Boot Barn (BOOT) is a Zack Rank #1 (Strong Buy) that is a leading lifestyle retail chain in the United States, focusing on western and work-related footwear, apparel, and accessories.
The company just reported an earnings beat, only to see the stock fall 20% since the report. While the move lower could simply be profit taking, news that the CEO is leaving accelerated the selling.
Investors are now looking at a long-term opportunity as the selling gets closer to support levels and earnings estimates head higher.
About the Company
Boot Barn has a market cap of $4 billion and the company employs over 11,000, including 3,100 full-time employees.
Founded in 1978 and headquartered in Irvine, California, the company operates over 420 stores across 46 states, offering a wide range of products including boots, shirts, jackets, hats, and rugged workwear for men, women, and children. In addition to its physical stores, Boot Barn also has a strong online presence, allowing customers to shop through its e-commerce websites like BootBarn.com, Sheplers.com, and CountryOutfitter.com
The stock has Zacks Style Scores of “A” in Momentum and “B” in both Value and Growth.
Q2 Earnings
On October 28th, Boot Barn reported Q2 earnings, beating estimates by 2%. Revenues came in slightly above expectations and the company raised its FY25 guidance. Boot Barn raised FY25 to a range $5.30-5.60 v the $5.38 expected, and sees Same Store Sales (SSS) at 3.0-5.0% v the prior -1% to +1.2%.
While next year looks positive, BOOT now sees Q3 at $1.96-2.07 v the $2.09 expected. So short term there was a little disappointment, which caused some selling after the earnings release.
More highlights from the earnings report include SSS up 4.9% y/y and affirming FY25 Capex. This includes the goal to open 60 new stores.
CEO Leaving
The stock traded lower by about 18% after the earnings release. But this wasn’t just because of a disappointment in earnings, it was also because long-term CEO Jim Conroy is leaving to join Ross Stores (ROST) in November. Conroy, who has led Boot Barn for over a decade, oversaw significant growth, including the company going public. So, investors that were big fans, might have decided to take some profits.
John Hazen, Boot Barn’s current chief digital officer, will serve as interim CEO while the company searches for a permanent replacement.
Estimates Headed Higher
Typically, when we see a big move lower in a stock, the estimates are going lower. However, the CEO departure might have overshadowed the fact that estimates are going higher.
Since earnings, the current quarter has remained the same, at $2.09. Looking at next quarter we see the move in earnings estimates go from $1.15 to $1.18, or 3%.
For the current year, numbers have gone from $5.38 to $5.43
Next year, analysts are looking for $6.53, up from negative $6.47 prior to the earnings report.
Boot Barn Holdings, Inc. Price and Consensus
To summarize, we have negative price reaction into short term stalling of growth and a CEO departure. And because the stock was up over 100% in 2024, profit taking has commenced.
However, analysts have kept price targets significantly above current trading levels.
Baird raised BOOT to an Outperform, with a target at $167, saying investors have a more favorable setup following pullback.
Benchmark reiterated its Buy and $192 target, while Citigroup lowered their target to $178.
These price targets give us a range of 30-50% above current trading levels.
The Technical Take
While those price targets look tempting to investors, a good entry point into the selling is critical. Let us look at some moving averages:
The 200-day moving average is at $118.65.
The 21-day MA is $159.
The 50-day is $154.50.
The 61.8% Fibonacci level drawn from the 2024 lows to highs is $109, while the halfway back is $120. This creates a solid buy zone just below the 200-day MA.
If Boot Barn can maintain its strong fundamental record, the selling should run into support and the stock will see a solid rally to those MA resistance levels above $150.
In Summary
Boot Barn faces short-term challenges with the departure of CEO Jim Conroy and a subsequent drop in stock price. However, the company’s strong fundamentals and optimistic outlook provide a solid foundation for potential recovery.
Analysts remain bullish, with several raising their price targets significantly above current trading levels, indicating confidence in Boot Barn’s growth trajectory.
As the company navigates this transition, maintaining its robust performance will be crucial for regaining investor confidence and capitalizing on its strong market position. Investors may find strategic entry points as the stock stabilizes, setting the stage for future gains.
— Jeremy Mullin
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Source: Zacks