An IPO to boot: Apparel retailer Boot Barn sets terms for $75 million IPO

Boot Barn Holdings, a western apparel and footwear retailer with 158 stores in the US, announced terms for its IPO on Monday. The Irvine, CA-based company plans to raise $75 million by offering 5 million shares at a price range of $14 to $16. At the midpoint of the proposed range, it would command a fully diluted market value of $398 million (enterprise value of $502 million).

Business
Boot Barn estimates that during calendar year 2013, the US western and work wear markets represented approximately $8 billion and $12 billion in retail sales, respectively. It operates 158 stores across 24 states, is most heavily concentrated in California (23% of stores), Texas (18%) and Arizona (9%), and estimates that the US can support at least 400 stores. Boot Barn has grown both organically and through acquisitions, including its purchase of western and work-related retail chains RCC (29 stores) in 2012 and Baskins (30 stores) in 2013. Its stores average 10,800 square feet and offer about 200 brands and over 1,500 styles. The company also sells through bootbarn.com (4% of 2014 sales). It has experienced 19 consecutive quarters of positive same store sales growth averaging 11.3% per quarter and 6.7% in the fiscal year ended March 29, 2014.

Private equity backer
The company is controlled by Freeman Spogli. Boot Barn notes that it issued a $40 million cash dividend in April. The private equity firm was also behind quick service Tex Mex chain El Pollo Loco (LOCO), which has gained 127% since its July IPO.

Recent financials
Revenue increased 28% to $82 million for the thirteen weeks ended June 28, 2014, driven by its acquisition of 30 stores as well as partial sales from new openings and same store sales growth of 7.7%. Gross margin contracted 190 bps to 32.6% ($27 million), which the company attributes to higher cost of goods sold and competitive pricing pressure. Its adjusted EBITDA rose 32% to $8 million during the quarter (9.4% margin) as SG&A fell as a percent of revenue. Adjusting for IPO proceeds used to pay down debt, total debt at quarter-end would have been $106 million (2.5x LTM adjusted EBITDA).

Boot Barn Holdings, which was founded in 1978 and booked $281 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol BOOT. J.P. Morgan, Piper Jaffray and Jefferies are the joint bookrunners on the deal. It is expected to price during the week of October 27, 2014.