In line with our motto which declares that "We own companies, not markets" and which advises investors to concentrate on businesses rather than the behavior of stock markets where shares of those businesses are bought and sold, we have over the years highlighted a number of the kinds of companies we own in our portfolio strategies.
Those interested can go back into the archive and find previous introductions to companies such as Carvana (CVNA), Kornit (KRNT), Glaukos (GKOS), IDEXX Laboratories (IDXX) and Vuzix (VUZI), all of which we believe to be classic Taylor Frigon companies and all of which we continue to own to this day on behalf of our clients.*
As we close the books on 2020 and begin the year 2021, we'd like to highlight another company we believe fits our definition of a well-run business positioned in front of fertile fields for future growth: specialty retailer Boot Barn (BOOT).
Boot Barn is a specialty retailer of western wear and workwear, selling footwear, apparel and accessories, with by far the largest market share in a fragmented market (three times the number of stores versus their nearest competitor), and constitutes the only nationwide retailer in the space.
The company has a little over 260 stores in thirty-six U.S. states which we believe can easily double over the next several years, even by very conservative estimates, with abundant new regions to target in addition to continuing to add stores in states where they have already been operating for years, such as California and Texas. We have always felt that the company's predictions of its potential total store count have been conservative in the past, and have noted that another company we own, Tractor Supply (TSCO), presently has over 2,000 stores.
Boots are the company's "signature category" and are placed in the center in order to "anchor the store." Boot Barn is an important distribution channel for major "western" and "country" brands, which often don't have a large variety of other retail outlets through which to move their products, with Boot Barn being the largest in many cases. Boot Barn has also been very successful at launching "exclusive brands," often partnering with major country music artists to do so.
The categories Boot Barn serves benefit from attractive growth drivers, including the population flows to the south and the west of the U.S., the increasing popularity of country music and associated lifestyles, and the paradigm shift in oil and gas production in North America (although this last factor also introduces some volatility as energy production goes through its own cycles, and as investors and algorithms trade their positions in Boot Barn based on their attempts to predict moves in those markets).
The company's stock price was (not surprisingly) absolutely hammered during the first weeks of the COVID lockdown, in which not only were many retail stores closed down but also nightlife, concerts, rodeos, and other venues associated with the lifestyle served by Boot Barn products -- in addition to the volatility in oil prices just mentioned.
While Boot Barn closed their stores in California and Louisiana during the first part of the lockdown, most other stores remained open. Remember that Boot Barn sells workwear, including work boots, and that these are considered essential because they actually are essential for workers who still have to perform necessary jobs in construction and logging and mining and a host of other vital parts of the economy.
And while Boot Barn has an online sales channel (actually three different online sites: Boot Barn, Shepler's, and Country Outfitter), the events of the past year have proven that the Boot Barn customer still likes to come into the store in person -- and in some cases needs to come into the store in person (if you need boots for work as a safety factor, and you experience a boot blow-out with your old boots, you can't wait around for an online order: you need to get some new boots right away).
Our analysis confirms that Boot Barn is led by a competent and experienced management team which has delivered very impressive results over the past ten-year period and which continues to make good business decisions and which continues to grow in a responsible and sustainable manner, and should have the ability to continue to do so for many years to come.
The company is a prime example of the kind of companies we look to own.
* At the time of publication, the principals of Taylor Frigon Capital owned securities issued by companies mentioned in this article, including CVNA, KRNT, GKOS, IDXX, VUZI, TSCO, and BOOT.
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