Welcome to the Boot Barn Holdings' Incorporated Fourth Quarter Fiscal Year 2015 Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host Jim Watkins, Vice President of Investor Relations and External Reporting for Boot Barn. Thank you, Mr. Watkins. You may begin.

Good afternoon everyone. Thank you for joining us today to discuss Boot Barn Holdings' Inc fourth quarter 2015 earnings results. With me on today's call are Jim Conroy, our President and CEO; Greg Hackman, Chief Financial Officer. A copy of today's press release 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 in the Investor Relations section of the company's website. I would like to remind you that certain statements we will make in this presentation are forward-looking statements and 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 in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our fourth quarter 2015 earnings release, which was furnished to the SEC today on Form 8-K, as well as our filings with the SEC referenced in their 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. With that, I'll turn the call over to Jim Conroy, Boot Barn's President and Chief Executive Officer. Jim?

Thank you, Jim and good afternoon. I would like to thank you all for joining us today. During my discussion I will provide you with an overview of our fourth quarter results and the key drivers of that performance [Technical Difficulty] next I would like to highlight areas of focus for us in fiscal 2016 as we continue to advance our strategic initiatives. Then Greg will review our financial performance in more detail and provide our outlook for fiscal 2016. Following that we will open the call up for your questions. Turning to your review of our fourth quarter results, we continued our positive momentum with strong execution across nearly all areas of the organization leading to a net sales increase of 16.7% over the same period last year to a $103.3 million. This increase was driven by the sales contributions of new stores as well as a strong 7% increase in same store sales. Roughly half of our increase in same store sales was driven by an increase in average transactions per store with the balance of the growth attributed to a higher basket size. We also achieved higher merchandize margins year-over-year primarily due to the planned increase in private brand penetration. During the quarter we achieved progress across each of our four key initiatives which I would like to highlight for you now. Our first initiative is to build more stores by both filling in existing markets and building out developing markets. During the fourth quarter we opened four new stores bringing the year-to-date total to 18 reflecting 12% new unit growth which is ahead of our 10% long term target. Total store count at the end of the year was a 169 stores in 26 states. As a group the new stores that opened in fiscal 2014…

Thank you, Jim. Good afternoon everyone. I will begin by reviewing our fourth quarter results and then provide our outlook for fiscal 2016. In my discussion I will be commenting on both actual and adjusted results excluding any onetime cost to facilitate comparability between periods in going forward. Please reference today's press release for all definitions and for reconciliation of GAAP numbers to these non-GAAP adjusted numbers. In the fourth quarter net sales increased 16.7% to a $103.3 million driven by the sales contributions of new stores as well as a 7% same store sales increase. Gross profit increased 23.5% to $34 million. This compares to $27.5 million in the fourth quarter of fiscal 2014 which included a $1.1 million adjustment related to remerchandising the Baskin stores. Excluding that prior year adjustment gross profit increased 18.6% and our adjusted gross profit rate improved 50 basis points. The gross profit rate improvement was driven by higher merchandize margins reflecting increased penetration of private brand and improved mark-up across the store. The increase was partially offset by increases in store occupancy cost and depreciation expense associated with the accelerate of new store openings compared to the prior year period. Operating expense was $26.2 million which included $0.5 million in cost associated with our secondary offering in February of 2015. This compares to $22.7 million in the prior year which included $1.6 million of Baskins integration cost and a $1.2 million loss of asset disposals. In addition to the cost of the secondary offering, the increase in operating expense was primarily attributable to store operating expenses from an increased store count, increased incentive compensation related to Q4 of fiscal 2015 hire sales, employee relocation cost and public company cost that were not incurred in Q4 fiscal 2014. Income from operations was $7.8 million…

Thank you, Greg. I'm pleased with our fourth quarter results which have been a year of strong performance and solid execution across our entire organization. During fiscal year 2015 we increased our sales by 16.4% driven by the solid performance from 18 new stores opened during the year and a 7.3% increase in same store sales growth. We expanded our merchandize margin and on an adjusted basis increased our operating margin by over 40 basis points even as we accelerated the pace of our new store openings and augmented our management team. I would like to take one minute and extend my personal gratitude to the entire management team as well as the stores organization for successfully growing Boot Barn in such an accelerated manner. We have surpassed $400 million in sales and more than double the size of chain in less than three years. This is really a testament to the hardwork and dedication of the entire team across the country. Our continued success is rooted in our leading position as a lifestyle retail brand that serves the Western Country and work customer groups, a demographic that is loyal, vibrant and growing. Our business is well balanced and diversified across categories and geographies with plenty of white space for continued growth. We’re excited and energized by the opportunity before us to expand the Boot Barn concept nationally and have confidence in our ability to achieve the objectives we have set for ourselves for the current fiscal year and beyond. I would now like to open the call up for your questions. Devin?

[Operator Instructions]. Our first question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.

First question, new store productivity was very strong in the quarter, could you just talk about the performance in your newer stores and then Jim if you could just elaborate on some of the trends that you’re seeing in those newer markets?

Sure. So the newer stores taken in total both from last fiscal year fiscal 2015 and in fiscal 2015 have been performing better than our pro forma's at least in total and which means their payback will be faster than three years. We have seen strengthen across many different markets, so it's not a pocket of stores and probably the thing we’re most excited about is that the stores that have opened in our newest markets and you can read into that most of the stores in the South-East where we didn’t have as strong a brand presence or as many stores and in some states we’re opening our first or second store, we’re particularly pleased with how quickly those stores have gotten out of the gate and we had originally thought maybe they would build sales more slowly than stores in our more legacy markets that was our hypothesis going in, that hasn’t proven to be true so we’re delighted to see sort of the speed that those stores have ramped up.

And then just a quick follow-up, from a margin perspective. I guess Jim how would you reflect on some of the wins that you’ve seen over the past year and then more so looking forward, what's the best way to rank the margin expansion opportunities as you kind of lay them out over the next couple of years?

So as we reflect back and Greg talked a bit about the -- we have had margin expansion from a few different areas right, so we have had from private brand expansion, increased mark-up across the stores. If you went back through the whole year not necessarily in the fourth quarter part of it was a composition of higher boot sales and higher growth of boots versus other pieces of our business which as you know boots are margin enhancing. As we look forward I would come back to the same three or four lever. So we have continued to grow private brand penetration, we have communicated that we expect that we can grow that by 250 or 300 basis points of penetration each year with the goal of getting to 15% two years from today. I think that we will find that number to be a little bit conservative. We also are continuing to expand our full container vendor direct program, so this is buying bigger lots of merchandize directly from our vendors typically on the most basic merchandize with very low if not zero markdown exposure and by doing so in lowering the cost reserved [ph] from our vendors we’re getting higher mark-up there. We also think that as we continue to evolve as a company, and mature as a company we will be able to expand the merchandize margin rate for private brands and it's in a very, very early stages but we have communicated that we will be putting an office overseas, China or Hong Kong probably more specifically to help us get more than our stated 1000 basis points of mark-up. Now the reason that I ranked third is number one it will take some time to ramp up and number two we’re going to start in categories that aren't huge drivers of the business but have less of a strong brand preference from our customers. So, if you tie that into our front door of our store initiative where we’re looking at jewelry, accessories, items around the cash or at home and gift merchandize, customers typically don’t have a very strong brand preference for those items and if we can bring those overseas we think we can really expand the merchandize margin for that product.

Thank you. Our next question comes from the line of Peter Keith with Piper Jaffray. Please proceed with your question.

I wanted to just continue the discussion a little bit on gross margin. It looked like the gross margin from a product margin perspective came in at least better than what we expected and offset some of the [indiscernible] leverage and I was curious if there was anything specific to the quarter or maybe that [indiscernible] launched and accelerated their private label penetration or something that they might be continuing into the New Year here?

There is no specific anomaly. We are helped a bit by higher than -- the higher comp, we’re helped because private brands performed well but there was nothing extremely uniquely happened in that quarter that drove an outsized number other than some really great execution by our merchants to be honest.

And then Jim, I was intrigued with one of the initiatives this year you’re talking about going after the country music and festival crowd. Is that something that’s relatively new for this year and I guess should we think about that as maybe a Q1 and Q2 sales driver specifically for you?

I would say it's a continuation of strategy that started and many of these things tied together. So if you went back far enough before we had really begun to penetrate the South Eastern part of the U.S. we thought we needed to become more relevant in country music to help bring the brand to life in the states that aren't, in the western part of the U.S., so that was the umbrella strategy. Last year we said to ourselves we have opportunity to expand a more modern fit men's private brand and at the same time we wanted to have a direct connection to country music where we bought those two things together we developed MoonShine Spirit by Brad Paisley. As we looked this year and the first quarter of this year and over the summer we have and you can see it in our stores, we have made a press for festivals so this is younger customers typically but all customers often wear to outdoor music events and we have really made a press not only focusing on that merchandize but bringing some emerging country music artist to life so if you were to go to our site or see our most recent direct mail campaign or go to our store you would see that there is a big presence of Brad Paisley, I mean there is a smaller presence of some of the country music artist that are much smaller in stature [indiscernible], Mary Sarah, so it's kind of all tying that together and that is something that we’re looking to grow as we look at fiscal 2016.

And maybe is there any early read on that or historic read that you might have with your reward program and have some of those customers continue to shop your store or is it more of maybe a onetime purchase?

No I don’t think it's a onetime purchase. I think while we’re merchandizing it if you will in the packaging of country music festivals it really is part of the aesthetic that these customers wear all the time, right, so if you walk into one of our stores right now you would see our store associates outfitted in straw hats, [indiscernible] around their neck talking about be festival ready and it's just something that we’re shinning a light on, it's been in the assortment and merchandising it if you will in the literal sense of the term.

Thank you. Our next question is from the line of Randy Konik with Jefferies. Please proceed with your question.

I just want to go back to the store acceleration roll-out, when you’re thinking about that what is the interest behind that? Is it you’re getting better locations that you’re finding or the execution of the builds are better, just kind of curious on what you’re seeing there and from a store you kind of alluded to it earlier on another question but it seems like all the stores are doing well in new markets and existing in-store markets. Are the store economics looking that should in the new versus existing markets, that’s my first kind of question. Thanks.

On the acceleration piece, there is a couple of factors at play, one was when we first came to market we said we grow new units by about 10% a year and we had over the most recent couple of years before we introduced it to the public markets, we didn’t have an enormous track record that we could point to from a new store perspective. So we came out with a relatively conservative unit. What we said to the investment community at that time is if we start to see success with our new store performance we would likely accelerate it and we said explicitly and you can certainly read into the fact that we’re accelerating it because we are seeing ongoing success of our new store and our new store program which is if you were to model this business going forward the biggest lever for us in terms of sales growth and growth in earnings per share is our new unit capacity and the fact that we can take a compelling four wall [ph] model and continue to roll it out and more than double the chain size from today. In terms of the new store economics and how they vary across the country. There is no support for any of the more typical hypothesis that while the store in North Carolina or South Carolina where we have very few stores versus a new store that opens in California with the first one in North Carolina taking longer to ramp up or having a slower payback, we had those hypothesis we haven't seen them prove out. I think there is just too many other variable at play that we have had just some terrific stores opened in essentially brand new markets and we have had some pretty good stores open in existing markets where the Boot Barn brand is already known and fortunately we virtually have no really bad stores that have opened in the last couple of years which just underscores our confidence to continue to take the model and grow it in a more accelerated way but still be prudent so that we can continue to be certain to monitor and manage the growth effectively.

And then I guess my last question is maybe if you just give us a little guidance or help with how we should be thinking about quarterly flow. It seems like the store cadence will be more front end loaded so we should expect more I guess potential key leverage on the front half of the margin side of the year rather than the back half, just curious on how we should be thinking about quarterly flow from the margin perspective in this regards? It's very helpful. Thanks.

So we said 13 stores in the first six months and nine in the back half so yes you will see a little bit more margin pressure on the first part of the year. In terms of quarterly flow we’re six stores into the year already so we will open seven more in the balance of this quarter and next and the nine I would almost just split them equally if you wanted to modulate 4 and 5 between the third and fourth quarter. So yes I think the way you’re thinking about it is right way, that there will be a little bit more margin pressure in the first six months but it's really the difference between 13 stores and 9 stores.

Thank you. Our next question comes from the line of Corinna Freedman with BB&T Capital Markets. Please proceed with your question.

I wanted to ask about the Carhartt roll out of shopper stop, what is your target for 2016 as far as number of openings and how many have you done in 2015?

So there is about -- I think the plan for this year in the 22 stores nearly all of them will have a Carhartt shop and the ones that won't will either be undersized or we don’t think there is a huge opportunity for work. Last year we expanded about 20 or so Carhartt shops and the total number I think is in the 70s.

Yes, we’re just under 70 right now.

We can give you some more dimension to that. Carhartt has been a great partner to us and as we look to open more stores and bring their brand to life within the work part of the business it helps the work apparel business, it helps the work boot business and it's just been a great addition for us.

Okay. Another merchandising question, any new categories that you plan to introduce in the next year or two such as like outer wear or athletics?

No sharp turns left or right in terms of while we’re doing from a merchandize assortment standpoint. I would say most of the categories that we’re adding are in concentric circles that are pretty close to our core assortment. For example we have expanded in some stores a line of camouflage both out wear and hunting boots but it's not an enormous roll-out. It's not all stores in terms of the athletic piece and I know that’s important trend in the rest of the retail business. Our customer wears blue jeans and boots just about every day. So while we see the rest of the world chasing this athletic trend we’re pretty happy selling blue jeans and cow boy hats and western boots. So we’re going to kind of continue to stick to what's been working.

Okay, my last question was on ecommerce. You did a sort of for the private label launch the specific landing page for Brad Paisley but wasn’t necessarily with the banner of Boot Barn, with under -- through a separate, did that drive more ecommerce traffic and conversions? That’s my last question. Thank you.

I can't speak to this specific traffic that we get from that microsite. I can however tell you that just the relationship that we have with their camp and Brad Paisley personally if I'm honest has been just extremely positive. They and he have gone above and beyond any contractual arrangement with us and have continued to support merchandize assortment, the Boot Barn brand, the MoonShine Spirit brand. He has given us mentions on national TV, he has tweeted about us. He has just been a phenomenal, phenomenal partner and frankly our obligation back to them is to continue to try to return the partnership every single one of our stores has a full Brad Paisley merchandize fixture. We have expanded the boot line of MoonShine Spirit, when we launched we had two styles of boots in all stores with some stores having four styles and we have doubled that both of those numbers. So today we have four styles of boots in all stores and some stores having eight styles. So we will continue to work with Brad and his team and I think it may feel equally good about the partnership with us, don’t want to speak for them but the relationship has just continued to strengthen and started off on a really good foot anyway.

Thank you. Our next question comes from the line of Jonathan Comp [ph] with Robert W. Baird. Please proceed with your question.

Just a couple of question guys if you don’t mind, maybe first Jim, just want to ask about the same store sales strength and obviously the results beat the plan that you laid out for the quarter and it sounded like based on your commentary that the traffic accelerated sequentially. I think you said it was 50% on the same store sales versus 20% last quarter if I remember correctly. So can you maybe just talk about what's driving that trend as you see it and how you’re viewing the overall landscape in terms of the same store sales that you’re seeing?

Sure. Your recollection is exactly right, that the split between traffic and ticket between Q3 and Q4 did move the way it did, if you went back a quarter prior to that it looked more like Q4, my honest answer John is, when we look at the key performance indicators that are driving same store sales we really are trying to get both growth and traffic and growth in basket size, however I don’t read anything into what I perceive to be a relatively minor shift between the split. If one were to turn south on us I might have a different answer but I think they are both healthy, both being average transactions per store and the size of the basket and I don’t really view it as a sequential change between Q3 and Q4 that being the composition of our comps. I guess I'm most happy in Q4 that we had another plus seven on top of nearly a plus nine last year that was probably the thing that I was most proud of the team for.

And maybe one more on the same store sales, I know you’ve done a very good job of breaking out some of the exposure of the oil related markets and I just wanted to see if you can maybe quantify or give any more contacts to the degree of the deceleration you saw for those oil markets during the quarter. I know you said they are still above the overall average but maybe asked another way, do you expect them to stay above the company average or do you expect them to be lower than the company average as you look ahead or how should we think about the degree of deceleration there?

Sure. So I can't necessarily predict how much deceleration or they will continue or if they will go the other way and accelerate on us. The way I would think about it though and I encourage everybody to think about it is we feel obligation to mention this to the public markets because of the hot topic and I’ve been on record saying we will keep everybody apprised of what's happening but most importantly this is a very small portion of our stores. If oil and gas business took off and those stores started having outside comps in a tremendous way it wouldn’t have a meaningful tailwind impact, nor will it have a super meaningful headwind impact on our business for 15 stores out of what is today 175. So I guess what I'm suggesting is I wouldn’t be distracted by the performance of 15 stores, when the whole chain is performing so well. If I want to give you any color I would say that any of the softness or deceleration that we have seen has mostly been focused on the back information and the stores related to the back information, the Texas business continues to be quite strong for us and continues from the same store sales perspective continues to be one of our better markets.

And maybe last one for me for -- maybe for Greg or Jim. You provided some detail on the outlook for the year in terms of the operating margin and I think you said kind of flat or no expansion year-over-year and you outlined a number of the investments you’re making. I'm wondering if you can just give any more color maybe from a broad stroke perspective that magnitude of some of those investments and some of the margin impact and I'm talking more specifically about the accelerated new store openings, the overseas sourcing presence that you’re planning to setup in the consolidated warehouses if you can give any more color on kind of the magnitude of some of those.

Sure. I think Greg and I might tag team on this a little bit, I think just to put everything in context as it relates to our operating margin rates our original stated strategy was we get 25 to 30 basis -- this is big picture, this was up in most recent quarter but we would get to 25 to 30 basis points of margin enhancement as we continue to grow private brands because private brands was growing 250 to 300 basis points a year and a 1000 basis points pick up and we said if we grew at 10% new units we would essentially offset from a margin rate perspective that pick up of 25 to 30 basis points because the new units are compositioning in at higher occupancy rate because they haven't been in the chain and they haven't grown to full maturity and push their occupancy leverage down. So the starting point was we would get merchandize margin improvement that would be offset by new store growth at 10% new units. As we have accelerated our new units beyond the 10% with what we’re communicating is not only have we accelerated the new units, we have also made investments and we’re still maintaining our operating margin rate. And the reason I want to go through that is I think there is a big -- an overarching picture that relates to the back that we’re accelerating new stores and then there are some specific investments that we’re making in our infrastructure to help us continue to scale the business and I will let Greg kind of walk you through those.

Right. So in terms of like the overseas sourcing presence, this year we expect that to be roughly $400,000 so we expect to open that in Q2 with four folks and an office and they will have some ramp-up time and then we will start to get some traction in terms of margin expansion next year 2017. From the DC consolidation if you will or the consolidation of four warehouses into a distribution center that again is something like a 300,000 or 400,000 spend largely in Q2 and then if you think about the cost associated with new store openings. I mean the main driver of that is pre-opening costs, I mean there is obviously an occupancy element and depreciation element but pre-opening is roughly a $100,000 of store so that as you think about how that works into your model. So hopefully that helps.

There are no further questions at this time. I would like to turn the floor back over to Mr. Conroy for closing comments.

Well thank you again everybody for joining us and we look forward to discussing our first quarter results with you in late July and speaking to many of you in the interim. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.