Buckle Q4 2023 Earnings Call Transcript

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March 10, 2023

Key Takeaways

  • For Q4 ended January 28, net sales increased 5.5% to $401.8 M with comparable store sales up 4.6%, and online sales rose 2.3%, while full‐year net sales grew 3.9% and comps increased 3.3%.
  • Q4 net income was $87.8 M ($1.76/share) up from $83.9 M ($1.69/share) last year, with full‐year net income essentially flat at $254.6 M ($5.13/share) versus $254.8 M ($5.16/share).
  • Gross margin dipped 10 basis points year-over-year to 53.0% in Q4 and 50.3% for the fiscal year, while SG&A expenses increased due to higher store labor and other costs, driving operating margins down to 27.4% for Q4 (from 28.8%) and 24.4% for the year (from 25.9%).
  • The company exited the year debt-free with $293.7 M in cash and investments, continued its 15th consecutive special dividend, and maintained healthy inventory levels only modestly above 2019 unit levels.
  • Buckle expanded its footprint with 4 new stores and 23 remodels (17 relocations) in FY2022 and plans to open 6 new stores and complete 12–17 remodels in fiscal 2023.
AI Generated. May Contain Errors.
Earnings Conference Call
Buckle Q4 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Well, good morning, everyone. And thank you for standing by and welcome to Buckle's 4th Quarter Earnings Release Webcast. As a reminder, all participants are currently in a listen only mode. A question and answer session will be conducted following the company's prepared remarks with instructions given at that time. Members of Buckle's management on the call today are Dennis Nelson, President and CEO Tom Heacock, Senior Vice President of Finance, Treasurer and CFO Adam Ackerson, Vice President of Finance and Corporate Controller and Brady Fritz, Senior Vice President, General Counsel and Corporate Secretary.

Operator

As they review operating results for the Q4, which ended January 28, 2023, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statements. All forward looking statements made by the company involve material risks These are subject to change based on factors which may be beyond the company's control. Accordingly, the company's future performance and financial results may differ purely from those expressed or implied in any such forward looking statements. Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. Company does not undertake to publicly update or revise any forward looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Operator

Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its expressed written Any unauthorized reproductions or recordings of the call should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. And now it is my pleasure to turn the webcast over to your host, Dennis Nelson. Dennis, over to you.

Speaker 1

Thank you. Good morning, and thank you for joining us. I want to start out today's call by thanking all our Our talented teammates for their great work over the past year. Coming off our best year ever, we developed plans to keep our momentum going And you delivered by evening our relationships with guests while growing the top line, empowering guests to shop however and whenever they want, Growing our multi channel businesses and guests, developing great product assortments and maintaining our reputation as a denim destination and optimizing our store base, working to make sure we are in the best shopping area in all of our markets. We achieved all of this while keeping our focus on long term profitability and solid fundamentals.

Speaker 1

We ended the year with operating margins of 24.4% and remain committed to protecting our strong balance sheet, Ending the year debt free and with total cash and investments of 293,700,000 We continued our practice of paying quarterly dividends and also paid a special dividend for the 15th consecutive year.

Speaker 2

I will now turn it over to our CFO, Tom Heatock. Good morning and thanks for being with us. Our March 10, 2023 press release reported that net income for the 13 week 4th Quarter ended January 28, 2023 was $87,800,000 or $1.76 per share on a diluted basis Compared to net income of $83,900,000 or $1.69 per share on a diluted basis for the prior year 13 week 4th quarter ended January 29, 2022. Net income for the 52 week fiscal year ended January 28, 2023 was $254,600,000 or $5.13 per share on a diluted basis compared to net income of $254,800,000 or $5.16 per share on a diluted basis for the prior year 52 week fiscal year ended January 29, twenty 22. Net sales for the 13 week 4th quarter increased 5.5 percent to $401,800,000 compared to net sales of $380,900,000 for the prior year 13 week Q4.

Speaker 2

Comparable store sales for the quarter increased 4.6% In comparison to the same 13 week period in the prior year, and online sales increased 2.3% to 74,800,000 For the full year, net sales for the 52 week fiscal year increased 3.9 percent to $1,345,000,000 Compared to net sales of $1,295,000,000 for the prior year 52 week fiscal year. Comparable store sales for Full year were up 3.3% in comparison to the same 52 week period in the prior year and our online sales increased 4.3% to $230,400,000 For the quarter, UPTs decreased approximately 1%. The average unit retail increased approximately 6.5% and the average transaction value increased about 5.5%. For the full year, UPTs decreased approximately 1%. The average unit retail increased approximately 4.5% And the average transaction value increased approximately 4%.

Speaker 2

Gross margin for the quarter was 53.0 percent down 10 basis points from 53.1 percent in the Q4 of 2021. Our full year gross margin was 50.3%, also down 10 basis points from 50.4 percent for the same period last year. Merchandise margins were down about 75 basis points for the quarter and about 45 basis points for the full year period. Selling, general and administrative expenses for the quarter were 25.6 percent of net sales compared to 24.3 percent for the Q4 of 2021. The 4th quarter increase was primarily due to a 55 basis point increase in store labor related expenses, along with increases in several other SG and A expense categories, which had a combined 75 basis point impact.

Speaker 2

Full year SG and A was 25.9 percent of net sales compared to 24.5% for the same period last year, and the full year increase was due to 100 basis point increase in store labor related expenses, along with increases across several other SG and A expense categories, which had a combined forty basis impact for the full year. Our operating margin for the quarter was 27.4% compared to 28.8% for the Q4 of fiscal 2021. And for the full year, our operating margin was 24.4% compared to 25.9% for the same period last year. Income tax expense as a percentage of pre tax net income for the quarter was 23% compared to 24.7% for the Q4 of fiscal 2021, bringing 4th quarter net income to $87,800,000 in 2022 compared to $83,900,000 in 2021. For the full year, income tax expense was 24 percent of pretax net income compared to 24.6% in 2021, Bringing full year net income to $254,600,000 in 2022 compared to $254,800,000 in 2021.

Speaker 2

Our press release also included a balance sheet as of January 28, 2023, which included the following: Inventory of $125,100,000 which was up 22.5% year over year, but only up approximately 3% compared to inventory of $121,300,000 at the end of fiscal 2019. We also ended the year with total cash and investments of $293,700,000 which was after payment of $202,900,000 in dividends during the year. We ended the year with $112,400,000 in fixed assets, Net of accumulated depreciation, our capital expenditures for the quarter were $8,000,000 and depreciation expense was $5,300,000 For the full year, capital expenditures were $30,400,000 and depreciation expense was $18,900,000 Full year capital spending was broken down as follows: $29,500,000 for new store construction, store remodels and technology upgrades and $900,000 for capital spending at the corporate headquarters and distribution center. During the quarter, we opened 1 new store, completed 7 full remodels, 4 of which were relocations into new outdoor shopping centers and closed one store. This brings our full year 2022 totals to 4 new stores, 23 full remodels and 3 store closures.

Speaker 2

Of the 23 total remodels during the year, 17 were relocations to new outdoor shopping centers. Current plans for fiscal 2023 includes opening 6 new stores and completing 12 to 17 full remodeling projects. We've also closed 2 stores year to date with 1 additional store closing planned for March. Buckle ended the year with 4 41 retail stores in 42

Speaker 3

Thanks, Tom. Women's merchandise sales for the quarter were down about 0.5% against the prior year and represented approximately 42.5% of sales compared to 44.5 percent in the prior year. Average denim price points increased from $74.45 in the Q4 of fiscal 2021 to $79.75 in the Q4 of fiscal 2022, while overall average women's price points increased about 5% from 47.90 to 53. On the men's side, merchandise sales for the quarter were up 8.5% against the prior year, representing approximately 57.5 percent of total sales compared to 55.5% in the prior year. Average denim price points increased from $78.05 in the Q4 of fiscal 2021 to $86.25 in the Q4 of fiscal 2022.

Speaker 3

For the quarter, overall average men's price points increased approximately 6.5% from $51.05 to $54.50 On a combined basis, accessory sales for the quarter were up approximately 15% against the prior year, while footwear sales were down about 7%. These two categories accounted for approximately 10.5% and 9%, respectively, of 4th quarter net sales, which compares to 9.5% 10% for each in the Q4 of fiscal 2021. For the quarter, Average accessory price points were up approximately 9.5% and average footwear price points were down slightly. For the quarter, denim accounted for approximately 41.5% of sales and tops accounted for approximately 30%, which compares to 40.5% 31.5% for each in the Q4 of fiscal 2021. Our youth business continued to grow nicely during the holiday period, posting an up 16.5% on the quarter.

Speaker 3

For the year, our youth business grew approximately 27% and represented 3% of total sales. Our buying teams continue to develop and deliver a strong assortment of private label brands. For the quarter, private label stayed consistent with the prior year, representing 48% of sales. For the full year, our private label selection grew from 42.5 percent of sales in fiscal 2021 to 44.5% in fiscal 2022. We continue to feel good about our inventory position and we're pleased with the strong full price selling during the quarter.

Speaker 3

And with that, we welcome your questions. Thank you.

Operator

Well, thank you so much. And as a reminder for the participants, if you would like to ask a question, please click the raise hand tab located at the bottom of your screen. And then prior to asking your questions, we please ask that you please state your name and then your firm affiliation as well. So we will hear first from John Braatz. John, please go ahead.

Operator

Well, John, we can currently can't hear you. I do see that your microphone is open. So if you're on a phone or Just go ahead and say a few words for us. All right. So while we wait for John to work out his audio issue, I'll go ahead and welcome more questions.

Operator

Again, everyone, please go ahead and click the raise hand feature located at the bottom of your screen indicating you'd like to ask a question. And John, I see you're still out there. Go ahead and Can you let's see. All right. Hearing no response from John, I'll go ahead and ask everyone once again to please click raise your and at the bottom of your screen to indicate that you have a question.

Operator

Well, we have no questions at this time. I do see that John still wants to ask we have a question now from Alan Glenn. Alan, please go ahead with your question.

Speaker 4

Yes. Alan Glenn with Concord and Main. I wondered about the February Sales numbers that showed, I believe, a 6% decline. Do you have any insight into that? Was that just a tough comp from the previous year?

Speaker 1

Yes, Alan. I would say that's the main part of it. We were up last You're 33%. This year, we were down 6%. Of that $5,400,000 that we were down, It was down $5,200,000 was the decrease was in footwear.

Operator

Okay. Thank you.

Speaker 1

Yes. And just to add to that, last year, the footwear category was up 64% in February.

Speaker 4

Thank you very much.

Speaker 1

You're welcome.

Operator

Great. Thank you so much. And we will move on to Jennifer Taylor.

Speaker 5

Hi, can you all hear me?

Operator

We sure can. Please go ahead.

Speaker 5

Terrific. Thank you. Thank you for And I may have missed it in the commentary, but in light of it follows on to the previous question, but how are you thinking about Various inventory levels and just consumer caution generally, I'm just wondering How you might characterize what you're seeing from your customers?

Speaker 1

Thank you. Yes, we are we feel good about our inventory. Our dollars are up More than our because probably because of A Rock Revival, Miss Me, inventories are up where they were down substantially Due to deliveries the previous year, actually our units are down probably 4% From 2019, from where we are today. So we are very comfortable with our inventory and we feel these The new deliveries coming up will continue to create some excitement in our stores.

Speaker 5

That sounds great. And a couple of times you've mentioned versus 2019. And I guess just to elaborate On your thoughts, are you figuring that sort of how should we should view normalized if we could Not to be cliched, but

Speaker 1

Yes, I mean, it's still been kind of a guideline that Some of our investors like to hear about. And so this will probably be the last comments going from there. Like our Ecom business is up over 100% from 2019. So it just shows The growth and improvement in our business over the last few years.

Speaker 5

Great. Thank you.

Operator

And again, everyone, please use the raise your hand tab located at the bottom of your screen to indicate you asked someone to ask a question. So John, I see that you're still out there. I see you're still unmuted. Do you want to go ahead and see if we can hear you and ask your question? All right, still nothing from John Brad.

Operator

So I will give everyone a final opportunity to raise your hand, let us know that you have a question. All right. Well, there are no further questions. So I will turn things back to the Buckle team for any closing remarks.

Speaker 2

Well, just thank you, everybody, for joining us and hope you all have a wonderful day. And John, we wish we would have known what your question was, But we'll have to get it later. So thank you everyone and enjoy the day.

Operator

Absolutely. And again everyone we thank you all for joining us today and we look forward to seeing you on the next earnings. So take care in the meantime. Thank you all so much.

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