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About Boot Barn
Boots are about as specialty as it gets.
Down in Texas and we’re sure other parts of the South, leather boots and boots in general are a little bit more than just a mere fashion statement; they’re a way of life.
If you have yourself a pair of boots and aren’t afraid to show them off, one is likely to earn a lot of instant respect but of course, as the old adage goes, you got to pay the cost to be the boss.
And boots, especially at southern with a hint of western specialty boot retailer, Boot Barn, ain’t cheap, as specialty brands such as Boot Barn accordingly charge specialty prices.
Although boots are the main point of interest for someone strolling through one of the company’s stores, the company also sells jeans, t-shirts, regular shirts, underwear, ties, wallets, gloves, hats (no, not just cowboy hats) and a host of other accessories.
What initially enticed us about this company is the fact that one of its stores is in our neck of the woods and we see it quite often but have oddly enough never been inside.
What is more interesting to us about this company is the high likelihood that it has fairly high profit margins given that, again, it operates and for the most part dominates a specialty clothing sector within the retail space.
All that being said, let’s get right into this company’s financials to get a better gauge as to whether or not its stock (NYSE: BOOT) is worth buying and holding onto for the long haul.
Boot Barn’s stock financials
Weighing in with a market capitalization of $2.2 billion, a share price of $72.32, a price-to-earnings (P/E) ratio of 13.06, all while not currently distributing an annual dividend to its shareholder base, Boot Barn’s stock (NYSE: BOOT) is off to a rather fashionable start given its relatively low price-to-earnings ratio, indicating that the company’s shares are presently trading at a discount relative to their actual, intrinsic value.
Additionally, we’re far from concerned regarding the company not paying out a dividend given that it does after all operate in the retail sector, which tends to involve a hefty amount of cash burn and inventory-related expenses, even during the good times.
Diving a little deeper in the nooks and crannies of this company, Boot Barn’s executive members are tasked with properly tending to $1.2 billion in terms of total assets along with $600 million in terms of total liabilities.
We like this total asset-total liability breakdown, as per every dollar of total liabilities Boot Barn has on its books, it has two dollars in total assets to match, which, when operating in any sector is far from a bad thing and gives us some quantitative confidence that this company’s leadership is keen on keeping its balance sheet in good shape.
Moving right along to the company’s income statement, Boot Barn’s total annual revenue over the past five years has experienced, as also seen with other companies we’ve analyzed in the past, a steady and predictable increase each year, which, is far from a bad quality, especially when the past handful of years have offered more bad news than good.
Specifically, the company’s total revenue in 2018 stood at $678 million, rose the next year to $777 million, $846 million the year after that, all the way to its latest reported figure (on TD Ameritrade’s platform) of nearly $1.5 billion.
One of the things we’ve noticed about specialty retail is that in more cases than none, it is somewhat insulated from harsh economic backdrops, which, at least seems to be the case with Boot Barn.
Objectively speaking, there aren’t likely as many penny-pinching, paycheck to paycheck consumers consistently making purchases at Boot Barn given how marked up its products are, which naturally means that the company’s core consumer is filled with the not-so-price sensitive crowd, which is a positive for a company like Boot Barn, especially during periods of economic distress.
It is also worth adding that this company likely has a very loyal consumer base and thus, when necessary, can raise its prices and still have its core customers spending at the Barn, which is another huge long-term tailwind.
As it pertains to the company’s cash flow statement, positive net income generation and positive total cash from operations generation hasn’t been much of a struggle for Boot Barn, as both figures have been resoundingly positive over the last five years.
Boot Barn’s stock fundamentals
According to TD Ameritrade’s platform, Boot Barn’s trailing twelve month (TTM) net profit margin is far from lackluster and rises a bit above that of the competition, on average.
More specifically, the company’s TTM net profit margin is 10.45% to the industry’s average of 8.16%.
We initially expected the company’s TTM net profit margin to be a bit higher, however, retail is retail and there are too many expenses to count when it comes to successfully operating in the retail-sphere.
Thus, we’re far from concerned with Boot Barn’s TTM net profit margin as it stands comparably tall against the competition’s average, as it should.
When it comes to the company’s TTM returns on assets and investment(s), they both lag the industry’s averages by a modest margin (around between 3-7% each), which doesn’t actually surprise us all that much. Mainly, this seemingly mature western-styled retailer still has a lot of room for growth both geographically across the United States as well as it relates to the merchandise within each of its stores.
This sort of growth can hamper a company’s ability to maintain a higher TTM return on assets and investment(s) and if that is the case with Boot Barn (which we think it is), then we’re not losing any sleep.
Should you buy Boot Barn stock?
Hey, have we mentioned that retail isn’t necessarily our favorite investment sector?
Speciality retail on the other hand appears to be the best of the worst of retail, as mark-ups tend to be higher, customers are more brand loyal, less price sensitive and they’re also not as difficult to figure out, as Boot Barn, from our understanding, has a fairly specific type of customer to win over, whereas other retailers have a whole host of customers to constantly figure out.
Given all of this information, tying in the fact that the company’s core figures and metrics are solid across the board, we give Boot Barn’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.