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Boot Barn Holdings Inc (NYSE:BOOT)
Q2 2021 Earnings Call
Oct 28, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Boot Barn Holdings Second Quarter Fiscal Year 2021 Earnings Call. As a reminder, this call is being recorded. Now I'd like to turn the conference over to your host, Mr. Jim Watkins, Vice President, Investor Relations. Please go ahead, sir.

Jim Watkins -- Senior Vice President, Finance and Investor Relations

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Boot Barn's Second Quarter Fiscal 2021 Earnings Results. With me on today's call are Jim Conroy, President and Chief Executive Officer; and Greg Hackman, Chief Operating Officer and 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.

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 during this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our second quarter fiscal 2021 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?

James G. Conroy -- President And Chief Executive Officer

Thank you, Jim, and good afternoon. Thank you, everyone, for joining us. On today's call, I will review our second quarter results, update you on our current performance and walk through each of our four strategic initiatives. Following my remarks, Greg will review our financial performance in more detail, and then we'll open the call up for questions. Before we begin, I would like to acknowledge the entire Boot Barn organization for their continued hard work and execution as we navigate through the current macro environment. The team has adapted quickly to the ever-changing nature of the pandemic and has done a tremendous job serving our customers, while focusing intensely on maintaining a safe shopping environment.

I continue to be humbled by the culture of the company, and I'm grateful to be a part of this wonderful organization. We are very pleased with our second quarter results, which exceeded our expectations. Beginning with our top line, net sales were down 1.4% from a year ago with same-store sales decreasing 5.1%. Given the environment and the many pressures on the business, our ability to nearly maintain our sales volume year-over-year was quite an accomplishment. By channel, same-store sales in our retail stores declined 9.1% and e-commerce same-store sales increased 17.6%. Following a slow start to the quarter due to an increase in COVID cases in several of our key states, same-store sales growth improved sequentially each month of the quarter and has continued to increase during October. Consolidated same-store sales declined 9.8% in July, 8.9% in August before turning positive in September, increasing 1.3%. The acceleration in consolidated same-store sales was driven by sequential improvement in our retail stores.

As we mentioned on our last quarter's call, we have seen a correlation between consumer sentiment around COVID-19 and retail store sales. From a margin perspective, our second quarter merchandise margin was strong in both stores and online. We have maintained our full price selling philosophy with minimal markdowns and promotions, resulting in growth in product margin, which helped to partially offset deleverage of buying and occupancy costs, higher freight expense and margin headwinds due to channel mix. Once again, the merchandising team has done a great job of navigating through the many challenges in the retail environment and has us well positioned from an inventory standpoint without incurring margin pressure due to product markdowns. The strong full price selling, combined with our recent cost reduction efforts, resulted in second quarter net income of $5.8 million or $0.20 per diluted share.

This was better than our expectations and compares to $7.7 million or $0.26 per diluted share in the prior year period, which included a $0.02 per share benefit due to income tax accounting for share-based compensation. Given the challenging macroeconomic environment, we are particularly encouraged by our bottom line performance in the quarter. I'd like to now provide an update on current business. We saw continued improvement during fiscal October as same-store sales in our retail stores were flat to last year, and our online sales remained very strong. While work boots continue to be our strongest performing category, we are also encouraged to see more broad-based growth across other categories with momentum building in denim, hats and western boots, all of which are now comping positive quarter to date. I would now like to provide an update on each of our four strategic initiatives, beginning with driving same-store sales growth. During the quarter, we saw significant sequential improvement in the retail stores business, improving from a same-store sales decline of 15% in July to slightly negative comps in September and further improving to flat comps in the month of October.

While we experienced several headwinds related to COVID-19 that impacted sales transactions during the quarter, our underlying business remained solid. Low oil prices impacted employment in some of our markets, most notably in West Texas, while COVID-related restrictions have slowed travel in some of our markets that benefit from tourism. Additionally, events such as rodeos and concerts have been canceled across the country. These events typically provide a catalyst for our customers to get into our stores and purchase boots and apparel in preparation for attending the event. Despite these COVID-related challenges, we were able to improve our retail store same-store sales from a decline of 27% in the first quarter to a decline of 9% in the second quarter, ending the month of September with essentially flat store comps. The improvement in the business showcases the strength of the Boot Barn model and our customers' affinity for our in-store shopping experience. From a merchandise perspective, work boots continue to be our strongest performing category. Sales of non-flame-resistant work apparel were up in the quarter as our core customer purchased functional products for their work needs. In contrast, demand for our FR work apparel business was soft due to high unemployment for our customers working in the oil and gas industries, which pressured same-store sales at some of our stores in Texas and other oil-dependent markets. In addition, sales of both men's and ladies' Western boots and apparel declined during the quarter. From a marketing perspective, upon the onset of COVID in the spring, we adjusted our media mix by placing more emphasis on digital and pay-per-click advertising, while pulling back on direct mail and radio spots.

Now with the business returning to a more normalized composition with stores returning to a penetration of more than 80%, we have reverted back to our more traditional marketing program, which includes radio, television and direct mail, in addition to the digital marketing that we have had in place. From a customer segmentation perspective, in addition to marketing spots targeted at our work customers, we are refocusing on our core Western and fashion segments, especially during the holiday and gift-giving season. We've also recently expanded into a new segment called Just Country. This new segment extends our customer reach to those who don't live a core western lifestyle but fit into a rugged, outdoor, adventure enthusiast and recreational category. Recognizing opportunities to expand our product offering to those living in an increasingly more outdoor lifestyle and in line with our Just Country segmentation, our merchandising team has broadened our assortment of hiking boots, outerwear and outdoor footwear and apparel. Inventory in these expanded product categories have started to build. We expect this offering to draw new customers to the brand and expand our share of wallet with existing customers. From an operational perspective, essentially all of our stores are open today with normal hours of operation.

We continue to promote a safe shopping environment with the use of face coverings, Plexiglass partitions at the registers and social distancing. We've also made terrific progress in recruiting and hiring much of the seasonal staff that we will need for the holiday builds and business. As we look forward to our holiday quarter, we feel great about how we are positioned from our merchandising, staffing and marketing standpoint to handle the holiday surge and to react to whatever challenges are presented by the external environment. Moving to our second initiative, strengthening our omnichannel leadership. During the second quarter, e-commerce same-store sales increased 17.6%, and our continued focus on e-commerce profitability drove a more than 100% increase in operating income. Our increase in sales was driven by both new and existing customers. We are focused on stepping up our efforts to add more new customers and optimize conversion across each of our online platforms. The majority of the online growth we saw during the quarter was driven by a 42% increase in sales on bootbarn.com with a healthy year-over-year increase in both traffic and conversion. Sales at bootbarn.com now make up more than 50% of our e-commerce business.

While e-commerce sales in the rest of our online business were down low single digits year-over-year, we have seen significant improvement in e-commerce profitability, partly as a result of the rebranding of the sheplers.com site and the associated changes we made in our promotional posture to reflect a more full price selling model. The ongoing changes we have made and our focus on increasing e-commerce profitability have not only greatly improved our bottom line but have continued to narrow the margin differential between the stores and online channels. We are making improvements to our omnichannel capabilities and believe the enhanced capabilities will enhance -- will enable us to continue to meet our customer shopping needs during these unusual times. We now offer a variety of omnichannel options, including our endless aisle WHIP tablets; Rangefinder tool; Buy Online, Pick-Up In Store; and curbside pickup. We are pleased with the success we have seen in recent weeks with our Buy Online, Pick-Up In Store sales as some of our customers have adjusted their shopping habits. We recently added additional capabilities to our e-commerce business, including fulfillment of e-commerce orders from our stores and same-day delivery from our stores. We believe these enhancements provide us with additional competitive advantage, including same-day delivery of holiday gifts purchased on our sites, which will extend our online shopping season several days longer than traditional direct-to-consumer players. Additionally, in the coming weeks, we plan to launch virtual clienteling, which will allow our customers to shop from home while video conferencing with an in-store expert stylist as their virtual shopper. While still in the early days, we are encouraged by the performance across each of these platforms and expect them to provide incremental sales and enhanced customer satisfaction, especially as we head into the holiday shopping season.

From an e-commerce fulfillment perspective, the upgraded automation and enhanced warehouse management system added to our distribution center over the last few years has reduced picking times and shortened the time from order to delivery. These changes, along with expanded capacity at the fulfillment center that has recently been added, have us well prepared to fulfill essentially any type of online demand during the busy holiday season. Now to our third strategic initiative, exclusive brands. During the second quarter, exclusive brand penetration grew to 24.9%, an increase of more than 350 basis points compared to the prior year period. This growth is a testament to the high-quality product offering and the overall brand receptivity we have seen with our customers. As a reminder, our exclusive brands are created and nurtured as true brands and not as inexpensive alternatives to third-party brands. This focus on brand development has positioned Cody James and Shyanne as our number 2 and number 4 top selling brands in the store. We believe our exclusive brands in combination with the assortment we offer from third-party vendor partners will continue to drive traffic to our stores and our e-commerce sites and further develop loyalty from our customers. We expect to see continued growth in our exclusive brand penetration in the range of 200 to 300 basis points during the current fiscal year.

Finally, our fourth initiative, expanding our store base. We opened one new store during the second quarter and an additional store in October, bringing our total store count to 266 stores. We plan to open in both new and existing markets and continue to target a total of 15 new store openings in fiscal 2021, including the seven stores opened year-to-date. We are very encouraged by the performance of the newly opened stores, particularly those in new markets. This strong performance, despite the challenging macro environment, underscores the strength of the business model and further validates the significant opportunity for us to continue to open new stores with attractive returns going forward. While we have intentionally slowed new unit growth this fiscal year as a result of COVID-19, we remain confident in our long-term ability to expand our store base by 10% or more each year in a more normalized external environment.

I'd like to now turn the call over to Greg Hackman.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thank you, Jim. Good afternoon, everyone. In the second quarter, net sales decreased 1.4% to $184.5 million. The decrease in net sales was driven by a 5.1% decline in same-store sales with same-store sales in our retail stores declining 9.1% and e-commerce same-store sales increasing 17.6%. The decrease in retail store sales was primarily a result of decreased traffic in our stores that resulted from customers staying at home in response to the COVID-19 crisis. Gross profit decreased 6.5% to $55.5 million or 30.1% of sales compared to gross profit of $59.3 million or 31.7% of sales in the prior year period. A 160 basis point decrease in gross profit rate resulted from a 110 basis point increase in buying and occupancy costs and a 50 basis point decline in merchandise margin rate.

The deleverage in buying and occupancy costs was primarily a result of lower sales due to the COVID-19 crisis. Merchandise margins declined 50 basis points, of which 30 basis points is a result of higher e-commerce penetration and the balance a result of higher freight, partially offset by better product margins. Operating expense for the quarter was $45.4 million or 24.6% of sales compared to $46.4 million or 24.8% of sales in the prior year period. Operating expense decreased primarily as a result of lower marketing and pay-per-click expense. Income from operations was $10 million or 5.4% of sales in the quarter compared to $12.9 million or 6.9% of sales in the prior year period. Income tax expense was $2 million in the quarter compared to $1.9 million in the prior year period, resulting in an effective income tax rate of 25.6% in the second quarter. Net income was $5.8 million or $0.20 per diluted share compared to net income of $7.7 million or $0.26 per diluted share in the prior year period.

Turning to the balance sheet. Inventory decreased approximately 14% compared to last year, both on a comp store basis and on a total company basis. The decrease in total company inventory was primarily driven by a reduction in comp store inventory and a decrease in inventory at our Fontana distribution center, partially offset by growth in inventory for new stores added in the last 12 months. We continue to be pleased with the team's ability to manage inventory levels during the current environment. As of September 26, 2020, we had a total of $179.3 million of debt outstanding, including a $111 million term loan and $68 million outstanding on our $165 million revolving line of credit. During the second quarter, we reduced our line of credit borrowings by approximately $62 million, resulting in $97 million of remaining availability. We had $35.7 million in cash on hand at the end of the quarter, and our net debt leverage ratio at the end of the quarter was 1.7. Given the continued lack of visibility into the business as a result of COVID-19, the company has not provided third quarter guidance at this time.

Now I'd like to turn the call back to Jim for some closing remarks.

James G. Conroy -- President And Chief Executive Officer

Thank you, Greg. Although the current environment remains challenging, we are pleased with our second quarter results and are optimistic about maintaining our positive momentum through the holiday season and back half of the year. We continue to believe in the strength of the Boot Barn model and look forward to the opportunities that lie ahead. Once again, I would like to thank the organization for their hard work and commitment, taking care of our customers and executing on our initiatives through a difficult backdrop.

Now I would like to open the call up to take your questions. Stacey?

Questions and Answers:

Operator

[Operator Instructions] Thank you, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using Cisco equipment it may be necessary to pick up your headset before pressing the star keys. Our first question comes from Matthew Boss with JPMorgan. Please go ahead.

Matthew Robert Boss -- JPMorgan Chase & Co -- Analyst

Great, thanks. Congrats on the business momentum.

James G. Conroy -- President And Chief Executive Officer

Thank you, thanks.

Matthew Robert Boss -- JPMorgan Chase & Co -- Analyst

So maybe first on your positive 2% comp in October, what performance are you seeing in maybe some of your core markets, such as California, relative to Texas or oil and gas market? And Jim, given the top line stabilization, is there any impediment to returning to 10% new unit growth as early as next year?

James G. Conroy -- President And Chief Executive Officer

Okay. So good question. From a regional perspective, the way we think of the field organization is, we split into three different regions. The West region, which includes California and a few other states, has performed the best. The South region, which includes Texas, has been under the most pressure, largely due to some of the oil markets in West Texas and some softness in overall Texas. And then the North region includes essentially the rest of the country. And that's been somewhat -- somewhere in between those 2. But I think as we see the business progressing month after month after month, the story that's emerging, that's pretty encouraging is, we -- three or four months ago, we were selling work boots and some work apparel. And then sort of one by one, each department started to sequentially improve and then turn positive, et cetera. So we've seen a nice steady improvement in men's cowboy boots and ladies cowboy boots, a nice steady improvement in men's work apparel, a nice steady improvement in ladies apparel. And many of those departments are now positive, not all of them, but many of them are -- have turned positive, which is great to see a broader-based growth than just being single-threaded through sort of the work business. The second part of your question was around new store development. And while this might seem like a paradox, in the height of a pandemic when stores are curtailing hours and people are shifting to online, the truth here at Boot Barn is we are probably even more involved than we've ever felt about opening up new stores. There's a couple of reasons for that. One, we have opened brand-new stores in new markets that didn't really even know the Boot Barn brand right in the middle of the pandemic, and they are exceeding our expectations, will pay back at least in totality. The group of stores will pay back faster than the 3-year benchmark that we hold for ourselves. And this is, again, opening up in the kind of worst of environments, and these stores are doing great. The second reason is, as we continue to open stores in existing markets, we're realizing that our store density assumptions actually may have been too conservative. And we probably can open even more stores in existing markets than we had originally thought. So when you put all that together, I think returning to 10% once we get back to somewhat of a normal environment, and I'm not sure when that will happen, I think we'll absolutely be able to return to 10%. And I think we'll absolutely be able to at least double our store count. And we're continuing to look for more and more opportunities to grow the Boot Barn brand across the country.

Matthew Robert Boss -- JPMorgan Chase & Co -- Analyst

Great and then maybe just a follow-up for Greg. On gross margin, what's the best way to think about merchandise margin in the third quarter, maybe relative to the 50 basis points contraction in the second quarter? And just as -- maybe as a reminder for the back half of the year, if there's any puts and takes, but what is the comp that you think you need to leverage buying and occupancy costs in the back half of the year within the gross margin?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Yeah, we haven't given guidance at all really on those kinds of things this year. Having said that, I think the leverage points we've given in the past probably hold true today. There's nothing abnormal about this year other than pressure on the top line, of course, that is going on. So I think if you revert back to what we've said in the past, that's probably a pretty good guide. As you think about the merchandise margin in Q3, I mean, of the 50 points -- 50 basis points decline in merchandise margin, 30 basis points of that was related to growing e-commerce penetration year-over-year. And the e-comm penetration, I think, at the end of October was 16%, which is probably more in line with what we would see in October last year, for example. So I don't know that we'll have the same -- I don't know the composition of sales in Q3, but to the extent that e-comm penetration grows by one percentage point, that costs us about 15 bps of pressure on the merchandise margin line. So in Q2, we had two points of increased penetration year-over-year, and that was 30 basis points of headwind for us. The other piece of this was, we had expansion in, what I'll call, product margin, the sale of the product that's in our store, but we had some headwinds related to freight. And you may have seen that from some other retailers. So there's a little bit of freight pressure out there. There's backups in the West Coast ports. And so we're having to do some things differently to get product in. I don't expect that to be a significant headwind in Q3, but that affected us a little bit in Q2. But it really comes down to what the composition of our sales will be in Q3 in terms of how you think about merchandise margin.

Matthew Robert Boss -- JPMorgan Chase & Co -- Analyst

Thanks, great cover and congrats again.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks very much.

Operator

Our next question comes from Max Rakhlenko with Cohen and Company. Please go ahead.

Maksim Rakhlenko -- Cowen and Company -- Analyst

Hey guys, thanks a lot and congrats on the nice quarter. So on the e-comm comps, can you maybe share how much of that came from new shoppers? And then can you talk about how those baskets look similar or different from your typical shoppers? And then we have one more.

James G. Conroy -- President And Chief Executive Officer

Sure. Well, there's two different stories online, right? The bootbarn.com business, very strong top line, very strong bottom line performance. And that is a combination on the top line of healthy traffic and healthy improvement in conversion. On the Sheplers side, we are -- we've completely rebranded that site. We've taken away the sales and promotional aspects of it, and we're really pleased that traffic has continued to improve. But given the fact that the price points are a little higher and it's not nearly as promotional and is really trying to underscore the legacy of this Western -- 100-year-old Western brand called Sheplers, the conversion has come down. So -- and that's not entirely unexpected. But given that fact that we've changed the promotional posture and put all of that together, our e-commerce profitability is up over 100% versus last year. So we essentially view that as a comp growth of 100% in e-comm, despite the fact that it's a combination of sales and margin. In terms of your specific question of new customers versus existing customers, about -- if we just think about Boot Barn, about 1/3 of the increased traffic, maybe a little bit more than that, is new customers. And the others are either existing customers shopping more frequently or stores customers shifting over. You had one other question before you had your additional question that you were going to ask which was around how does the basket differ? There's not huge differences. I mean boots are penetrated a little bit higher on bootbarn.com. Denim has penetrated a little bit higher on sheplers.com. The average basket online is a little bit higher, about $30 higher than the basket in the stores. So roughly $130 or $135 versus $105 in the store, something like that. But other than that, the composition of the business, as you look at all of the different channels and the different brands, is sort of in line with each other. I mean there are some nuances that the merchants would see. But by and large, we're selling boots and denim and hats and work apparel.

Maksim Rakhlenko -- Cowen and Company -- Analyst

Understood, and with some of the various supply chain risks in mind for the holiday season, how are you thinking about maybe moving some of those sales, shifting them from December earlier into the quarter? I would just love to hear about that.

James G. Conroy -- President And Chief Executive Officer

There's been a lot of discussion about how to shift sales earlier. And I do think that is something that retailers try each and every year. We have sort of a similar promotional cadence to last year. As you know, we don't have massive sales or massive promotions planned anytime during the year, including during the holiday period. We've adjusted our marketing a little bit to be a little earlier. But in terms of price points and breaking price, et cetera, we have no intention of doing that this year. Just like last year, we have overemphasized marketing spend prior to Thanksgiving a little bit differently than last year. And I think the last thing that we've done to try to mitigate either people shopping late or people running out of time and shop online is to develop every flavor of omnichannel capability that you can imagine to make it easy for a customer to shop with us in any manner that they want. So that's our current strategy. And I know some other retailers are probably going to be out early with more promotional pricing and it's just not a strategy that we think would work for us.

Maksim Rakhlenko -- Cowen and Company -- Analyst

Got it, thanks a lot. Congratulations again.

James G. Conroy -- President And Chief Executive Officer

Thank you.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks man.

Operator

Our next question comes from Janine Stichter with Jefferies. Please go ahead.

Janine M. Stichter -- Analyst

Hi, thanks for taking my question. Another question on the e-commerce channel. So naturally, we've seen it slow a little bit month-over-month as the store performance has improved. Do you have any sense of what you would consider kind of a normalized rate of growth there, understanding that there's a divergence in performance between bootbarn.com and the other banners? And then also I just wanted to ask about profitability at e-comm. I think you've noted that the profitability has been improving. Maybe give us some perspective on where the gap in profitability versus stores stands? And maybe how much more room do you think there is in potentially bridging that gap? Thank you.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

So I'll take the second part of your questions, Janine, which is on the margin profile of e-comm versus stores. Our stores continue to outperform the e-comm channel. But as Jim mentioned, we doubled our earnings in the e-comm channel on a reasonable comp performance of plus 18% in the quarter. So we continue to make progress. The places where -- the most significant place that e-comm is disadvantaged on is the freight piece, right? And Jim talked a lot about some of the initiatives we've made to be able to fulfill an e-commerce order from the store, and that will help that freight line or that disadvantage on the freight line, but that's the most significant piece, that freight going to our stores is relatively inexpensive and sending a pair of boots to a customer in New York City is more expensive on a rate basis. Beyond that, there's a little bit of disadvantage in the e-commerce channel as it relates to exclusive brand penetration. As you know, in stores, the customer can see and feel and recognize the quality of our exclusive brands. And that's harder to do online. So the stores business has a heavier penetration or a bigger penetration of exclusive brands, which, of course, helps the profitability profile. Those are probably the two biggest things that make it difficult to overcome or catch up to the stores margin rate. I can cover the first question or...

James G. Conroy -- President And Chief Executive Officer

It's OK. I got it. You had asked about why -- how we would expect the business to look going forward from an e-commerce perspective. And while that falls a little bit into "guidance", which we haven't provided, we can give you a sense for, I think, what we're thinking, which is Boot Barn continues to be a solid grower. The 42% top line growth in the quarter was quite nice. I would imagine we'll continue to have solid double digits, maybe 42% will be a high watermark. But I think our business will be solid double digit on Boot Barn. The rest of the online businesses will be probably slight drags on our comp, like it was in this quarter. And it is something that we try to overly amplify on the call because we -- if we weren't focused on rebranding Sheplers and we weren't focused on really improving the margin profile of our e-commerce business, we probably pretty easily could have had a plus 30% or 40% comp on e-comm and driven our consolidated same-store sales higher, but it would have been EBIT eroding. So I would just kind of remind everybody that it's a very strategic and conscious decision we're making to focus on the bottom line performance of our e-commerce business, despite the fact that it's slowing or at least restraining top line growth. It's absolutely been an EBIT-enhancing tactic that we've taken.

Janine M. Stichter -- Analyst

Okay, thank you

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks janine.

Operator

Next question is from Jonathan Komp with Baird. Please go ahead.

Jonathan Robert Komp -- Robert W. Baird & Co. -- Analyst

Yes, great, thank you. Jim, I want to back up and ask about the category performance and wanted to hear your thoughts on what's driving the nonwork businesses to the rebound like they have. And maybe a broader question, understanding you're not guiding, but with most of the categories trending well and positively, any thoughts on if there's a chance that your comps might be back to more of a sustainably positive trajectory going forward here?

James G. Conroy -- President And Chief Executive Officer

Sure. So I think -- it's sort of followed a natural storyline, right, from pure needs-based to the next business that got turned on to positive was something like men's denim, right, somewhat on the Western side, somewhat needs-based, but not perhaps as much as work boots. Then we started to see an improving trend in men's western boots, which is just about flat now, which is great. And it's some need-based, but oftentimes, discretionary spend. And so I can see how it's playing out as customers are now starting to just shop for more traditional clothing and apparel and boots for them or their family. I think the other thing, perhaps giving a little credit to the merchant team and the stores team, is, we have pretty quickly made some adjustments, right? So to give you a few examples, the trends in the business now have tended to be more casual. So rather than button down woven shirts, they're buying more T-shirts, and they're buying things that they might just wear sort of more casually. For example, we believe some of our lace-up work boot sales without a safety toe have been selling because people are using them for weekend hikes and things of that nature. We've also added some pieces to the assortment, right? So we have adjusted to what we're seeing out there. We've expanded a hiking boot assortment in not all of our stores but a good number of our stores. And we're trying to kind of manufacture some sales where we see the consumer taking us. And then the last thing, I give some credit to the stores. Embedded in the comp performance is a nice increase in our units per transaction. Part of that admittedly is selling facemasks and hand sanitizer. But even if you strip that out, we've really had the stores focusing on adding a pair of socks, adding boot care or boot trees to boot purchases, and our units per transaction have helped as well. So I think when you put all that together, while it's still a battle to gain positive same-store sales, particularly in the stores, we are starting to see some really nice momentum across multiple departments, and it's encouraging.

Jonathan Robert Komp -- Robert W. Baird & Co. -- Analyst

Yes, that's great. And maybe one more question. Looking forward to the holiday, can you just remind us how some of the mix changes play out for your business across channel and across categories in the store? And then the initiatives you talked about adding, so the same-day delivery and the virtual clienteling, just any thoughts on potential contribution there from a sales perspective? And what do the economics look like for those new lines of business?

James G. Conroy -- President And Chief Executive Officer

Sure. So on the mix, in our third quarter, in our holiday quarter, we just think of work versus Western. Work does decrease slightly as a percent of the total business, and Western becomes a little bit more because it's a little bit more gifted than the work business. And we're not exactly sure how that will play out, right? The work boots business is very strong. The FR work apparel is very weak. So it could almost offset, maybe not quite, but the mix might be a slight headwind to same-store sales, although I think we have some other things that are maybe pushing from a tailwind perspective. In terms of the new capabilities that were built, right now, they are a very small portion of our business. We built them out because it's -- it can be additional sales, it can be margin accretive versus a regular e-commerce business -- e-commerce sale. If it's a product that's already in the store and the customer is going to pick it up, we can save the freight piece that Greg spoke about earlier. And the other pretty significant reason that we really wanted to have every possible omnichannel capability built out that we could was, in the downside scenario where COVID surges tremendously and local or state governments take significant action with curtailing store traffic or store hours, we wanted to have sort of every hedge possible against that to help bolster the business, if we did have to shut down in a market or we did have to curtail store hours or curtail the number of people in a store during the holiday period. So we built the ability to, you can buy from the local store and have it shipped directly to your house or delivered directly to your house that day by delivery service. You have the ability to order a gift for somebody across the country and have it delivered to them from the store local to them. And all those capabilities came together extremely quickly and hats off to the e-comm and the IT team for getting them up and running and working with very, very little speed bumps in the process.

Jonathan Robert Komp -- Robert W. Baird & Co. -- Analyst

Yeah that's great. Good luck and gear it up for holiday.

Operator

Next question comes from Paul Lejuez with Citigroup. Please go ahead.

Paul Lawrence Lejuez -- Citigroup Inc. -- Analyst

Hey, thanks guys. Sorry if I missed this, but you mentioned your store comps in October. I was curious if you could talk about if you have actually seen traffic turn positive or if that's being driven more by AUR, UPT, overall transaction size? And then curious if you could talk a little bit more about marketing. I think you said you pulled back a little bit. You're going to start going back to normal. Were there any timing shifts as well that impacted your second quarter? Just how maybe we should be thinking about marketing expense in 3Q? Thanks.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

So I'll start with the marketing spend. We did save a little bit of marketing in Q2 on a year-over-year basis, and we called that out as one of the contributors. And we do expect to see a little higher marketing spend this year in Q3 than we did in Q2. It's not millions of dollars, but we do expect just to invest a little bit in the businesses as we're trying to play offense a little bit given the sales trajectory and improvement from August into September and then September into October. So we're playing a bit of offense. We're open our normal hours. Jim talked about the fact that we're doing a good job of hiring our seasonals. So we're investing in the business and prepared to play a little bit of offense. So we're also investing in marketing in Q3, which is a little bit higher than last year.

James G. Conroy -- President And Chief Executive Officer

In terms of your question, Paul, around October's business, we are encouraged that the business on a consolidated basis has sequentially improved a little bit. The stores business is roughly flat. Traffic, or at least in our world, average transactions per store as a proxy for traffic is down slightly, ADT is up slightly. So that has offset to become roughly a flat comp. One of the other encouraging things, and with no intent to try to get people too overly energized, we are cycling a pretty strong October last year. We were -- on our call last year, we said we had a plus 10% comp in the month of October. So to be able to post the plus 2% on a plus 10% in this environment, we feel pretty good about that.

Paul Lawrence Lejuez -- Citigroup Inc. -- Analyst

Got it -- and just one follow-up. On inventory, it seems very well controlled from an inventory perspective. Are you too light anywhere? Maybe talk about categories that may be running a little bit lower than you would like. You did mention some port delays. Curious if there's a difference in terms of the inventory change over year in your private label versus your branded goods? Thanks.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Yes. So Paul, we did see a 14% reduction in average store inventory, and we were not targeting to be minus 14%. We thought we'd be -- we'd have a little more inventory than that. But our sales have improved in September, and so we did see -- also see a little bit of receipt disruption. And you've heard about that, I'm sure. There's backups in the West Coast ports that are delaying a little bit of our exclusive brand product. And some of our vendors reacted in the middle of COVID and cut back on their commitments as well. So we're a little lighter than we had targeted. But I don't think we're exposed in any meaningful categories, and we have lots of substitution opportunities. So if we were light in denim, ladies denim in a certain brand, we've got plenty of other denim in the store. So the major categories are covered by substitution opportunities. So we think we're fine. As a reminder, we turn about two times a year and if you were to look at last year's transcript, you'd see that our average inventory per store was up about 15% from the prior year. So when you put those things all together, we feel pretty good about our inventory position at this point.

Paul Lawrence Lejuez -- Citigroup Inc. -- Analyst

Gotcha, thank you guys, Good luck.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks Paul.

James G. Conroy -- President And Chief Executive Officer

Thanks Paul.

Operator

Next question, Peter Keith with Piper Sandler. Please go ahead.

Peter Jacob Keith -- Piper Sandler & Co. -- Analyst

Hey, thanks a lot. Nice to see the improvement in the business guys. Maybe to follow up on the inventory question. So one dynamic we've heard about the industry that's somewhat unique is the dropship to store model, right, vendor to store, it would impact you guys, but it would impact sort of everyone in the industry. And with all the delays with UPS and FedEx that, that might cause some out of stocks for the holiday season. Is that anything you're thinking about or planning around in advance?

James G. Conroy -- President And Chief Executive Officer

Yes, it is. And the UPS news, we're managing it like everybody else is managing it. We have done some things to help mitigate it. So we've tried to accelerate inventory receipts earlier in the holiday season than we normally would. Now in fairness, we're also being -- there's a countervailing for us there where some receipts were just coming in late from overseas. So we're trying to build the inventory in the stores a couple of weeks early, so if we're a little late, we'll still be fine. We've taken a couple of vendors that would do exactly what you're describing. And rather than be at their behest, we brought some of those brands into our own distribution center, and we're distributing ourselves, perhaps still beholden to UPS, but at least we can control when we ship it. We -- it is something we're watching. We've asked the stores to ensure a very quick putaway of product that is brought in. We've augmented the replenishment models to bring in a little bit more safety stock. So we've done a number of things. One of the things that does help us relative to the vast majority of retailers is, and Greg called this out, we have the luxury of being able to carry 26 weeks of supply or something like that because we don't -- we have no markdown risk. So even if we're a little bit delayed in getting some product in, we do have the goods to get through the holiday season and replenish as we get into January.

Peter Jacob Keith -- Piper Sandler & Co. -- Analyst

Okay, that's good to hear. On a totally different topic, I wanted to ask about the Just Country segment that's certainly interesting. And it feels like something different than what you guys have done in the past, where you're almost bolting on a potentially new customer opportunity. So Jim, could you just flesh that out a little bit more for us? Do you think there'll be a lot of overlap with the existing customer base? Or you think the majority of the sales will be new customers? And anywhere to frame up like the TAM? Or where you would hope it might land as a percent of sales over time?

James G. Conroy -- President And Chief Executive Officer

Yes, it's a great question. It is another step in the process. If you really follow the long Boot Barn for eight or 10 years, we were Western only, then we added work, then we added Wonderwest, which was this sort of very contemporary fashion segment. And now we've said, all right, let's look at the customers in one big concentric circle around our core western customer. And this person wears boots and jeans, but wears T-shirts, matte woven shirts, wears baseball hats and now cowboy hat, and you're right, the addressable market there is quite a bit larger than the addressable market for sort of the pure Western lifestyle customer. In terms of where we think the sales will come, I think a portion of it will be coming back to that share of wallet concept with our existing customers. If you walk into our stores now or even over the last few quarters, particularly on the ladies side, ladies apparel, we've expanded quite a bit around a core western customer and have brought in some more casual fashion. And I think the assortment there is built quite nicely. I think more recently, the men's side has done the same. So part of it is share of wallet with our current customers. We're also changing how we go after new customers and -- from a media mix standpoint, from the stations and channels that we market on, from some of the Adwords that we buy, on pay-per-click, how do we prospect for new customers. That tends to take longer, of course, and tends to be a little bit more expensive to get that new customer. But I think we can do it. And if you were to look at our same-store sales growth for the last two years, almost every single quarter, at least prior to COVID, a really healthy contributor to our same-store sales growth was an increase in customer count on a comp store basis. And frankly, this is an extension of that strategy. And ironically, we're somewhat fortuitous that we're bringing this more casual assortment to the stores at a time when the customer has started to move in that direction anyway. So it's -- there's -- we're pretty pleased with the progress so far, but really encouraged by the outlook because I think it fits well with where the customer is. I can't say that we planned that nine months ago when we started this, but once in a while, you get lucky.

Peter Jacob Keith -- Piper Sandler & Co. -- Analyst

Yeah, it's remarkably well-timed with step-up in outdoor activities. So look forward to seeing how that progresses. Thanks so much.

James G. Conroy -- President And Chief Executive Officer

Thanks Peter.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks Peter.

Operator

Next question comes from Rick Nelson with Stephens. Please go ahead.

Nels Richard Nelson -- Stephens Inc. -- Analyst

Thanks a lot. Curious, Jim, about the lead times to restart that 10% store growth. If you come through this kind of fiscal third quarter, December with positive comps, that, that October momentum is sustained, is that the point, you think, where you commit to that 10% store growth for fiscal '22?

James G. Conroy -- President And Chief Executive Officer

I think it's more related to the macro. It's actually more related to the pandemic, really. I mean we're in a very solid position right now, as Greg mentioned. We're about to go through holiday. That just bolsters our capital structure even more. But we pulled back simply because we were preserving capital and didn't think that new store openings during a pandemic, a, could be tone deaf, and, b, they may not work. As it turns out, once we were able to get some of these stores open, we realized that there was a market, there was a customer ready to shop there. And even in some of these new markets, they're performing quite well. So I don't think we necessarily need a plus 10% store comp to be confident that opening up new stores is a good investment. I think we need any kind of normal in the world over the next few months to -- once we get to January, February to reengage for growth on new stores. In terms of time line, well, we can move pretty quickly. It's a 5- or 6-month process from finding a location to getting a store built. So we probably have to hustle a little bit, but I think we could get 10% new stores in our upcoming fiscal year, particularly if we see the macro environment stabilize. We have a very solid new Head of real estate, started about nine months ago, and he has already found some great locations. So I think we can get there pretty quickly, including next year.

Nels Richard Nelson -- Stephens Inc. -- Analyst

Thanks. Also, I'll be interested in drilling down a little bit into the October trend, maybe sequential week-to-week basis, is that possible? And we've seen those covered at new highs recently. What that's done in terms of your customers and sales and channel, stores and e-comm?

James G. Conroy -- President And Chief Executive Officer

So I would say the encouraging thing -- without going into very specific detail, the encouraging thing is, over the last nine weeks, which would include our fiscal September and our fiscal October, seven of them were positive. So it hasn't been sort of one great week masking a bunch of lousy weeks. And they've been pretty consistent. And one was flat. So most of them were pretty solid. As we got into October, there's been very little difference across the weeks. And frankly, once the weather broke, that helped our business a little bit more. It's been very, very short amount of time since that happened. But the cooler weather in many parts of the country has been a nice uptick, at least in the last part of October going into November.

Nels Richard Nelson -- Stephens Inc. -- Analyst

Great, and finally, if I can ask you, there's recent mix shift, I guess, away from workwear toward the more fashionable categories. How you plan that on a go-forward basis? Do you think those trends have legs to them?

James G. Conroy -- President And Chief Executive Officer

So on a go-forward basis, what we -- we've got, I think, the appropriate amount of inventory on what you described as a more fashionable pieces of the business, the Western side of the business. And the work business can grow very quickly without requiring big new inventory commitments. We simply just replenish faster. So we sort of have a natural ability to feed the -- certainly the work boot business, most of the work apparel business, just by spinning the inventory slightly faster because we just replenish it. And the only business that we're going to -- we need to -- I guess, two pieces of it, that we need to look further out is parts of ladies apparel, particularly nondenim. And we have to make some decisions around exclusive brands with longer lead time commitments. But even a good portion of that is basic in nature. So we'll buy with the ability to fuel a growing business. And if we fall slightly short of that growing business, we'll do what we just did over the last nine months and bleed down the inventory slowly without having to kind of feel it in the margin line.

Nels Richard Nelson -- Stephens Inc. -- Analyst

Okay, good. Excellent and good luck.

James G. Conroy -- President And Chief Executive Officer

Thank you.

Operator

Next question comes from Mitch Kummetz with Pivotal Research. Please go ahead.

Mitchel John Kummetz -- Pivotal Research Group LLC -- Analyst

Yes, thanks for taking my questions. So a follow-up on Rick's question about COVID. There have been spikes in the Upper Midwest of late. I know you guys don't have a lot of stores up there, Iowa, Indiana, Michigan, Wisconsin, but I'm just curious if you have seen any change in the pace of business traffic comp, store comp in some of those markets as COVID rates have gone up again?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Yes, Mitch, it's Greg. We haven't really seen a meaningful change in the trajectory of North region's business, and that's what we described. So, -- we haven't seen that yet. We hope not to see it, but we're certainly prepared if it does.

James G. Conroy -- President And Chief Executive Officer

And to add to that just quickly. We -- our core customer has an affinity to shop in a store, perhaps doesn't have quite as much concern shopping in our store because we're -- the stores are relatively large, there's not tons of customers in a small space. And we're not typically in malls, so they can kind of drive over, come into a pretty socially distanced environment and continue to shop with us. So what helps us more is when there's regulations that curtail our ability to operate in some way.

Mitchel John Kummetz -- Pivotal Research Group LLC -- Analyst

Got it. And then, Greg, well, obviously, October -- your comp in October was pretty similar to September, a little bit of an improvement. But as Greg mentioned, you did a 10% comp in October last year. So the 2-year stack on October is plus 12%. Could you remind us what September was last year? Or what's the 2-year stack on September is?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

It was plus 8% or 9%, plus 8%.

Mitchel John Kummetz -- Pivotal Research Group LLC -- Analyst

Okay. Got it. Okay. I was just wondering if there was some big improvement sequentially on a 2-year stack. It doesn't sound like. It -- a little bit, but not hugely meaningful. And then last question, just on the improving Western trend that you're seeing. Is there some macro behind that? I mean is that, you think, as -- particularly in kind of some of the maybe western and southern markets as COVID has died down a little bit, some of those maybe consumer confidence has gone up or maybe disposable income has gone up, is there some underlying macro issue? I wouldn't imagine that it's really a fashion thing for you guys, but I'm wondering if there's something else that you're seeing that's leading to this uptick in your Western business.

James G. Conroy -- President And Chief Executive Officer

I think -- from a hypothesis standpoint, I think it's -- the word you used was confidence, right? I mean consumer confidence or people are just more comfortable shopping in this crazy environment that we have. Many of the macro factors that would drive our business, particularly concerts and rodeos, et cetera, are still essentially all canceled, right? So we haven't gotten any help there. That's still a headwind. I just think people are either desensitized or slightly more comfortable that if they take the appropriate precautions, they'll likely or hopefully be safe. And therefore, they're out and about and buying more than just what they absolutely need to get to work.

Mitchel John Kummetz -- Pivotal Research Group LLC -- Analyst

Got it, OK. Thanks guys.

Operator

Next question, Jeremy Hamblin with Craig-Hallum. Please go ahead.

Jeremy Scott Hamblin -- Craig-Hallum Capital Group -- Analyst

Thanks and I'll add my congratulations on the momentum. I had two questions I wanted to ask about. First is, just in the change in getting back to your more normalized operating hours, I think in most of your markets, you're back to kind of nine a.m. to nine p.m. And I think that mostly started in September. Can you just give me a sense of, a, the factors going into getting back to those more normalized hours? And b, as we look to this December quarter here, in terms of thinking about your SG&A expenses, having reduced hours like we've seen over the last 4, five months, what does this imply in terms of SG&A in the December quarter? Should we assume that it's going to be up on a year-over-year basis in absolute dollar terms? Or are there changes that you'd made this year that are kind of permanent in nature?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Great question. I'll take the second piece of that question first. It's Greg. And I think as we look at the SG&A in Q3, we're not providing guidance on the top line unless it's impossible to guide on SG&A. What I did say earlier in the call is we are playing a bit of offense, right? We're going to invest in more marketing. We're investing in seasonal hires. So we're doing some things that would suggest to you that we're playing offense. And if the sales don't come which I -- we do believe that the sales will come, but if they didn't come, we're not going to be able to leverage our expenses as opposed to Q2 where we were still playing a bit of defense with the reduced hours, et cetera. So I can't tell you how to model that other than to say that we're not trying to leverage the SG&A rate in Q3.

Jeremy Scott Hamblin -- Craig-Hallum Capital Group -- Analyst

Got it, and then the other question is just in looking at some of the competition out there, and I think you indicated that you feel better about your competitive positioning moving forward, can you give us a sense of how kind of your -- your market still continues to be quite fragmented, how your mom-and-pop competition is performing? If they've gotten a little bit more promotional? And then related to this is, are you seeing maybe some increased M&A opportunities, some tuck-in deals? And what would be the earliest, given the environment we're in today, that you consider looking at opportunities for some tuck-in deals?

James G. Conroy -- President And Chief Executive Officer

So on the first piece, I think it's safe to say that the mom and -- the traditional mom-and-pop retailer in our industry, which is the majority of the industry, that group is our biggest competitor, has, unfortunately, if I'm honest, struggled through this because they just didn't have necessarily the capital structure or the wherewithal to continue to fight through it. So we have seen weakness. We've had some inbound calls. We've seen some guys go out of business or leave the markets that we were in. So that does present us with an opportunity, of course, competitively. There is a -- in all fairness, there's a counterbalance of that because there's other channels that have strengthened with trip consolidation, going to the farm and ranch channel, selling a little bit more of our product. So it's -- when -- it may be they offset in the current environment. I think going forward, we will likely benefit because I think the mom-and-pop group will be weakened or whittled down a bit permanently. And I think our customer will come back to get a broader assortment of the product that we sell rather than consolidate their trips elsewhere where they just can get sort of the most basic stuff. From an M&A standpoint, I think there'll be some opportunities. That said, there isn't really any meaningful chains left other than one big one in Texas that is unlikely to be an acquisition candidate. So that gets us to use the word tuck-in, so the guys that have one store or maybe two stores. And we'll look at them just as we decide to enter a market as a build versus buy and is there some advantage in moving more quickly by buying one of those guys and getting their customer base, et cetera, or should we just open a store that fits our model better. And frankly, it's a bit easier to open a brand-new store. So I don't think that's going to be a massive impact on our store count or the economics or whatever. If we -- if I were modeling them, I would just model them as a new store.

Jeremy Scott Hamblin -- Craig-Hallum Capital Group -- Analyst

Got it. All right, goodluck guys and thanks for taking my questions

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks Jerermy.

Operator

Next question comes from Tom Nikic with Wells Fargo. Please go ahead.

Tom Nikic -- Wells Fargo Securities -- Analyst

Hey guys, thanks for taking my question. So I wanted to follow up on some of the questions earlier about e-commerce. So I know -- pretty impressive improvements in profitability in the channel. And I know it's been a few quarters now that you've sort of had this trading sales for profitability situation with Sheplers. And do you kind of feel like -- or how far along are you in sort of rebasing the Sheplers business, sort of retraining that customer to not look for promos, et cetera? Like at what point does that website become a grower again and a contributor to the top line?

James G. Conroy -- President And Chief Executive Officer

We made the changes between, call it, April and July. So the aesthetic changed around April and then the pricing changed over a series of weeks in July. So once we wrapped those two time frames, we'll be back -- we'll have a more normalized LY comparison. So I guess if I'm -- if you just work through that, it's probably July of next year where we get back -- when we have a comparison that we should be able to grow from -- I don't know if that helps.

Tom Nikic -- Wells Fargo Securities -- Analyst

Yes, that's helpful. And can you just kind of like remind us like what sort of the core differences are between Boot -- the Boot Barn customer, the Sheplers customer, the Country Outfitter customer?

James G. Conroy -- President And Chief Executive Officer

Sure. Well, the Boot Barn customer is sort of slightly younger than the Sheplers customer. It's more balanced between male and female. The Sheplers customer is a little bit older, a little bit more male. And just given the way that brand has grown up, more heavily focused on denim than Boot Barn. So Boot Barn, when they first launched the Boot Barn site with boots only, then apparel was added. And just given that legacy, bootbarn.com business used more heavily to boots than the Sheplers business does. Country Outfitters continues to do a very nice job going after a sort of more fashionable female, younger customer. But in all candor, it's just much smaller than the other two big brands.

Tom Nikic -- Wells Fargo Securities -- Analyst

Got it, that's helpful. Thanks guys and best of luck to [Indecipherable]

James G. Conroy -- President And Chief Executive Officer

Thank you.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks Tom.

Operator

Next question comes from Sam Poser with Susquehanna. Please go ahead.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

Thank you for taking my question. And this time, I would say, a great job on the inventory. And I have a question of, does that sort of create a new base for the second quarter? And somebody else asked if you have enough, but I guess the question is, is this a good new base to work from, hence, then increasing your annual turn over the long term?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Sam, it's Greg. I guess, in answering one of the questions, I commented that we had targeted not quite a 14% reduction. So I would tell you, it's not the new baseline. We have expected to have more inventory than we had. We've been managing inventory closely and trying to control receipts. And then our supply chain got -- started to be the news and disrupted. We started to write some orders to bring in more of the replenishment product that carries no markdown risk, which I think we've proven we don't incur. So we tried to bring in more inventory, and we're -- we've experienced some delays. So I would say it's not the new base. It's not last year's level, but it's not the new base for sure.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

I have a few more questions, but just a follow-up on that. What was the target you were aiming at?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Yes, we're not going to disclose that, Sam.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

Okay, on the Just Country new initiative, what brands, if we go to your website, should we be looking for that's part of that?

James G. Conroy -- President And Chief Executive Officer

Sure. Well, I'll give you one of the examples we talked about earlier, was we've added a nice selection of hiking boots to the stores. And many of them are up online as well, but brands like Merrell or KEEN hiking boots. And then on the apparel side, just a number of different brands that might be a little bit less Western in nature. But we're certainly focusing pretty intently on the boot side. There are also places where we have a traditional Western brand that has a broader assortment that we've just bought more deeply into their assortment.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

Thank you, and then -- two more. Holiday e-comm versus the stores. Given COVID and everything, do you foresee that there could be some -- even though your stores are big and they're off-mall, could you see capacity constraints, hence leading to more gift-giving via e-commerce, hence having the third quarter e-commerce sales kick up from -- the growth rate from Q2 to Q3, despite the fact that you have all your stores open now?

James G. Conroy -- President And Chief Executive Officer

So, we can almost guarantee that Q3 e-comm as a percent will be the highest of the quarters for us. It is every year. And what you're asking, I think, is it going to be even more outsized than typical? It's very hard to say. Certainly, if there is another major problem with COVID and a surge and a shutdown, it will spike right back up, e-comm will spike right back up just like it did in the first quarter. But if it's business as usual, it will be maybe a little bit more than it was last year. This e-commerce business is growing pretty nicely. But when you throw any kind of store comp in there, even if it's flat, and you have new stores coming into the mix, it tempers the shift for us, maybe more so than a lot of other places. In terms of store capacity -- are you asking about store capacity or e-commerce capacity to take care of customers?

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

No, I was really talking about stores. I mean, like, for instance, you're still probably having to keep social distancing requirements in the stores and so on. So, when you get into your highest traffic time of the year, that also could have more people move over to e-commerce, more so than, let's say, in the second quarter when you're not seeing the traffic in the stores that you normally would see during holiday.

James G. Conroy -- President And Chief Executive Officer

Yes, and I think that's true. And it's true in a handful of days. It's concerning here, handful, right? It's Black Friday or it's the Saturday before Christmas. But even when we get busier during holiday, just the way the model works is, you'd see 15 customers, 20 customers in a store, you're not going to see 200 customers in a store. It's just not sort of the way our store model works. But you're right to call it out. And it's the reason we've been so intent on saying what we can deliver it to your house, you can pick it up in store, you can pick it up at the curb. And I fully recognize we're not the only retailer doing that, but we're really trying to give them every opportunity to shop with us in whatever manner they feel best doing so.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

Thanks, and then lastly, you talked -- the e-comm business, due to shipping -- a lot of shipping rate and the mix, your margins are less than the stores. But have you considered trying to entice people with a small promotion to build the basket size of that something that could ship along for free? I mean, for instance, like a facemask or some aged goods that, you say, OK, we'll give you 20 off, but it increases the ticket enough and you don't pay the -- it doesn't add as much weight to the box. So you actually get your shipping cost as the rate goes down. Have you thought of ways to do that to sort of try to increase the average ticket, even though it is already higher than the stores, but to try to push it higher, maybe through a little bit of promotion, but that would more than be offset by the rate savings and you get to move more merchandise as well?

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Yes. Sam, it's Greg. And our Head of e-commerce, a gentleman named John Hazen, has been leaning on e-commerce for 15 years, and he's a big test and learn guy. And so he's been doing that kind of testing to see if it moves the needle at all. So you can be sure that we're looking for opportunities to do just that.

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

Thank you very much and have a successful holiday season.

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Thanks Sam.

Operator

I would like to turn the floor over to Jim Conroy for closing comments.

James G. Conroy -- President And Chief Executive Officer

Very good. Thank you, everyone, for joining the call today. We look forward to speaking with you on our third quarter earnings call. Take care.

Operator

[Operator Closing Remarks]

Duration: 82 minutes

Call participants:

Jim Watkins -- Senior Vice President, Finance and Investor Relations

James G. Conroy -- President And Chief Executive Officer

Gregory Hackman -- Executive Vice President, Chief Operating Officer and Chief Financial Officer

Janine M. Stichter -- Analyst

Matthew Robert Boss -- JPMorgan Chase & Co -- Analyst

Maksim Rakhlenko -- Cowen and Company -- Analyst

Jonathan Robert Komp -- Robert W. Baird & Co. -- Analyst

Paul Lawrence Lejuez -- Citigroup Inc. -- Analyst

Peter Jacob Keith -- Piper Sandler & Co. -- Analyst

Nels Richard Nelson -- Stephens Inc. -- Analyst

Mitchel John Kummetz -- Pivotal Research Group LLC -- Analyst

Jeremy Scott Hamblin -- Craig-Hallum Capital Group -- Analyst

Tom Nikic -- Wells Fargo Securities -- Analyst

Samuel Marc Poser -- Susquehanna Financial Group -- Analyst

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