next question comes from the line of Corey Tarlowe with Jefferies.

I just wanted to ask on price increases. Is there perhaps like a timeline that you could give in terms of when you're expecting to see these price increases come through? And then just on the exclusive brand penetration, has that changed at all as you've tweaked the pricing across the other brands that you sell in your store?

Yes. So as we said a little bit earlier, I'll just walk through that timeline one more time. We have received price increases from many third-party partners or vendors. We've started to re-ticket those items in stores. We're about halfway done with the re-ticketing process, and the re-ticketing will be complete by the end of August. So the price increases, which are mid-single digit that we've received from third-party vendors will be done end of August. We are holding lower for longer on our exclusive brands, and we really have 2 windows where we can increase price on exclusive brands as well to preserve rate. And those windows are October and then into January, post-holiday. You, obviously, can't do in November or December. So we're going to see how exclusive brand penetration performed against third-party vendors over the course of September and probably the first week or 2 of October and make the call style by style on what we keep lower and maintain pricing on versus what we increase prices on to preserve margin rate.

Understood. Just no color as of yet based on reactions.

No, it's still early days. With half of these items, roughly half of the styles being re-ticketed and that was really completed within a week or 2 of where we are right now at the time of this call, it's still too early and haven't seen any change. We had nice EB penetration throughout Q1. So the penetration we talked about was not driven by some dislocation between pricing of EB and third- party brands.

Next question comes from the line of Ashley Owens with KeyBanc Capital Markets.

So to follow-up on the exclusive brands questions a bit. I would be curious at all how you plan to communicate or market some of that pricing differential to consumers over the next couple of months. What levers you have in place to drive incremental sales to exclusive brands by choosing to hold those prices, and if it could carry on further past January?

Yes. We generally don't talk about price. We've never been a very promotional retailer, very full-priced business. And I'm personally, especially from some past experience in other positions I've had at other companies, I'm very careful about being promotional or talking about pricing because it's hard to walk back from that. So we know that many of our customers come to bootbarn.com, and they browse the product on bootbarn.com before going into stores. And as you filter and look at different products and different price buckets, they'll be able to see that price differential there, but I don't see a world where we're going to be screaming it from the rooftop and putting it in e-mails that we're still pre-tariff pricing like you see in the automotive industry and things of that sort. So I don't think we're going to take the approach that you perhaps have seen in other businesses. That being said, a lot of these prices, especially on the boots side of things, there are psychological price barriers that have been breached with some of these mid-single-digit price increases, where now, we have a boot that's under $200 and other boots are now above $200. So I think that will work in our favor. But I don't think we're going to have kind of a pre-tariff pricing marketing campaign in any way around this. And we'll let the consumer choose, and they'll see the pricing, whether they be in stores or they're doing their research at home on bootbarn.com before coming in.

Okay. Got you. And then just as a follow-up. We know you're performing really well in denim. It's been seen by some other brands in apparel are really trying to capitalize in on this in some of the denim tailwinds. We've seen this over the past week. Just any plans to lean into additional marketing there?

We're doing things in stores. So we're focusing on fit guides and talking about denim in stores and making sure our partners are educated on the different fits and the different rises, especially on the women's side. So denim guides that each store partner will have are going out as we speak. I think they landed in all stores over the last week or so, and they look great. So we're going to be educating partners on denim. . And our denim continues to be very much our boot-cut silhouette, as you would imagine, given our business and given the footwear or the boots that we sell. And so it really comes down to the rise, the stretch, the different types of boot cuts that continues to sell very well for us. I don't think we're going to have any real kind of denim or jean campaign like others have seen over the last couple of weeks with American Eagle and some others. I think we'll continue to market who Boot Barn is and our broad assortment of product that includes denim, but no large, dedicated denim campaign in the works right now.

Next question comes from the line of Jeff Lick with Stephens.

And congrats on a great quarter. John or Jim, I was just wondering, what is typically the spread between exclusive brands and the national third-party brands? And how much will it widen here in this interim period? And I'm curious, does your research indicate like just how much does exclusive brand adoption kind of revolve around price or -- and/or once you try it, you get a lot of repeat customers because it seems like you're running an interesting little test tube here with pricing.

Yes. The spread between exclusive brands and third-party brands, and we've said this publicly for several quarters, is generally 1,000 basis points, is what we've seen up until now. The honest answer is we don't know how much price and especially the psychological price barriers are going to play into the customer's choice. And that's why we're running this kind of large-scale elasticity test. We have the opportunity to stay lower for longer. And EB penetration, while we want to get to 50% over the next 5 to 6 years, 100 to 200 basis points increase per year, it's been our experience that sometimes that isn't a straight line kind of growth, and there has been step function jumps in the past. And let's see if this can be one of them, and we don't know how the customer will react to holding these prices. If everything else has gone up and people seem to absorb inflation quite well, as they have overall the last 4, 5 years, it may not be a factor. But if a boot starts with a [ $200 ] and our starts with a $199 or a $189, it may make a difference. But that's why we're running this test, and that's why we're going to decide style-by-style where we hold and where we increase price to preserve margin rate.

I'm just curious, did you have kind of detailed conversations with different vendors about, hey, this is kind of what you're going to be -- what we're doing and did any vendors say, "You know what, I'll keep the prices same. I don't want to go through that test and want to lose share".

No. The vendors have been -- look, they are dealing with a very difficult situation, a very fluid, a very dynamic situation, and it's very -- it was all -- especially today on tariff day eve, I suppose, it's almost impossible for them to do this style by style. They -- many of the vendors have put these mid-single-digit price increases across the Board to kind of insulate them against these increased costs and tariffs. And so they had to do it across the board, and they couldn't. They're not going product by product or style by style. And so for them to back off of that across the entire industry, I think, would be difficult them to do. But we said it on the last call, and I think most of them are aware that we're taking this tact, if they've listened to the call, but we haven't had any of them come back and say, "Hey, we're going to rewind some of those price increases or rescind them". That has not happened.