Boot Barn Holdings, Inc. (BOOT) Q4 2016 Earnings Report, Transcript and Summary

Greetings and welcome to the Boot Barn Holdings Fourth Quarter Fiscal Year 2016 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Jim Watkins, Vice President Investor Relations and External Reporting for Boot Barn. Thank you. Mr. Watkins, you may now begin.

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn’s fourth quarter and fiscal year 2016 earnings results. With me on today’s call are Jim Conroy, President and Chief Executive Officer 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 on 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 2016 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 Jim Conroy, Boot Barn’s President and Chief Executive Officer. Jim.

Thank you, Jim, and good afternoon. Thanks everyone for joining us. On today’s call I’ll be providing a review of our results, followed by a discussion around the key drivers of our business first for the core Boot Barn business and then for the Sheplers business. Following that, Greg will review our financial performance in more detail and provide our outlook for fiscal year 2017. Finally, we will open the call up for your questions. During the fourth quarter, we further increased our share of the Western Europe market with sales increasing 45% year-over-year. Our top-line growth was driven by the sales contribution of the newly acquired Sheplers business, a 22 new Boot Barn stores opened during fiscal year 2016. Consolidated same-store sales decline 1.2%, e-commerce had positive double-digit growth and strong performance in both brands, which was offset by decline in the stores business with the rebranding Sheplers stores outperforming the Boot Barn stores. While we had a strong start of the quarter, consolidated same-store sales declined in February partially due to warmer weather across parts for the country. Similar to the second and third quarters of fiscal year 2016 in market such as North Dakota, Wyoming, Colorado and Texas we faced headwind associated with the softness of local economies dependent on oil and other commodities. We continue to see solid growth in many core markets without commodity exposure particularly in the West, but not enough to offset the declines in markets facing these headwinds. In terms of category performance at our core Boot Barn business, we saw modest improvement in our [work] (Ph) business. Earlier in the year, we had introduced an expanded line of work boots and a broader line of work apparel both of which seems to gain interaction. Unfortunately, we saw downward pressure in ladies boots and ladies denim both comping negative in the quarter. This composition of sales leads us to believe that disposable income has declined in areas with commodity exposure customers are avoiding discretionary purchases, while focusing their spending on more immediate subsidies such as, work boots and work apparel. I'm pleased with our continued efforts to improve merchandize margin by increasing our private brand penetration in both purchases, which we believe have the potential to increase our merchandize margin rate overtime. During the fiscal year 2015, our higher margin private brands represented 13% of stores sales, excluding Sheplers stores up from 10% for fiscal year 2015. Our private brands continue to round out our assortment and help to differentiate us from our competitors. Our initiative to expand sales in our e-commerce channel is progressing well, during the quarter we achieved solid growth in Bootbarn.com driven by enhancements and search engine optimization, better site merchandizing and improvement made to pay-per-click advertising. We have also continued to make progress with integrating the back office operations at the two e-commerce business driving further expense reduction. Turning now to our Sheplers business. In the quarter we continue to transition the merchandize in the Sheplers stores to the Boot Barn assortment. A major component of that strategy were to increase sales and penetration for western boots, work Boots and work apparel. Each of those businesses experienced growth in the quarter. However, we experience weakness in Western apparel particularly with denim business, as we continue to cycle the Sheplers price promotion activity in the prior year. Our merchandize margin on both prices sales in the converted Sheplers stores increased sequentially. Our overall merchandize margin in these stores declined, this decline is a result of increased freight cost, higher shrink and outside clearance activity as we continue to exit one of the Sheplers’ inventories. Having said that, we still feel confident in our ability to achieve in margin rate synergies we’ve outlined previously and that we began to experience in the third quarter. We’ve added our private brand for the Sheplers stores and achieved a penetration 8% of sales for the fourth quarter, which is passed within our experience in other acquisitions. As we look forward for fiscal year 2017, we expect our private brand penetration including new stores to grow by 200 basis points, which excludes the Sheplers.com. We also expect to see a meaningful increase in full container importing of branded merchandize that should further bolster the merchandize margins rate. Looking now to Sheplers’ e-commerce business, in fiscal 2016 we integrated the management of SEO, SEM and e-mail marketing across the online businesses. We also consolidated the Boot Barn customer service call sender into the Sheplers’ facility Wichita, Kansas providing us with multi language 24/7 customer service for the Boot Barn site. We believe that the acquisition of Sheplers have increased our digital expertise, enabled us to grow our share of the e-commerce market and has positioned us well for future online sales growth. While we intend to operate both brands online, we are continuing to make progress as validation of the operational aspect of the two e-commerce businesses. Overall, while fiscal year 2016 was not without its challenges, we made progress on a number of our growth initiatives that we believe position us well to continue to take share of the western and work industry. During the year, we opened 22 new Boot Barn stores, expanding our presence nationwide. We increased sales by 41% through our private brand penetration and we completed the acquisition and integration of Sheplers. Looking forward to fiscal year 2017, we remain focused on our near-term goals with an eye on achieving our long-term objectives. We plan to open 15 new stores in fiscal year 2017 and expect to expand our merchandize margin through increase private brand penetration and ongoing sourcing efficiency. E-commerce remain a key area of emphasis for us and in fiscal year 2017, we will be upgrading our online platform and continuing to combine components of Bootbarn.com and Sheplers.com into a common backend system. The new platform will enable us to provide our customers with an aim to omni-channel capabilities, which we expect will drive future sales growth. We’ve been also been working to further optimize our online pricing strategy, improve our mobile traffic conversation and enhance our CRM capability. Additionally, we have a number of initiatives design to drive same-stores sales growth, including broadening our assortment of men’s western boots, expanding our work boot business, growing our commercial accounts business and bolstering our shop-and-chop concept, leveraging the success we‘ve had with Carhartt. Turning to current business. We have now more than seven weeks into the first quarter and to-date we have achieved positive same-stores sales growth. These results compares strong same-stores sales performing at Boot Barn in the first quarter of last year as well as highly promotional activity in the Sheplers stores in that same period. While this is encouraging, we remain guarded about extrapolating this growth as this quarter is the smallest of the year and visibility into sales continues to be very challenging. While the current macro-environment makes it difficult to predict when the external pressures to our business will subside, we continue to believe we have appropriately positioned our merchandize offering, marketing strategy and inventory levels to manage through the current cycle. We continue to prudently invest in our business for long-term growth and increase value for our shareholders. Now, I would like to turn the call over to Greg Hackman.

Thank you, Jim. Good afternoon everyone. I will begin by reviewing our fourth quarter and full-year results and then provide you with our outlook for fiscal 2017. In my discussion, I will be commenting on both actual and adjusted results, excluding any one-time costs to facilitate comparability. Please reference today's Press Release for all definitions and for a reconciliation of GAAP numbers to these non-GAAP adjusted numbers. In the fourth quarter, net sales increased 45% to $149.5 million. As Jim mentioned, this was driven by the sales contributions from Sheplers and the 22 new Boot Barn stores opened in fiscal 2016, partially offset by a 1.2% decline in consolidated same-store sales. The payback of our new stores opened during the past two years is slightly above our target of our three-year payback. We continue to expect for the first 12-months of operations of the 22 stores opened in fiscal year 2016 to average approximately $1.7 million, which is in-line with our sales target in these stores. Adjusted gross profit increased 29.2% to $43.9 million compared to gross profit of $34 million in the fourth quarter of fiscal year 2015. At our core Boot Barn business, our pricing strategy was fairly consistent with the prior year period with no meaningful increase in promotions. Consolidated merchandize margin rate declined 320 basis points. This decline is primarily the result of a historic merchandize margin rate at Sheplers that is growing in the merchandize margin rate at the core Boot Barn. The composition of the businesses this year with Sheplers as compared to last year when the Company did not own Sheplers drove declined in the consolidated merchandize margin. In the fourth quarter, we completed our annual fiscal inventory while our shrink rate is low by retail industry standard of approximately 1% of sales. During the quarter, we recorded a $900,000 charge above our provision, which negatively impacted gross profit by 20 basis points for the fiscal year of 2016. We attribute the increased shrink disruption in the Sheplers business as a result of the expensive store remodeling efforts and the relocation of inventory from their Irvine warehouses to our Fontana distribution center. There was a slight decline in merchandize margin at the core Boot Barn business comprised of higher freight costs, higher shrink and some seasonal clearance partially offset by the better mark up associated with the increased private brand penetration. Our adjusted operating expense was $36.2 million, which excludes $300,000 of costs associated with the integration of Sheplers. This compares to $25.6 million in the prior year period. The increase in adjusted operating expenses contributed to the operating costs related to the Sheplers business and the 22 Boot Barn stores opened in fiscal year 26. We leveraged adjusted operating expenses this quarter reducing our expense rate by 60 basis points to 24.2% of sales. While our adjusted EBITDA increased in the fourth quarter of fiscal 2016. Higher depreciation and amortization expense drove an 8.5% decrease to $7.7 million in our adjusted income from operations. Also contributing to the decrease in adjusted income from operations was higher shrink in the first quarter this year. Pro forma adjusted net income for the quarter was $2.5 million or $0.09 per diluted share as compared to $4.6 million or $0.17 per diluted share in the fourth quarter of fiscal 2016. Interest expense was $2.4 million or $0.05 per share higher in the pro forma adjusted interest expense last year. The prior year net income has been adjusted to reflect the impact of the post-IPO interest expense. On a full-year basis, we increased net sales by 41% to $569 million driven by the contribution of the Sheplers business, reopening of the 22 new Boot Barn stores and we achieve flat same-store sales in a tough retail environment. Adjusted income from operations for fiscal year 2016 increased 20.4% to $42.7 million, this compares to adjusted income from operations of $35.4 million in the prior fiscal year, which includes a $1.5 million adjustment to reflect the estimated public Company cost as if the Company had been public during the entire year. Interest expense was $6.7 million or $0.15 per share higher than the pro forma adjusted interest expense last year and primarily reflects debt associated with the acquisition of Sheplers. Adjusted earnings per share in fiscal 2016, was $0.69 compared to $0.72 in fiscal year 2015. Turning to the balance sheet, as of March 26, 2016 we had total of $242 million outstanding on our revolver and term loan. At year-end we had approximately $76 million of availability under our revolving credit facility and $7 million of cash and cash equivalence. Our net debt leverage ratio was 3.8 times, which is in-line with the expectations we outlined for you on our most recent earnings call and which we expect we will further improve in fiscal year 2017. Excluding the converted Sheplers stores, our inventory was up 2% on an average store basis. On a consolidated basis, inventory rose 36% to a $176 million compared to a year ago. The increase is primarily driven by a 20% increase from the addition of the Sheplers stores business with 10% increase from the new stores added in the last 12-months and a 6% increase in inventory related to the Sheplers distribution center. Now I would like to turn to our outlook for fiscal year 2017. Factoring in the continued headwinds we are facing, we expect same-store sales for the consolidated company to be between slightly negative and slightly positive. We expect earnings per diluted share in the range of $0.63 to $0.73 per share, based on an estimated weighted average diluted share count of 26.8 million shares for the full fiscal year. As a reminder, fiscal year 2017 is 53-week year and we expect to earn approximately $0.03 per share in the 53rd week, which is included in our guidance range. This represents income from operations as $42.2 million to $46.8 million. We expect our net income for the fiscal year 2017 to be between $16.9 million and $19.6 million. Our fiscal year 2016 results included two quarters of the Sheplers business. We estimate that had we owned Sheplers during all of fiscal 2016 our earnings would have been $0.03 lower than are we reporting, while $0.66 per diluted share primarily a result of higher interest expense. We estimate that our fiscal 2017 earnings at the high end of their guidance range of $0.73 will represent 11% earnings growth of our fiscal 2016 earnings per share of $0.66. We expect capital expenditures to be in the range of $13 million to $15 million the majority related to investment in stores. We plan to open 15 stores during the year with three expected to open in the first half of the fiscal year and the remainder in the second half. We expect our tax rates to 39.4% and interest expense is expected to be in the range of $14 million to $15 million. Based on our earnings per share projections of $0.63 to $0.73, we expect to generate free cash flow of between $13 million and $20 million. As we look to the first quarter of fiscal 2017, we expect same-store sales to be flat compared to the prior year period. While our sales are comping positive quarter-to-date, sales have proven to be difficult to predict. We estimate our first quarter earnings per diluted share to be in the range of $0.01 to $0.03 per share based on an estimated weighted average diluted share count of 26.8 million shares for the first quarter. Our earnings guidance in the first quarter of fiscal 2017 is loaded with $0.06 of additional interest expense that we did not have last year prior to the acquisition of Sheplers. Now, I would like to turn the call back to Jim for some closing remarks.

Thank you Greg. Currently the retail environment remains challenging and we are managing the business accordingly. We are looking for all opportunities to drive same-store sales growth, we are managing our investment in inventory and stores prudently and we remain steadfast in our discipline around expenses. Now, I would like to open up the call to take your questions. Doug.

Thank you, [Operator Instructions] our first question comes from the line of Matthew Boss from JPMorgan. Please proceed with your question.

Hey thanks, so apparel inventory out there in the channel is clearly elevated and the competition is fierce. I guess any changes you guys think necessary to the 90% full price model and then just how best to think about merchandize margin this year and then how you would rank the opportunities going forward from a gross margin perspective?

Okay so on the $0.90 full price model. That model has worked for us for years and we have tried to augment the volume that we shout are underlying values and the offer that are in that store. So we haven't really made fundamental changes to our promotional posture, while I think that might give us a short-term boost in same-store sales, I think it's just a race to the bottom in terms of profitability. In terms of merchandize margin and where the opportunities are, the biggest opportunity is to continue to grow private brand as a percentage of our business. So we are doing that same-source, we are doing Bootbarn.com and we will be introducing our private brand into Sheplers.com as well. So each of those should be able to give us about a thousand basis points of improved merchandize margin of a third-party product across each of those businesses. We are also looking to increase the amount of containers that we import directly from overseas. So we just brought on one of our major vendors where we can buy container loads, bring that period into our new distribution center in Fontana and breakup our products and send it out to the stores. So those are sort of the areas where we are looking for margin expansion.

Great. And then just a follow-up on the expense side. What is the best way to think about the comp leverage point on the SG&A front through this year and then just a similar question what will it take to lever buying and occupancy this year within gross margin?

Sure. On the SG&A line, we need to get roughly between 1% and 2% somewhere in that range. And then in terms of occupancy, it’s really just a little bit - a little north of 3%, but call it 3%.

Got it. Okay. Best of luck guys.

Thank you.

Thanks Matt.

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

Great, thanks a lot guys. This is actually Jon on for Peter tonight. Our first question is just around some geographical performance. I think in fiscal Q3 you mentioned California, Arizona and Nevada were kind of in that solid mid-single-digit comp range. Just first of we were kind of curious about how Q4 trended with those geographies and then also with those geographies relative to some of these oil and commodity impacted geographies did that comp gap widen at all?

So in the west, we still had a nice positive store level comp. So we are pretty pleased with that part of the business. In terms of the oil market with the states, the four states that we call out right North Dakota, Colorado, Wyoming and Texas. The first three have continued to be very, very difficult for us in the Q3 and now into Q4 and the business has gotten tiny bit worse, but started out at pretty bad numbers. So those three states comprise about 30 stores and a double-digit negative decline there, which is something we’ve been settled with for a couple of quarters now. Texas on the other hand, Texas is still negative but has been improving sequentially since the third quarter. We obviously hope that continues, but it’s still a negative drag on same-store sales and we have 47 stores in Texas, so it’s a bigger anchor to some degree than the first three states, which are only 30 stores. But Texas is down and isn’t down nearly as much of the first three. We think about it is, I think there is a little bit more diversification in the Texas economy and we’re trying to look for opportunities there to take advantage of that diversification. And some of those other markets as we’ve discussed in the past, some of them are specifically focused on oil and gas and some are specifically focused on fracing and while the price of oil has come back bit, it hasn’t really created a lot more investment yet in the fracing industry in state like North Dakota.

Okay, great. Thanks for that. And then I guess as a follow-up. I know you guys said during the first like [indiscernible] weeks to quarter, here you are running positive, you guided Q1 took flat. So clearly you are still cautious, but I guess a lot of retail has still been pretty tough out there in April and May from what we’ve been seeing. What do you think is driving the sequential performance in year comp versus maybe what is going on out there in the rest of retail?

It’s a very good question. What we’ve seen is just to kind of give everybody the sequential view. As we have report on our last call, January was pretty solid, February was pretty darn difficult and then business got sequentially better in March slightly negative and then positive in April and into May. Part of that I think is where we’ve got a number of initiatives that we covered in the past with you all that we think are gaining traction. So I would like to think that some of that is as a result of a lot of hard effort from folks across the field organization. We haven’t yet started to cycle very difficult business. So I don’t think it’s a year-over-year comparison and we will start to cycle more negative or more weaker comps as we go forward, but that really hasn’t happened yet. In fact, in our core Boot Barn business we won't see a negative comp month of any material nature until November. So I think it’s really attributed to some of the things that we are doing from a merchandizing perspective, really focusing on boots and denim and within boots looking at work boots and western boots and trying to diversify those two businesses. And then within the work apparel business, we've gotten some nice growth with brands and with classes of merchandize in the overall work parallel department that have extended us beyond the oil industry. So that has helped a bit and then finally, we've really being working with the stores organization to try to improve conversion and we believe that the traffic is down, we know that transactions in our average store are down. So now it's how do we ensure that we convert more of the shoppers to buyer and how do we build the basket. But an answer to your question while we think some of the things might be having an impact the visibility as we've said and I know a number of other retailers are reporting is very, very blurry as we look into sales going forward and as we try to do comparisons year-over-year and do two your stacks. The traditional analytics seem to have broken down so there just seems to be a lot of volatility in how we are looking at the business.

Okay thanks a lot guys. Good luck this year.

Thank you.

Our next question comes from the line of Mitch Kummetz from B. Riley. Please proceed with your question.

Yes thanks. Maybe a first question just a follow-up on a comment that you made Jim where you said that core Booth Barn comp you didn’t see a negative there until November of last year. I'm curious if you could say when the comp started to run negative in those four oil and gas states. I would imagine that those turn negative sooner than November of last year.

They did, we were positive in nearly all of them up until about May or June last year and then they started to turn negative and then quickly went strongly negative. So we haven’t yet hit a negative number in North Dakota, Colorado or Wyoming really and then Texas tend to go negative until sometime in the second quarter.

Got it, and then when I think about your Q1 to-date comp as well as your comp guidance. That you are going up against I think to five to six last year, you mentioned you are positive through seven-weeks. I would imagine as you think about the next six-weeks the compares are probably quite a bit easier than the comparison you have been running up against through the first-seven weeks. Is that accurate?

Yes. We still had a pretty solid June last year, say May was our best month of the quarter, June was still a pretty solid mid-single-digit comp.

Okay. And then I think it’s the last question more housekeeping I guess. I don’t think you guys broke out your comp in terms of the Boot Barn business versus a Sheplers business and then may be Sheplers’ e-commerce stores. I think you have done that in the past, so it’s something you might be able to do that for some of those comp?

The way we think about it is, both online businesses are growing nicely, both are double-digits comps. The stores business was negative, unfortunately, the Sheplers Stores business was I would say slightly negative and the Boot Barn business was a little bit more negative than that. And we are starting to manage the overall business in a consolidated way, which is why we are starting to consolidate how we reported about it and just gives a little bit of color on what is creating swings up or down.

Got it, alright. Thanks guys. Good luck.

Thanks Mitch.

Thanks Mitch.

Our next question comes from the line of Paul Lejuez from Citigroup. Please proceed with your question.

Hey, thanks guys. It's Tracy filling in for Paul. I had two questions. The first is I was wondering in some of these pressured oil and gas market what you are seeing from a traffic versus ticket perspective, is it really just the traffic thing or our ticket also pressured and then I also have a follow-up.

.: From a ticket standpoint, I honestly can’t comment specifically on the basket size and different days, we don’t track it that closely or we don’t look at it every week. I can tell you that one of unfortunate consequences of the oil pressure is some of the more high end areas of our business most notably exotic boots have really been under a lot of pressures. So historically the traditional oil worker who is making a fair amount of money is being pursued to move up to North Dakota where he is spending not only on merchandise to go out in the fields to work, but had enough disposable income to spend $500 or $600 on boots. And we've seen a notable decline in that portion of our business. So that's undoubtedly pushing down at least AUR and presumably basket size as well.

Got it thanks. And then my second question is about your loyalty program and I was wondering how many of the Sheplers customers you have enrolled in your loyalty program and what you have seen from those customers in terms of their frequency of spending and how much they spend per visit versus what a typical Boot Barn loyalty customer spend?

That's a great question and unbelievably complicated question, so I appreciate you asking me on the public call. The quick answer is we've seen a nice pick up to the Be Rewarded loyalty program within the Sheplers stores. So on average we have about 10,000 customers in a Sheplers store that have already sort of voluntarily signed up for the program. Anecdotally, I would tell you that the Sheplers shopper tended to shop more frequently, because they had a higher degree of apparel purchases than boots. I'm not certain that we can claim that just yet because a lot of these customers are just being introduced to Boot Barn. So as we think about the loyalty, I think it's a little bit early to really segment sort of the gold customers in their stores versus the more traditional Be Rewarded customers to give you a split for how much of the business is being driven by sort of the heavy purchasers. But that something we can come back to on future calls.

Yes, we’ll make sure to ask you again in a couple of quarters.

Thanks Tracy, I'll count on it.

Our next question comes from the line of Randy Konik from Jefferies. Please proceed with your question.

Hi this is [indiscernible] or Randy. I wanted to get some color on the work wear business, it sounds like that was relatively price [indiscernible] in the quarter. so I think [indiscernible] could be driving that. I think you had mentioned offering some apparel or price points maybe moving away from some of the flame resistant apparel. Can you explain given that business that would be really helpful? Thanks.

Sure and you have nailed it. in the work business overall, we have about work boots and apparels so within the boot side, we would really emphasize performance boots so think of brands like Keen and Timberland some of our more hiking and hunting boots and really extended our definition of "Work Boots" a bit. And then on the work apparel side Carhartt gives the preeminent branding and fundamentally the highest priced brand although it really offers great value for that you get and great quality. So we brought in a couple of brands that are a little bit lower priced, most notably a company called the Ligs and we've seen a nice pick up in that piece of the business which we feel good about. So we're still servicing the worker. The downside of that is we are trading customers down to a lower price points, but if that’s what they can afford, we are there to provide their needs. So that's been a nice bright spot. And looking into Sheplers stores, we've really increased the presence of both work boots with dedicated fixtures and work apparel with the Carhartt shops and we've seen very, very nice growth in both of those departments within the Sheplers stores.

And has there been any variation in performance on between the oil related states and non-oil related states in that category?

Yes, I mean the oil related states are having difficult business. Across the Board we're trying to blend some of those declines with some of these initiatives, but if we look at a work department level view of sales in North Dakota or Wyoming, we see softness from top to bottom. We have seen maybe paradoxically some more softness in non-work categories that are more discretionary and cut out ladies boots. But probably the hypothesis that we've kind of betted bit with fields and the store managers specifically is guys have either lost their job or they are making less money. So they have less money to spend on family, lives, et cetera. So they still need to go work so they are buying either some of the Ligs work apparels or some those on work boots but they are not spending on pure discretionary spend.

Great, thank you.

Thank you.

Thank you.

Our next question comes from the line of Tom Nikic from Wells Fargo, please proceed with your question.

Hi guys thanks for taking my question. I was kind of wondering I know that [indiscernible] but with sort of the recovery in oil prices over last three-months or so, do you have any sort of educated guesses that [indiscernible].

You are right about the crystal ball piece. The oil piece of it, if we think about our experience as oil started to fall in November of 2014, I guess. But we didn't start to feel it in our business for 18-months no six-months.

Call it eight-months, nine-months or something like that.

So there was a pretty significant lag between the decline in oil prices and what we understand is as oil started to come down the oil companies kind of held on to the workforces, expecting it to potentially go back. And certainly not wanting to close up shop on the hope that it would reverse itself and make it start drilling again and started expanding their drilling facilities. I think on the way back up, I think we probably see a similar lag, I can't really see into how the exploration companies think about it. But my hypothesis would be that they will expect to see oil up in the 70 plus before they start to expand and introduce more capital to continue to take more out of the ground. But we're watching it, we track as best we can rig counts and employment, et cetera and obviously we would presumably benefit if they start to invest again. But I don't it's going to happen as quickly as the oil price moves from 30 to 40 or 45.

Okay great that's helpful. I also wanted to follow-up on the store plans, I believe you said 15 stores this year, did you mention if you plan to close any stores, and that you know 15 stores have 7% to 8% growth sort of below the double-digit number that you talked about in the past. Should we kind of think of you 15 stores a year as kind of the sort of medium term run rate, any help there would be great thanks.

The 15 stores this year is a result of two things. One, we just expanded 40 stores organically in the two years and added 19 stores of Sheplers right. so we've added 60 stores to the base over the last 24-months or so. And second, is just to be a little bit cautious in time or visibility is challenging in terms of capital preservation. So I think when we think about fiscal 2018 growth it will depend completely on how this year evolves. I would think that long-term, 10% is still a good number to model, but this year we very purposefully pulled that down a little bit. But again, if we see things starting to rebound and we start getting back to a positive same-store sales growth will probably ramp right back up to 10% so probably 22 to 25 stores. In terms of the second part of your question around closing, we have no plans of closings right now. Well the nice facts about the Boot Barn business is the store model is pretty resilient, so nearly every store in the comp base still makes money. So there is not a burning desire of ours to start closing down stores because they are losing lots of money.

Alright great, thanks very much and best of luck.

Thank you.

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

Just to follow-up on that last question, does that imply that all of your leases for next year are locked and loaded and ready to go or is it possible that from that second half weighted openings could push into 2018? Thank you.

Not all the leases are locked and loaded, I would say that the pipeline for this year is pretty robust, I'm not concerned that we couldn’t get to 15 stores. If any of those stores push to the next year, it would push off 30-days or so and we would probably have a few stores left to fully solidify it. So we feel pretty good about the 15 stores there, we have letters of intent or leases on a number of them already of course.

Okay, great. Thanks. Best of luck.

Thank you.

Thanks Corinna.

There are no further questions in queue. I would like to turn the call back over to management for closing comments.

Thank you everyone for joining the call. We look forward to speaking with you on our first quarter earnings call this summer. Take care.

Ladies and gentlemen this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.