Boot Barn's Q1 2025 Gives Confidence In Return To Growth, But The Stock Is Still Expensive

Core Viewpoint - Boot Barn's 1Q25 results indicate a return to comparable sales growth after a challenging FY24, driven by improved digital advertising returns and stable margins despite store expansion [1][2][3] Group 1: Financial Performance - Comparable sales increased by 1.4% in 1Q25, reversing negative trends from 2H24 where same-store sales were down nearly 5% to 10% [2] - Operating margins remained flat, with gross margins up 100 basis points from merchandise but offset by a 100 basis point decline in overhead [2] - The company expects FY25 sales growth of 9-11% with flat comparable sales, and operating margins projected to remain around 11.5% [3] Group 2: Management and Strategy - Boot Barn's management is recognized for effective ad spend and inventory management, focusing on long-term profitability rather than short-term growth [4] - The company plans to expand store square footage by 15% annually, with a target to grow from 400 to 500 stores [3] Group 3: Valuation and Market Position - Boot Barn's current market cap is $4.1 billion, with expected operating profits of$220 million, leading to a P/E multiple of 25x and an earnings yield of 4% [5] - The stock is considered overvalued, requiring significant growth to achieve a fair return, with potential risks from execution, fashion cycles, and macroeconomic factors [5]