The Buckle, Inc. (BKE) on Q2 2023 Results - Earnings Call Transcript
Operator: Good morning. Thank you for standing by, and welcome to Buckle's Second Quarter Earnings Release Webcast. As a reminder, all participants are currently in a listen-only mode and a Q&A 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 second quarter, which ended July 29, 2023, they would like to reiterate their policy of not giving future sales or earnings guidance, have the following safe harbor statement. Safe harbor statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on the factors which may be beyond the company's controls. 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. The 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 expressed written consent. Any unauthorized reproductions or according to the call should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. I'd now like to turn the conference over to your host, Tom Heacock. Tom Heacock: Good morning, and thanks for joining us this morning. Our August 18, 2023 press release reported that net income for the 13-week second quarter ended July 29, 2023 was $45.6 million or $0.92 per share on a diluted basis, which compares to net income of $50.1 million or $1.01 per share on a diluted basis for the prior year 13-week second quarter, which ended July 30, 2022. Year-to-date net income for the 26-week period ended July 29, 2023, was $88.6 million or $1.78 per share on a diluted basis, which compares to net income of $105.4 million or $2.13 per share on a diluted basis for the prior year 26-week period ended July 30, 2022. Net sales for the 13-week second quarter decreased 3.2% and to $292.4 million compared to net sales of $302 million for the prior year 13-week second quarter. Comparable store sales for the quarter decreased 3.3%, in comparison to the same 13-week period in the prior year, and our online sales decreased 5.6% to $43.6 million. Year-to-date, net sales decreased 5.9% to $575.3 million for the 26-week fiscal period ended July 29, 2023, compared to net sales of $611 million for the prior year 26-week fiscal period ended July 30, 2022. Comparable store sales for the year-to-date period were down 6.3% and in comparison to the same 26-week period in the prior year, and our online sales were down 5.6% to $94.9 million. For the quarter, UPTs decreased approximately 2%, the average unit retail increased approximately 2%, and the average transaction value increased about 0.5%. Year-to-date, UPTs increased slightly. The averaging at retail increased approximately 0.5% and the average transaction value increased approximately 1%. Gross margin for the quarter was 47.3%, down 90 basis points from 48.2% in the second quarter of 2022. The current quarter decline was the result of 60 basis points of deleverage buying, distribution and occupancy expense along with a 30 basis point decline in merchandise margins. Year-to-date gross margin was 47.2%, down 150 basis points from 48.7% in the prior year. The year-to-date decline was due to 100 basis points of deleverage buying, distribution and occupancy expense along with a 50 basis point reduction in merchandise margins. Selling, general and administrative expenses for the quarter were 27.9% of net sales compared to 26.4% for the second quarter last year. Year-to-date, SG&A was 28% of net sales compared to 26% for the same period last year. The second quarter increase was due to a 60 basis point increase in store labor related expenses, a 25 basis point increase in G&A salaries, a 25 basis point increase in equity compensation expense and a 25 basis point increase in marketing spend, along with increases across several other SG&A expense categories, which had a combined 50 basis point impact. These increases were also partially offset by a 35 basis point decrease in incentive compensation accruals. Our operating margin for the quarter was 19.4% compared to 21.8% for the second quarter of fiscal 2022. And for the year-to-date period, our operating margin was 19.2% compared to 22.7% for the same period last year. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing second quarter net income to $45.6 million for fiscal 2023 compared to $50.1 million for fiscal 2022. Income tax expense as a percentage of pretax net income for both the current and prior year-to-date periods was also 24.5%, bringing year-to-date net income to $88.6 million for fiscal 2023, compared to $105.4 million for fiscal 2022. Our press release also included the balance sheet as of July 29, 2023, which included the following: inventory of $136.1 million, which was up 5.9% from $128.5 million as of July 30, 2022, and also $322.9 million in total cash and investments. We ended the quarter with $119.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $8.6 million and depreciation expense was $5 million. For the year-to-date period, capital expenditures were $17.9 million and depreciation expense was $9.9 million. Year-to-date capital spending is broken down as follows: $17.2 million for new store construction, store remodels and technology upgrades and $0.7 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed six full remodels, four of which were relocations into new outdoor shopping centers, and we also opened two new stores earlier this month in Nampa Idaho and Poplar Bluff, Missouri, which brings our year-to-date count to four new stores, 10 full remodels and three store closures. For the remainder of this year, we plan on opening five additional new stores and completing eight more full remodeling projects. Buckle ended the quarter with 440 retail stores in 42 states compared to 441 stores in 42 states at the end of the second quarter last year. And now I'll turn it over to Adam Ackerson, Vice President of Finance. Adam Akerson: Thanks, Tom. Women's merchandise sales were down about 6% against the prior year and represented approximately 43.5% of sales compared to 4.5% in the prior year. Average denim price points increased from $77.80 in the second quarter of fiscal '22, is $7.10 in the second quarter of fiscal '23. While overall average women's price points increased about 2.5% from $41.85 to $42.85. Going up against the strongest Q2 on record, we were pleased with the strong sell-throughs in our spring assortment and ended the quarter with comfortable inventory levels across all categories. The women's denim business saw particular strength in our private label brands, while being off in our branded styles, which was largely driven by planned inventory decreases. Our women's top business was highlighted by the performance of graphics, sheer fabrics and product with shine. And while we came into the quarter with plans to chase product in our tops categories, we were unable to source enough newness to drive growth. Women's footwear business saw a nice response to our selection of casual styles, but the open toe and sandals business was impacted by the delayed spring temperatures. On the men's side, merchandise sales for the quarter were down about 1% against the prior year, representing approximately 56.5% of total sales compared to 55.5% in the prior year. Average denim price points increased from $87.60 in the second quarter of fiscal '22 to $89.50 from the second quarter of fiscal '23. For the quarter, overall average men's price points increased approximately 4% from $47.30 to $49.25. Growth in the men's denim category continued to lead the way with a nice mix of growth in both private and branded styles. For tops, we are excited about the performance in a wide variety of looks and styles of our short sleeve button ups. Footwear remains challenging with both difficult comparisons in a difficult competitive landscape, but we continue to identify other accessories that have resulted in nice add-on business. We feel good about our overall inventory positioning as we enter the back-to-school and fall selling season. On a combined basis, accessory sales for the quarter were up approximately 3.5% against the prior year, while footwear sales were down about 13.5%. These two categories accounted for approximately 11.5% and 7.5%, respectively, of second quarter net sales, which compares to 11% and 8.5% for each in the second quarter of fiscal '22. For the quarter, average accessory price points were up approximately 7.5% and average footwear price points were up about 9.5%. We are encouraged by the performance in our youth business, seeing particular strength as we enter the back-to-school selling season ending the quarter with sales up 5% year-over-year. For the quarter, denim accounted for approximately 33% of sales and tops accounted for approximately 30%, which compares to 32% and 30.5% for each in the second quarter of fiscal '22. We continue driving growth in our private brands with private label representing 41% of sales versus 40% in the second quarter of fiscal '22. And with that, we welcome your questions. Operator: Thank you. [Operator Instructions] First person with hand raised is Mauricio Serna. Mauricio, you should be announced -- be allowed to [indiscernible] Mauricio Serna: Hi. Yes. Can you hear me now? Operator: Yes, we can. Mauricio Serna: Yeah. Good morning. Mauricio Serna from UBS. Thanks for taking my questions and congrats on the results. I guess I just wanted to ask if you could elaborate a little bit more on what were the drivers behind the merchandise margin contraction 30 basis points? Is this related to cost pressure inflation? How do you see that evolving in the back half of the year? And then secondly, you mentioned something on the women's side being affected given that you were unable to source enough newness. How much -- and if you could maybe give us an idea of like how much like newness you should represent of your business or how relevant is that to the overall business growth? Thank you. Dennis Nelson: Thank you for your question. I think the margin decrease was largely a part of the opportunity we had last year with the footwear, where we had substantial volume and a better margin, and that probably had the biggest effect on the margin part of our business. We're still very strong in most of those categories. On the ladies side, with the weather being difficult in the first several months of not surely getting summer weather, so to speak. We we're not getting the early sell-throughs on certain fashion products. So we did not pursue going back to that and focused on our back-to-school season. And so that's kind of why we didn't go aggressively with more new styles on the girls side. Operator: There are no further questions in the queue. [Operator Instructions] I have Mauricio here again. Mauricio, should be able to unmute now. Mauricio Serna: Thank you. Thanks so much for the follow-up. I guess just maybe if you could or you could elaborate over more on and you mentioned that you feel very good about your inventory for back-to-school. I mean, what are you thoughts on like how the season is, how the back-to-school season has played out? And maybe if I think all the inventory composition, I think it's still up 6% year-over-year in Q2. Like, how do you feel about that like in terms of the composition of it? And if you -- what makes you feel so comfortable about it heading into the second half of the year? Thank you. Dennis Nelson: Well, a little historical data probably on our inventory as the -- in '19, our inventory was probably in the $135 million ballpark, if I remember right. And then it was down in 2021 quite a bit. Last year, it increased to more of a normal level. And so, our business has grown substantially since that time period. We have -- most of our receipts are new and good response from our stores and our guests on the new selection. So we feel very comfortable with the selection at this point. Operator: Okay. No further questions in the queue. [Operator Instructions] Okay. There are no further questions. So, I'll now turn the call back over to Buckle for any closing remarks. Thank you. Tom Heacock: Thank you, everybody, for your participation today and your interest in Buckle, and everybody enjoy the rest of the day and have a wonderful weekend.
The Buckle, Inc. (NYSE:BKE) Sees Upward Trend in Price Target Amid Mixed Financial Performance
- The average price target for The Buckle, Inc. (NYSE:BKE) has increased from $37.33 to $46, reflecting growing optimism among analysts.
- Institutional investors have significantly increased their stakes in The Buckle, showcasing confidence in the company's potential.
- The Buckle reported quarterly earnings of $1.59 per share, with a net margin of 17.44% and a return on equity of 50.88%.
The Buckle, Inc. (NYSE:BKE) has experienced a notable shift in its consensus price target over the past year. The current average price target is $46, a significant increase from $37.33 a year ago. This upward trend indicates growing optimism among analysts about the company's stock performance. The Buckle operates 440 retail stores across 42 states and has an online presence through buckle.com, specializing in casual apparel, footwear, and accessories for young men and women.
Despite the positive sentiment reflected in the increased price target, The Buckle faces challenges. The company is trading near its 52-week highs, showing resilience in a tough retail environment. In Q2 2024, The Buckle reported a revenue beat but missed on earnings, with declines in both comparable store sales and digital sales. This mixed performance suggests that the stock may be best considered a hold, as highlighted by UBS analyst Mauricio Serna, who set a price target of $32.
Institutional investors have shown growing interest in The Buckle. Panagora Asset Management Inc. increased its investment by 119.2% in the fourth quarter, while Quadrant Capital Group LLC boosted its holdings by 527.4%. Dimensional Fund Advisors LP also expanded its stake by 1.1%, now owning over 1.26 million shares valued at $60.18 million. Overall, institutional investors and hedge funds own 53.93% of Buckle's stock, indicating confidence in the company's potential.
In terms of financial performance, The Buckle reported quarterly earnings of $1.59 per share, surpassing analysts' expectations of $1.44. Despite a 4.8% decline in revenue compared to the previous year, the company maintained a strong net margin of 17.44% and a return on equity of 50.88%. The Buckle also announced a quarterly dividend of $0.35 per share, resulting in an annualized dividend of $1.40 and a yield of 3.79%, with a payout ratio of 31.75%.
Analyst ratings for The Buckle are mixed. StockNews.com upgraded the shares from a "hold" to a "buy" rating, while UBS Group lowered its price target from $34.00 to $32.00, assigning a "sell" rating. Investors should consider these ratings, along with the company's financial performance and market position, when evaluating The Buckle's stock.
The Buckle, Inc. (NYSE:BKE) Sees Upward Trend in Price Target Amid Mixed Financial Performance
- The average price target for The Buckle, Inc. (NYSE:BKE) has increased from $37.33 to $46, reflecting growing optimism among analysts.
- Institutional investors have significantly increased their stakes in The Buckle, showcasing confidence in the company's potential.
- The Buckle reported quarterly earnings of $1.59 per share, with a net margin of 17.44% and a return on equity of 50.88%.
The Buckle, Inc. (NYSE:BKE) has experienced a notable shift in its consensus price target over the past year. The current average price target is $46, a significant increase from $37.33 a year ago. This upward trend indicates growing optimism among analysts about the company's stock performance. The Buckle operates 440 retail stores across 42 states and has an online presence through buckle.com, specializing in casual apparel, footwear, and accessories for young men and women.
Despite the positive sentiment reflected in the increased price target, The Buckle faces challenges. The company is trading near its 52-week highs, showing resilience in a tough retail environment. In Q2 2024, The Buckle reported a revenue beat but missed on earnings, with declines in both comparable store sales and digital sales. This mixed performance suggests that the stock may be best considered a hold, as highlighted by UBS analyst Mauricio Serna, who set a price target of $32.
Institutional investors have shown growing interest in The Buckle. Panagora Asset Management Inc. increased its investment by 119.2% in the fourth quarter, while Quadrant Capital Group LLC boosted its holdings by 527.4%. Dimensional Fund Advisors LP also expanded its stake by 1.1%, now owning over 1.26 million shares valued at $60.18 million. Overall, institutional investors and hedge funds own 53.93% of Buckle's stock, indicating confidence in the company's potential.
In terms of financial performance, The Buckle reported quarterly earnings of $1.59 per share, surpassing analysts' expectations of $1.44. Despite a 4.8% decline in revenue compared to the previous year, the company maintained a strong net margin of 17.44% and a return on equity of 50.88%. The Buckle also announced a quarterly dividend of $0.35 per share, resulting in an annualized dividend of $1.40 and a yield of 3.79%, with a payout ratio of 31.75%.
Analyst ratings for The Buckle are mixed. StockNews.com upgraded the shares from a "hold" to a "buy" rating, while UBS Group lowered its price target from $34.00 to $32.00, assigning a "sell" rating. Investors should consider these ratings, along with the company's financial performance and market position, when evaluating The Buckle's stock.
The Buckle, Inc. Q1 Earnings Report: A Closer Look
- The Buckle, Inc. reported Q1 earnings per share (EPS) of $0.69, missing the expected $0.74.
- Revenue for the period was $262.48 million, slightly below the forecasted $263.64 million.
- Despite a decrease in net sales and online sales, The Buckle, Inc. maintains a healthy financial position with a low price-to-earnings (P/E) ratio of approximately 8.64 and a strong liquidity current ratio of approximately 2.18.
On Friday, May 24, 2024, The Buckle, Inc. (NYSE:BKE), a prominent retailer known for its fashion apparel, footwear, and accessories for young men and women, reported its first-quarter earnings. The company disclosed earnings per share (EPS) of $0.69, which did not meet the anticipated $0.74. Additionally, BKE's revenue for the period was reported at $262.48 million, slightly missing the mark against the expected $263.64 million. This financial update provides a snapshot of the company's performance, reflecting challenges in meeting analyst expectations.
During the Q1 2024 Earnings Conference Call, key figures from The Buckle, Inc., including Tom Heacock, the Senior Vice President of Finance, Treasurer, and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Dennis Nelson, President and CEO, discussed the company's financial outcomes and strategic directions. The call, which was attended by analysts such as Mauricio Serna from UBS and Alan Glenn from Concord & Main Ltd., highlighted the company's efforts to navigate its financial landscape. Despite the slight shortfall in EPS and revenue, the company reported a net income of $34.8 million, translating to earnings of $0.70 per share and $0.69 per share on a diluted basis.
The Buckle, Inc. experienced a decrease in net sales, which fell by 7.2 percent to $262.5 million from the previous year's $282.8 million for the same fiscal quarter. This decline was also evident in comparable store net sales, which dropped by 9.0 percent, and online sales, which saw a 13.4 percent decrease to $44.4 million. The adjustments made for the comparison of comparable store net sales due to the 53rd week in fiscal 2023, aligning the current quarter's performance against the 13-week period ended May 6, 2023, underscore the challenges faced by the retailer in maintaining its sales momentum.
Financially, The Buckle, Inc. maintains a relatively healthy position with a price-to-earnings (P/E) ratio of approximately 8.64, indicating a low valuation compared to earnings. The company's price-to-sales (P/S) ratio stands at about 1.50, suggesting that the stock is trading at 1.5 times its sales. Additionally, the enterprise value to sales (EV/Sales) ratio is slightly higher at approximately 1.55, reflecting the company's total valuation in relation to its sales. With an enterprise value to operating cash flow (EV/OCF) ratio of around 7.55, it showcases the company's valuation in terms of its operating cash flow.
The earnings yield is at about 11.57%, offering an attractive return on investment from an earnings perspective. The debt-to-equity (D/E) ratio is relatively low at 0.19, indicating a conservative use of debt in financing. Lastly, the current ratio, standing at approximately 2.18, indicates a strong liquidity position, with the company having more than twice its current liabilities covered by its current assets. These financial metrics suggest that despite the challenges in sales and earnings, The Buckle, Inc. remains in a stable financial condition, capable of navigating through market fluctuations.
