Welcome to the Boot Barn Holdings' Incorporated First Quarter Fiscal Year 2016 Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Jim Watkins. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn Holdings' Inc first quarter 2016 earnings results. With me on today's call are Jim Conroy, President and CEO; and 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 first quarter 2016 earnings release, as well as our filings with the SEC referenced in our 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. Last week, the company filed an S-1 with the SEC for secondary offering of shares by certain of our stock holders. During today’s call we will not be commenting further on these filing. I will now 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 first quarter results and the key drivers of that performance Next, I would like to update you on plans and progress made regarding the integration of our recently acquired Sheplers business including some comments on the expected impact in the current quarter. Then Greg will review our financial performance in more detail and review our updated outlook for the full year of fiscal 2016 which now includes Sheplers. Following that we will open the call up for your questions. Turning to your review of our first quarter results, we continued our positive momentum with strong execution across nearly all areas of the organization leading to a net sales increase of 16.4% over the same period last year to a $96 million. This increase was driven by the sales contributions of new stores and a strong 5.6% increase in same store sales. We were particularly pleased that roughly three fourths 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 merchandized margins year-over-year primarily due to the planned increase in private brand penetration, higher markup across the store and an increase in e-commerce margin. During the quarter, we achieved a 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 first quarter we opened seven new stores including our first stores in Kansas and Oklahoma which became the 27th and 28th…

Thank you, Jim. Good afternoon everyone. I will begin by reviewing our first quarter results and then update you on our outlook for fiscal 2016 which now includes the impact of the Sheplers acquisition. 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 first quarter, net sales increased 16.4% to a $96 million driven by the sales contributions of new stores as well as a 5.6% same store sales increase. Gross profit increased 14.5% to $30.8 million, compared to $26.9 million in the first quarter of fiscal 2015. Merchandised margin rates grew in the quarter primarily driven by increased penetration in private brands, and prudent mark-up across the chain, and an improvement in e-commerce margin consistent with enforcement of our IMAP. This increase in merchandised margin was offset by increases in store occupancy costs and depreciation expense associated with the acceleration of new store openings compared to the prior year period; as a result the gross profit rate declined 50 basis points. Operating expense was $25.9 million which included $900,000 in cost associated with the acquisitions of Sheplers. This compares to $21.5 million in the prior year period. In addition to the acquisition related cost, the increase in operating expense is primarily attributable to store operating expenses resulting from increase store count and pubic company cost that were not included in Q1 fiscal 2015. Income from operations was $4.8 million which includes acquisition related costs of $900,000 compared to $5.4 million in the prior year period. Excluding the acquisition related costs and adjusting the first quarter of fiscal 2015 by $800,000 to reflect…

Thank you, Greg. Our first quarter results had a great start to the current fiscal year. Solid execution our business model is leading to continued growth and momentum in our business. This is a dynamic and exciting time for all of us at Boot Barn as we work to implement our growth strategies including the integration and re-branding of Sheplers. I would like to extend my appreciation to the entire stores team who continues to provide stellar customer service across the country as well as the organizations in the Irvine, Frisco, and Wichita offices who have already begun to come together as a solid and unified team. I look forward to continuing to bring in the combined Boot Barn and Sheplers to new height. I’d now like to open the call for your questions.

Thank you. You will now begin the question and answer session. [Operator Instructions] Thank you. Our first question is from Matthew Boss from JPMorgan. Please go ahead.

Hey, guys, can you just walk through the cadence of comps as the quarter progress, elaborate on some of the weakness that you talked about in ladies apparel that you mentioned and just what type of headwinds are you seeing in the oil and gas market?

Sure. So, we typically don’t provide intra-quarter cadence. The quarter, we’re pleased with the way the quarter rounded out with the 5.6% comp. Our ladies business, particularly on the apparel side continues to be the softest business that we had and one of the only businesses that was in decline. We had a lot of nice progress and nice growth in men’s western apparel, men’s western boots, work boots and hats all had nice growth. In terms of oil and gas, most of the weakness that we saw in oil and gas continue to be in the back information either right on top of the back information in North Dakota or related to the back information and that was impacting specifically the FR or Flame-Resistant merchandise for Boot Barn which is in the grand scheme of things is a relatively small business, but that particular business experience to decline which actually pulled the work of apparel business which includes other things that are non-FR from a positive to a negative from Q4 into Q1 sequentially.

Great. And then just a follow-up, I mean now that you’ve closed the Sheplers transaction, you’ve laid out some pretty detailed road marks for us today. Any higher level positive or negative take so far, I mean, obviously near term we have to suffer through some of the transition same-store sales and margin impact, but as you take a step back and think about the opportunity, if you could just kind of elaborate on how you’re thinking about it?

Sure. No negative surprises, in fact I would say that most of the things, virtually every thing we saw as an opportunity has materialized and maybe a little bit more than that. So we knew when we walk their stores and we’re in the due-diligent process that we had components of our assortment that weren’t represented at all or well represented within the Sheplers assortment, and now that we’ve gotten into the details and specific merchandizing performance that opportunity has certainly proven out. We knew that we could expand the cohort business, if we go back to Baskins, in the Baskins acquisition, that was a business that didn’t believe very much in cohort and we invested in the stores both from featuring standpoint and from a inventory standpoint, and so nice return in Baskins. And we expect those were the same thing that happened at Sheplers and as you know a lot of the stores are also in Texas, so we expect that to be kind of in line with what we had originally had seen. I would say the one that may have been a little bit more positive than we had expected is coupon competes extremely well in terms of being in stock. We’ve a very systematic approach to keeping our on hand inventory in stock particularly for basic and commodity type product, we coded numbers like 70% of our assortment is on automated replenishment, its actually higher than that boots and higher than that again in work boots. And that brings our in stock positions into the 90 plus percent and in some categories, the 95% in stock and that was something that was a little bit more difficult to evaluate pre-closing of Sheplers. But as we gotten into it, our hypothesis is right that their ability to be in stock was much less strong than our ability is and we’ve seen in other businesses when we continue to deliver styles in sizes for customers, it just builds customer loyalty and turns into a very strong same store sales growth. And based on what we’ve seen we would expect a similar result at Sheplers.

Great. Best of luck, guys.

Thank you.

The next question is from Jonathan Goff from Robert W. Baird. Please go ahead.

Hi. Thanks. Maybe if I could just start off with a couple of questions about the results themselves. Just the Boot Barn retail going back to the same store sales, if I’m not mistaken it looks like the transaction trend overall accelerated slightly compared to the last couple of quarters and that’s despite some of the headwind, incremental headwind from that 15 oil related stores, so can you just confirm that’s a case on a transactions and maybe talk a little bit more about what’s driving that strength for the core business?

You’re exactly right, in this particular quarter, the three fourths of our comp was attributed to more transaction per store well on record for the other quarters, and my memory – if my memory serves me, its about half of the comp in Q4 and about a quarter of the comp in the prior quarter in Q3, so you’re right, its been sequentially better. Look we were pleased with that; if I’m honest I like to see growth in transactions and growth in basket. We had both in this particular quarter. Within the basket growth we had in both AUR and UBT which was another kind of signal of positive signs. In terms of what that means more broadly, I think it simply mean that we’re continuing to drive a loyal engaged customer base back to our stores. But that number as you pointed out those Evan flow and while I’m pleased with it in this particular quarter. When its 50.50 or 25.75 in terms to be a portion of growth one way the other I might displease there, I just like to see them both going in positive direction.

Great. Make sense, and then maybe following up on the oil related stores and I’m sure you don’t want to get into that habit but guiding for specific subsector stores but maybe just directionally because you look at guidance overall for same store sales for the rest of the year, could you maybe just directionally what’s needed for those oil related stores. Are you assuming there remain a slight drag as their risk for the guidance I think it’s a lot worse or how should we think about directionally the guidance.

Sure. We’ve been trying the guys who are coming with how we see the oil and gas business. It was a drag on our Q1 comp and we expect there probably be a drag going forward. It is only 15 stores and now that 15 stores is on a base that’s much bigger than that with the Sheplers acquisition that would be the inclusion of much bigger ecommerce business from Sheplers. So we are all – we’ll continue to watch it. I would just kind of remind everybody that oil and gas is a very important and newsworthy event and that price of oil is obviously at a low point of pretty low points as it relates to the industry, but also just the portion of our business. Again, we’ve isolated those 15 stores. We have other categories of business that are seeing nice growth and with lots of other industries on the work side that are growing quite nicely, which is why we see work boots continuing to grow, while Flame Resistant which is a portion of work apparel which is a bigger portion of our overall work business, so resistant is going down, but lots of other things in the work business are increasing. So, again, strong growth in work boots, a pretty decent business in the work apparel business, if you excluded Flame Resistant. So there is a healthy set of industries out there in addition to oil and gas.

Great. And then maybe couple for Greg, just shifting to the outlook. Just in terms of some the detail guidance items that you have now including Sheplers, I maybe comparing to prior guidance which had give him excluding Sheplers. It looks like the income from operations you're targeting for the year increased a little better than 10 million, high and the low end of the ranges. So I’m just wondered if you can break that out maybe directionally how much of that is purely nine months of the Sheplers contribution and how much if any is changes related to the based business?

Yes I would say that we really didn't change our-based business projections as part of this. So, we continue to be confident in the guidance we gave you for the underlying Boot Barn business on our last call in May. So this is really just layering in the impact of Sheplers.

Got it. And then I just wanted to clarify I might've missed it for Greg did you talk about the for Sheplers same store sales in the second half of the year and maybe more broadly just talk about how you see that business trending over time and if there's anything maybe more specifically about the ecommerce business and some of the industry changes there that follow-up. If any of that changes, your view about what the business ultimately can grow to relative to what you previously were thinking?

Right. So Jim and I both commented that we thought Sheplers stores, same store sales with decline in the mid-single digits during Q2, and then would strengthen to be positive mid-single digits in Q3 and Q4. And then ecommerce, we saw weakness in Q2 and improvement in Q3 and Q4.

Yes. And just add to the ecommerce piece. When we look at their last year demand trend, July and August as I had mentioned were plus 42% growth. So we’re kind of “up” against plus 42 in terms of demand in July and August last year. And a month after that in the low 20s or mid-20s and sometimes in the high teens, so it is a temporary interview, it’s a temporary phenomenon and we expect that once we get through August and into our Q3, the year-over-year comparisons become much more moderated.

And just to follow-up, in terms of kind of context to that, the ecommerce business over time maybe over the next several years or just more on an intermediate-term horizon kind of once you get pass some of the unique comparisons, is it right to think about that business as a double-digit growth type business or how should we kind of adjust our expectations there?

I think the changes that we’re really outlined by our vendors to the industry are in general very big changes and very good rules has been put in place for Boot Barn overall, because number one that the vast majority of our business today is still in the stores and the vast majority of our business today is still conducted add or close to full price. So the fact that the industry is now saying we can’t have outlandish discounting online, favors in our view the overall business for the longer term. As it relates specifically to your question and what it means to ecommerce market place we’ll let it all play out. Our belief as we said here today is it will favor real brand. So Boot Barn is a real brand that we’ve been building and investing it over time and people will start to Boot Barn and it will favor companies that have been conducting business on a direct to consumer bases for long time and Sheplers. So, we believe its good overall and its good for Boot Barn on a consolidated basis and over the medium and long term I think it will be a good influence for Sheplers as well. We have to get through this temporary headwind that we’re facing.

All right. That’s it from me. Thanks for all that perspective.

Thank you. Operator The next question is from Peter Keith from Piper Jaffray. Please go ahead.

Hey, thanks everyone. Thanks for taking my questions. Jim, just a follow-up on some of the new IMAP rules. Could you give us a sense on what percent of your ecommerce sales that’s impacting? And then, what’s the timing of when some of these new rules rolled out?

It’s vendor by vendor decision. To abbreviate for the folks on the call, it’s started essentially in April, so just a few months ago. And for – so for Sheplers it was – some fairly significant portion of their sales were probably dropping below IMPA even before that. As were a lot of other online players for Boot Barn we bootbarn.com, I’m sure we were below what became IMAP, before IMAP was being in force, but much less frequently which is why it had a much less impact in fact our Boot Barn business continues to be quite strong online. So its – I think what it done has taken the folks that are competing purely on price and levels that playing field a bit. We do think that Sheplers is well positioned because they do have a very strong brand online. And because the people that run that part of our business Mark Antony particular was the first person running that business for years and continues to run it and he has an ability to take the business and make it grow with his team there. So we expect that ultimately the Sheplers brand will prevail on the sort of low price provider online relative to lot of the other players in our industry.

Okay. Thanks for that. I guess I wasn’t quite clear on why the Sheplers ecommerce business comp up for the 4th July and August and then slowed from there, can you help us understand that dynamic better?

Sure. What they were able to do, I think the comments in my script to an innovative approach or something. There they and Mark Antony particular and its normally entrepreneurial group. So what they were able to do was work through on the homepage and on the product detail page, the arithmetic surrounding what discount you will be provided as you look at the page. And a customer would see the full price, the coupon or percent of apply to it and how much they would save and then the ultimate selling price which sounds relatively straight forward, but Sheplers got out of the gate very quickly with that and we’re able to get sort of nice outsized growth in their business for two months and then lots of other people caught up and that sort of one time effect subsided. So that’s kind of why they’re business kind of – and it happened when we got to that week which we saw coming. It happened like clockwork, as soon as we got to that week, that part of their business declined and we expect that when we get through the eight or nine week period, eight-week period, we are up against these plus 40s. We’re projecting or forecasting that will see the business kind of come back up to a solid growth online.

Okay. Thank you, Jim. And then just a quick question for Gregg, so it looks like the occupancy was at least to 60 basis points headwinds on the gross margin line for the quarter, does that headwind updates a bit as we go forward on a Boot Barn business for the rest of the year or do that the access store opening this year continue to put some pressure there?

Yes. Because of the rapid growth of the new stores if it is a headwinds for the year, its both the occupancy cost and the depreciation impact to the new stores.

But [Indiscernible] with that run rate of 60 basis point headwind or does that ease a little bit?

I mean, it somewhat varies based on what comps and our ability to leverage that, but I think that’s probably a fairly for you to think about it.

Okay. Thanks very much guys. Good luck with that integration.

Thank you.

The next question is from Mitchel Kummetz from B. Riley. Please go ahead.

Yes. Thanks for talking my questions. Let me start on the Q2 guidance. Can you say what the Sheplers dilution is on the quarter?

I don’t think we can say that.

Okay. So, the guidance $0.03 to $0.05 there is no assume dilution in that $0.03 to $0.05?

It’s hard because of the range, right.

Yes.

Okay. And then as far as our guidance goes to, I know Jim you made some comments about you work through some of that – you’re clearing some of that Sheplers inventories, you transition to Boot Barn assortments. I wasn’t clear if that margin impact, that margin impact was in the guidance or is that something that you’re going to pro forma out in terms of that $0.02 to $0.05 that wasn’t really clear, if the guide included that or if it kind of out?

So, on a pro forma adjusted net basis so to speak it will be adjusted out, GAAP, it won’t be adjusted out.

Okay. And then, just thinking about kind of the projections on the Sheplers store comps, I know you’re saying down in the second quarter then up mid single-digit over the back half for the year, is there any way to kind of go back and look at Baskins and see how – can you just kind of remind us that how Baskins performed as you went through that transition. I would imagine that as you run through the transition it was negative in terms of how those store comp, kind of curious as to how those stores performed one or two quarter post transition?

Sure. And as I think about – I want to talk about your about your dilution question for a one quick second. When we look at the full year number in terms of EPS we raised our full year number like because we were at top end of $0.86, now we’re at $0.90. When we kind of model it out, I supposed part of that is dilution in Q2 followed by more accretion in Q3 and Q4 that offset that and gives us a $0.04 improvement on the full year basis. On your point about Baskins, as honest as we can be – as we look at Sheplers right now it is following almost the exact same trajectory and we’re haven’t granted yet, so it still early innings as the Baskins business had. And when we guide past rebranding at Baskins we had a very solid comp for Q3 of fiscal 2014 that improved again in Q4. We are forecasting internally a simple curves and its hard to say whether it would be more or less. But one of the things that we think is different in our favor is that a fairly high proportion of the sales or disproportion amount of the sales at Sheplers are from seven of their bigger stores and those seven stores are quite old, in fact the average age of those seven stores is 38 years old. So when we remodel, rebrand refixture, put in new flooring et cetera into those stores there will be a very obvious fees left to the consumer which we think may help the growth, which is not something that we really had at Baskins because Baskins for the most part a much newer store base. So that we think is a tailwind as it relates to the positive impact that we had from Baskins. What maybe offsetting that tailwind to some degree is Sheplers is a bit more price promotional that Baskins was, Baskins was also more price promotional than Boot Barn, but not quite as promotional as Sheplers. So, and we brand Sheplers. We are going to have to fit into potentially a headwind that customers are looking for the 25 off entire purchase or 25 off on item or whatever. In our mind we think those two things offset each other and may end in our favor.

Okay. Got it. And just to be clear again, you said, internally your forecasting is similar curve as Baskins, but I’m guessing externally what’s baked into the guidance, is it something a little bit more conservative to that?

I think our guidance and our projections are fair. I mean, we tend to try to put out numbers that we can achieve. But I don’t think we’re overly conservative.

Got it. And then one last thing on the women’s business I think you said overall women’s was down in term of comp. Maybe I miss heard that but can you guys talk little bit in terms of apparel versus boots and sort of any commentary on kind of how were the festival wear focus, performed and kind of how you’re transitioning the women’s business now that as we’re going to the fall season and all that?

Sure, absolutely. My comments earlier were very relating to women’s apparel. Actually our women’s boots business was positive in Q1, a decent positive comp and a bit better than it was in Q4, so we have some nice sequential improvement in the ladies boots business. And as we look forward there is some discussion, well, are we reentering a denim cycle and will that help our business. We’ll have to wait and see. Our customers wears denim typically as part of their everyday, assortment, we have said that our ladies denim business has been soft, but I don’t expected to get immediately positive if the denim – if we get back into a denim “Fashion world” because I think our customer is a little bit utilitarian as to how they look at their denim purchases. So we’ll see, I mean, that might become a tailend in the fall, but we haven’t seen it yet [Indiscernible]

Okay. Thanks guys.

The next question is from Corinna Freedman from BB&T. Please go ahead.

Hi, guys. Good afternoon. I wanted to ask a question about gross margin guidance going forward, what level of conservatives taking in for the balance of the year. And then back on the taxes point, same question, do you think that your low to mid single-digit which is not really unchanged from your prior guidance is appropriately conservative?

I suppose you think it’s a – conservative we think it will be in low to mid single as we talk about and I think that where we work prior to this call and where we are at this call.

Right. The Sheplers business is not changing the overall total company composition if you will negative mid single-digits in Q2 followed by positive mid single digits in Q3 and Q4, that’s not really changing our low to mid at the total company level.

Okay.

And then, your second – your first question was around…

Gross margin guidance for the balance of the year, what are you expecting, what should be modeling?

We haven’t given specific gross margin guidance per say.

I think what I will come back to is within the way we think better that we can comp in the low to mid single digits. We can offset the pressures of the new store occupancy and depreciation between the comp and between the private brand penetration improve the merchandise margin. And that sort of our overall plan remains in place and as we think about the fiscal year in totality we still intend to grow private brands, that particular part of our business is working quite well. That is 900 or 1000 basis points of improve markup and that coupled with a solid comp in the low to mid single digits offsets the pressure that we face from brining in new stores, the associated depreciation with them and the higher occupancy rate for that plug of new stores as we continue to build our portfolio. So I would kind of fall back to the way we’ve always thought about gross margin as we report and then as we leverage expenses we should overtime continue to see expansion at the EBIT margin rate. We have a nice expansion in this first quarter as we layer in Sheplers which operates at a lower margin rate you know we’ll have to try explain and communicate how that layers in over the next several quarters, because our first quarter was clean with Boot Barn against Boot Barn. As we go forward we’ll have it, the composition of the two businesses pulled together.

Great. I’m think the rest of my questions are fine. Thanks so much.

Thanks, Corinna.

There are no more questions at this time. I will now turn the call back over to Mr. Conroy for closing remarks.

Well thank you everyone for joining us on today’s call and we look forward to talking with you again in the fall. Bye bye.