Can Boot Barn Continue to Expand Its Merchandise Margin?

Boot Barn Holdings, Inc.’s BOOT merchandise margin delivered better-than-expected results in the first quarter of fiscal 2027, with merchandise margin exceeding guidance. Merchandise margin increased 220 basis points during the quarter, driven by a 250-basis-point benefit from tariff refunds and a 60-basis-point expansion in product margin, partly offset by a 90-basis-point headwind from lapping low freight expense in the prior-year period.

Exclusive brands remain an important contributor to merchandise margin expansion. However, stronger-than-expected performance in the work boots business, particularly across third-party brands, resulted in exclusive-brand penetration coming in below expectations during the quarter. Despite the lower exclusive-brand mix, stronger product margins enabled merchandise margin to outperform expectations.

The continued strength of Boot Barn’s work boots business represents a positive development, reflecting healthy customer demand and driving incremental sales. Management also noted that the category is attracting new customers to the Boot Barn brand while further strengthening its position as a leading destination for work boots. Importantly, despite the modest change in exclusive-brand penetration, management now expects full-year merchandise margin to expand by approximately 60 basis points, excluding tariff refunds.

At the high end of fiscal 2027 guidance, merchandise margin is expected to reach approximately 52.2% of sales, up 130 basis points year over year, supported by tariff refunds, product-margin expansion and freight improvement. For the second quarter of fiscal 2027, management expects 51.8% of sales, up 140 basis points year over year, reflecting freight improvement, tariff refunds and product-margin expansion.

Overall, strength of the work boots business and continued product-margin improvement support Boot Barn’s merchandise-margin outlook. Management also identified buying economies of scale, improved full-price selling, supply-chain efficiencies and sourcing initiatives as additional drivers supporting the full-year merchandise-margin outlook.

Zacks Rundown for BOOT

Boot Barn’s shares have lost 4.9% in the past three months compared with the industry’s decline of 9.6%.

Image Source: Zacks Investment Research

From a valuation standpoint, Boot Barn trades at a forward price-to-earnings ratio of 16.21, higher than the industry’s average of 12.73. BOOT presently carries a Zacks Rank #2 (Buy).

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for BOOT’s current and next fiscal-year earnings implies year-over-year rallies of 22.6% and 10.5%, respectively.

Image Source: Zacks Investment Research

Other Stocks to Consider

Some other top-ranked stocks have been discussed below:

Victoria’s Secret & Co. VSXY operates as a specialty retailer of women's intimate apparel and other apparel and beauty products worldwide. At present, VSXY carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for VSXY’s current fiscal-year sales and earnings implies growth of 9.2% and 57.3%, respectively, from the year-ago figures. VSXY has delivered a trailing four-quarter earnings surprise of 48.9%, on average.

FIGS, Inc. FIGS operates as a direct-to-consumer healthcare apparel and lifestyle company in the United States and internationally. At present, FIGS carries a Zacks Rank of 2.

The Zacks Consensus Estimate for FIGS’s current fiscal-year sales and earnings implies growth of 18.2% and 89.5%, respectively, from the year-ago figures. FIGS has delivered a trailing four-quarter earnings surprise of 201.8%, on average.

Fossil Group, Inc. FOSL designs, develops, markets, and distributes consumer fashion accessories in the United States, Europe, Asia, and internationally. At present, FOSL carries a Zacks Rank of 2.

The Zacks Consensus Estimate for FOSL’s current fiscal-year sales indicates a decline of 4%, while the same for earnings indicates growth of 96.7% from the year-ago figures. FOSL delivered a trailing four-quarter negative earnings surprise of 236.2%, on average.

Radical New Technology Could Hand Investors Huge Gains

Quantum Computing is the next technological revolution, and it could be even more advanced than AI.

While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.

Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.

Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research