Shares of Western-style apparel retailer Boot Barn (BOOT 0.47%) jumped higher on Thursday after the company reported results for its fiscal third quarter of 2024. As of 12:50 p.m. ET, Boot Barn stock was up about 11%.
The good and the bad for Boot Barn
On one hand, financial results for Boot Barn aren't great. During the quarter ended in December, same-store sales dropped a discouraging 9.7% year over year. And for fiscal 2024 as a whole, management expects same-store sales to decline by up to 7%. Granted, sales have soared in recent years so it's a tough comparison. But the pullback is discouraging nonetheless.
On the other hand, Boot Barn's profits are really strong. The company's Q3 gross profit margin improved to 38.3% compared with 36.5% in the prior-year period. Moreover, its operating income was up slightly to $75.1 million, which is a healthy margin of 14.4%.
That said, Boot Barn's profitability is expected to take a hit next quarter. Management expects that its sales will decline and that its operating margin will drop below 10%, which is a meaningful drop from Q3.
Therefore, Q3 results and forward guidance were a mixed bag for Boot Barn.
The bigger picture
I believe that Boot Barn stock is up in spite of its mixed quarterly results because the long term still looks bright for the business. As mentioned, its profitability is healthy even if it takes a step back next quarter. Moreover, it's in excellent financial condition with over $100 million in cash and no debt.
As of the end of Q3, Boot Barn had 382 retail locations, but it expects to reach 900 locations in its fiscal 2030. If the company can maintain its popularity and preserve its profit margin, then this stock has plenty of long-term upside.
Of course, Boot Barn's shareholders need to be aware that it won't necessarily be a straight line higher. As Q3 results demonstrate, the business may face headwinds along the way that are worth monitoring.
