MW Boot Barn's stock is rallying, but executives are cautious on upcoming tariff impact

By Bill Peters

Western-wear chain sees bigger dent to margins in the months ahead, as it starts to sell tariffed products

Western-wear retail chain Boot Barn Holdings Inc. called out strong sales trends over recent weeks and said Wednesday it was "confident" it could handle the world's trade tensions, but management nonetheless warned of higher costs, price increases and potentially weaker demand in the months ahead as tariffs begin to take a bite.

The company also outlined plans to lean less on China for some production, and said it would cancel orders on items hardest hit by the taxes on imports.

Chief Executive John Hazen, during Boot Barn's $(BOOT.UK)$ earnings call, said that as the company moves into the second half of its fiscal 2026, which runs through next March, it expects to see more pressure on margins as it begins to sell tariffed products.

"We do expect, given what we know today - and we know the situation with tariffs is very fluid - that we expect comps to flatten in the second half as price increases start to weigh on consumer demand," he said.

Boot Barn defines comp sales, or same-store sales, as those at stores open at least 13 months. Hazen made the remarks as Boot Barn tries to push more exclusive brands, open new stores and build out its online-ordering infrastructure.

Still, executives at the company - which sells cowboy boots, workwear, denim and other gear - said during the call that same-store sales were up 9% over the first six weeks of its first quarter. That trend was helped by more purchases, made at the full selling price.

Management also forecast a roughly 4% to 6% same-store sales gain over that period, above Wall Street's expectations. And their first-quarter revenue and per-share profit outlook was also above expectations.

Boot Barn's full-year forecast, however, missed estimates. But management also said the company's board had authorized a stock buyback program of up to $200 million.

Either way, shares of Boot Barn jumped 18% after hours on Wednesday.

Boot Barn's first quarter began just before President Donald Trump in early April announced sweeping new tariffs on much of America's imports, temporarily rattling markets and raising deeper concerns about how shoppers would respond to negative headlines about the economy.

Those steepest of those tariffs are on pause for now. But analysts have been zeroed in on retailers' ability to mitigate any hit to profit brought by those tariffs.

In a presentation on Wednesday, Boot Barn said that because of lower inventory turns - in other words, how quickly a business sells off its existing product backlog - and efforts to stock up before tariffs took hold, the impact of Trump's tariffs likely wouldn't be felt until the second half of its fiscal year.

The company also said it had "been notified of cost increases," which would take hold this summer, on products it gets from third-party vendors who are likely to raise their prices in the mid-single-digit percentage range. Boot Barn said it "expects to increase retail prices on the impacted products in order to maintain merchandise margin rates."

Boot Barn also said the factories it uses are either cutting costs or shifting their own sourcing to nations with lower tariffs. The company is cancelling product orders on items whose margins might be hit harder by tariffs, and said it was looking at each individual item it sells to determine whether to change its price.

The company also said it plans to rely less on China for production of its exclusive brands. Management said it expects that China will account for around 5% of its exclusive-brand products in the second half of fiscal 2026 and in fiscal 2027, as it shifts production to other nations. That figure stood around 24% in the last fiscal year, with Mexico accounting for around a third.

Wall Street will get a deeper sense of how consumers are responding to tariffs when Walmart Inc. $(WMT)$ reports quarterly results on Thursday. Shares of Boot Barn are up 20.8% over the past 12 months, as of the close of trading on Wednesday.

-Bill Peters

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May 14, 2025 20:11 ET (00:11 GMT)

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