The Buckle,Inc (NYSE:BKE) Defies The Odds, Shares Skyrocket

The Buckle: A Bet Against Brick & Mortar Retail

If you were one of the traders betting against The Buckle, Inc (NYSE:BKE) I don’t blame you. The company, a teen retailer, is heavily dependant on brick & mortar locations as well as the nation’s ailing malls. There really wasn’t any reason to think they could pull off the quarter they did. Except for a couple of things. The company has a vibrant eCommerce presence, it sells clothes for real people (not just models) and the retail rebound has been so much stronger than anyone expected.

The Buckle Crushes The Consensus

Needless to say, The Buckle did not have a very high bar to jump over in terms of the outlook for 2nd quarter results. The company was not expected to post a loss but it was not expected to produce growth, far from it. That’s why the results are so amazing and why the stock is up more than 20% in early action.

On the top line, revenue came in at $216 million and up a little more than 6.0% from last year. The growth part is surprising but the amazing part is that revenue came in 4200 basis points above consensus. That’s meaningful in ways beyond mere sentiment. This is a game-changing number that proves this company has not only survived the pandemic but come out stronger on the other side.

Record eCommerce Sales For The Buckle

Sales through the ecommerce channel increased by 99% on a YOY basis, not as robust as some others have reported but more than enough to impress. The $46 million reported accounts for just over 21.25% of the total revenue. Looking forward, the latest sales data show growth moderated at the end of the quarter but growth was still present. Even without a second round of stimulus checks, the second-half revenue should be solid if not as robust as in the 2nd quarter.

The top-line results carried through to the bottom line resulting in GAAP EPS of $0.71 or $0.65 better than expected. Looking forward, this figure puts the company solidly on track to beat consensus for the year and, even better, on track to reinstate the dividend. The company suspended the payment in June to preserve cash and that need seems to be diminishing very quickly.

Looking to the balance sheet, the company is in good shape to weather any future hiccups provided we don’t see another round of extended shut-downs. There is plenty of cash on hand and the debt level is low so not much to worry about other than the rebound itself. The biggest risk for The Buckle is another round of shutdowns. The eCommerce channel is certainly helping but without revenue from the company’s 446 stores (431 are open), it’s unlikely to meet targets.

The Technical Outlook: A Reversal In Progress

Shares of The Buckle appear to be staging a pretty strong reversal. After wallowing at the post-COVID lows for months the 2Q news has shares up more than 20% and well above previous resistance. The caveat is that this move is more about short-covering than the earnings report, at least for now. The short-interest on this stock was pushing 30% going into the session putting quite a few traders in the red this morning.

In the near-term, short-covering may keep prices elevated but I would expect to see them fall back to support before advancing much further. The chart looks like support could be strong at today’s low, near the $19 level, but there is a gap to worry about. Price action could fall as low $18 before support really kicks in. Longer-term, provided support at one of these targets holds up, I see this stock melting up to retest the $26 level fairly quickly.