Buckle Q4 2023 Earnings Report

Buckle EPS Results

• Actual EPS: $1.76
• Consensus EPS: $1.62
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $1.69

Buckle Revenue Results

• Actual Revenue: $401.80 million
• Expected Revenue: $386.36 million
• Beat/Miss: Beat by +$15.44 million
• YoY Revenue Growth: +5.50%

Buckle Announcement Details

• Quarter: Q4 2023
• Date: 3/10/2023
• Time: Before Market Opens
• Conference Call Date: Friday, March 10, 2023
• Conference Call Time: 10:00AM ET

Buckle (NYSE:BKE), Inc. is a specialty retailer of casual apparel, footwear and accessories for young men and women. Its merchandise includes denim, tops, bottoms, dresses, outerwear, shoes, jewelry and other fashion accessories, combining national brands with merchandise sold under the company’s private-label brands.

The company sells its products through a network of retail stores across the United States and through its e-commerce platform. Buckle stores typically emphasize personalized customer service and offer services such as complimentary alterations. The company also operates a customer loyalty program and uses digital channels to support its shopping experience.

Buckle traces its roots to 1948, when it began as a clothing retailer in Kearney, Nebraska. The company later adopted the Buckle name as it developed its focus on contemporary casual fashion and denim. Buckle remains headquartered in Kearney and is led by President and Chief Executive Officer Dennis H. Eck.

Buckle Q4 2023 Earnings Call Transcript

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.

Presentation

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

Well, good morning, everyone. 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 Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary. As they review operating results for the 4th quarter, which ended January 28th, 2023, they would like to reiterate their policy of not giving future sales or earning guidance and have the following safe harbor statement.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

All forward-looking statements made by the company involve material risks and uncertainties and 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 materially 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. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its express written consent. Any unauthorized reproductions or recordings of the call should not be relied upon, as the information may be inaccurate.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

As a reminder, today's webcast is being recorded. Now it is my pleasure to turn the webcast over to your host, Dennis Nelson. Dennis, over to you.

[Dennis Nelson, President and CEO at The Buckle]

Thank you. Good morning, and thank you for joining us. I wanna start out today's call by thanking all 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 deepening 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.

[Dennis Nelson, President and CEO at The Buckle]

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 $293.7 million. We continued our practice of paying quarterly dividends and also paid a special dividend for the 15th consecutive year. I'm confident our teams have us well positioned for ongoing success and I'm excited about the opportunities to continue serving our guests in 2023. I will now turn it over to our CFO, Tom Heacock.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Good morning. Thanks for being with us. Our March 10, 2023 press release reported that net income for the 13-week fourth quarter into January 28, 2023 was $87.8 million, or $1.76 per share on a diluted basis, compared to net income of $83.9 million, or $1.69 per share on a diluted basis for the prior year 13-week Q4 into January 29, 2022. Net income for the 52-week fiscal year into January 28th, 2023 was $254.6 million or $5.13 per share on a diluted basis compared to net income of $254.8 million or $5.16 per share on a diluted basis for the prior year 52-week fiscal year into January 29th, 2022.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Net sales for the 13-week Q4 increased 5.5% to $401.8 million compared to net sales of $380.9 million for the prior year 13-week Q4. 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 $74.8 million. For the full year, net sales for the fifty-two-week fiscal year increased 3.9% to $1.345 billion compared to net sales of $1.295 billion for the prior year 52-week fiscal year. Comparable store sales for the fiscal year were up 3.3% in comparison to the same 52-week period in the prior year.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Our online sales increased 4.3% to $230.4 million. 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%. Gross margin for the quarter was 53.0%, down 10 basis points from 53.1% in the Q4 of 2021. Our full year gross margin was 50.3%, also down 10 basis points from 50.4% for the same period last year.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Merchandise margins were down about 75 basis points for the quarter and about 45 basis points for the full year period. Selling general administrative expenses for the quarter were 25.6% of net sales, compared to 24.3% for the Q4 of 2021. The fourth quarter increase was primarily due to a 55 basis point increase in store labor related expenses, along with increases in several other SG&A expense categories, which had a combined 75 basis point impact. Full year SG&A was 25.9% of net sales, compared to 24.5% for the same period last year, the full year increase was due to 100 basis point increase in store labor related expenses, along with increases across several other SG&A expense categories, which had a combined 40 basis impact for the full year.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Our operating margin for the quarter was 27.4% compared to 28.8% for the Q4 of FY 2021. 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 FY 2021, bringing Q4 net income to $87.8 million in 2022 compared to $83.9 million in 2021.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

For the full year, income tax expense was 24% of pre-tax net income, compared to 24.6% in 2021, bringing full year net income to $254.6 million in 2022, compared to $254.8 million in 2021. Our press release also included a balance sheet as of January 28th, 2023, which included the following: inventory of $125.1 million, which was up 22.5% YoY, but only up approximately 3% compared to inventory of $121.3 million at the end of FY 2019. We also ended the year with total cash and investments of $293.7 million, which was after payment of $202.9 million in dividends during the year.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

We ended the year with $112.4 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $8 million, and depreciation expense was $5.3 million. For the full year, capital expenditures were $30.4 million, and depreciation expense was $18.9 million. Full year capital spending was broken down as follows: $29.5 million for new store construction, store remodels and technology upgrades, and $0.9 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened one new store, completed seven full remodels, four of which were relocations into new outdoor shopping centers and closed one store. This brings our full year 2022 totals to four new stores, 23 full remodels and three store closures.

[Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO at The Buckle]

Of the 23 total remodels during the year, 17 were relocations to new outdoor shopping centers. Current plans for FY 2023 includes opening two new stores and completing 12-17 full remodeling projects. We've also closed two stores year to date, with one additional store closing planned for March. Buckle ended the year with 441 retail stores in 42 states, compared with 440 stores in 42 states at the end of FY 2021. I'll turn it over to Adam Akerson, our Vice President of Finance.

[Adam Akerson, Vice President of Finance and Corporate Controller at The Buckle]

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% in the prior year. Average denim price points increased from $74.45 in the Q4 of FY 2021 to $79.75 in the Q4 of FY 2022, while overall average women's price points increased about 5% from $47.90-$50.30. On the men's side, merchandise sales for the quarter were up 8.5% against the prior year, representing approximately 57.5% of total sales, compared to 55.5% in the prior year.

[Adam Akerson, Vice President of Finance and Corporate Controller at The Buckle]

Average denim price points increased from $78.05 in the Q4 of FY 2021 to $86.25 in the Q4 of FY 2022. For the quarter, overall average men's price points increased approximately 6.5% from $51.05-$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 fourth quarter net sales, which compares to 9.5% and 10% for each in the Q4 of FY 2021. For the quarter, average accessory price points were up approximately 9.5%, and average footwear price points were down slightly.

[Adam Akerson, Vice President of Finance and Corporate Controller at The Buckle]

For the quarter, denim accounted for approximately 41.5% of sales, and tops accounted for approximately 30%, which compares to 40.5% and 31.5% for each in the Q4 of FY 2021. Our youth business continued to grow nicely during the holiday period, posting an up 16.5% on the quarter. For the year, our youth business grew approximately 27% and represented 3% of total sales. Our buying teams continued 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% of sales in FY 2021 to 44.5% in FY 2022.

[Adam Akerson, Vice President of Finance and Corporate Controller at The Buckle]

We continue to feel good about our inventory position, and we're pleased with the strong full price selling during the quarter. With that, we welcome your questions. Thank you.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

Well, thank you so much. 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. Then prior to asking your questions, we please ask that you please state your name and then your firm affiliation as well. We will hear first from John Braatz. John, please go ahead. Well, John, we 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. While we wait for John to work out his audio issue, I'll go ahead and welcome more questions.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

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. John, I see you're still out there. Go ahead. Let's see. All right. Hearing no response from John, I'll go ahead and ask everyone once again to please click Raise Your Hand at the bottom of your screen to indicate that you have a question. Well, we have no questions at this time. I do see that John still wants to ask. Oh, we have a question now from Alan Glenn. Alan, please go ahead with your question.

[Alan Glenn, Analyst at Concord & Main]

yes, Alan Glenn with Concord & 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?

[Dennis Nelson, President and CEO at The Buckle]

Alan. I would say that's the main part of it. We were up last year 33%. This year, we were down 6%. Of that $5.4 million that we were down, it was down $5.2 million, the decrease was in footwear.

[Alan Glenn, Analyst at Concord & Main]

Okay. Thank you.

[Dennis Nelson, President and CEO at The Buckle]

Yeah. Just to add to that, last year, the footwear category was up 64% in February.

[Alan Glenn, Analyst at Concord & Main]

Thank you very much.

[Dennis Nelson, President and CEO at The Buckle]

You're welcome.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

Great. Thank you so much. We will move on to, Jenifer Taylor.

[Jenifer Taylor, Analyst at Mac Funding I, Ltd.]

Hi. Can you all hear me?

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

We sure can. Please go ahead.

[Jenifer Taylor, Analyst at Mac Funding I, Ltd.]

Oh, terrific. Thank you. Thank you for the results. 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, or just consumer caution generally? I'm just wondering how you might characterize what you're seeing from your customers?

[Dennis Nelson, President and CEO at The Buckle]

No, thank you. Yes, we feel good about our inventory. Our dollars are up more than our, probably because of 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. We are very comfortable with our inventory and, you know, and we feel the new deliveries coming up will continue to create some excitement in our stores.

[Jenifer Taylor, Analyst at Mac Funding I, Ltd.]

That sounds great. A couple of times you've mentioned versus 2019, I guess just to elaborate on your thoughts, are you figuring that's sort of how we should view normalized, if you could, you know, not to be cliché, but?

[Dennis Nelson, President and CEO at The Buckle]

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. You know, like, our e-com business is up over 100% on, from 2019. It just shows the growth and improvement in our business, over the last few years.

[Jenifer Taylor, Analyst at Mac Funding I, Ltd.]

Great. Thank you.

[Dennis Nelson, President and CEO at The Buckle]

Mm-hmm.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

Again, everyone, please use the Raise Your Hand tab located at the bottom of your screen to indicate you want to ask a question. John, I see that you're still out there. I see you're still unmuted. Do you wanna go ahead and see if we can hear you and ask your question? All right. Still nothing from John Braatz. I will give everyone a final opportunity to raise your hand, let us know that you have a question. All right. There are no further questions. I will turn things back to The Buckle team for any closing remarks.

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

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

[Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary at The Buckle]

Absolutely. Again, everyone, we thank you all for joining us today, and we look forward to seeing you on the next earnings. Take care in the meantime. Thank you all so much.

Participants

Executives

• Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary
• Dennis Nelson, President and CEO
• Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO
• Adam Akerson, Vice President of Finance and Corporate Controller

Analysts

• Alan Glenn, Analyst at Concord & Main
• Jenifer Taylor, Analyst at Mac Funding I, Ltd.