The Buckle, Inc. (BKE) on Q1 2022 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. 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 the opening results for the first quarter, which ended April 30, 2022, they would like to reiterate their policy of not giving future sales or earnings guidance and 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 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. 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 express written consent. Any unauthorized reproductions or recordings of the calls should not be relied upon as the information may be inaccurate. That being said, welcome, everyone, to the Buckle's first quarter earnings release. I would now like to turn the conference over to our host, Mr. Tom Heacock. Please go ahead. Tom Heacock: Good morning, and thanks for joining us this morning. Our May 26, 2022 press release reported a net income for the 13-week first quarter ended April 30, 2022, was $55.3 million or $1.12 per share on a diluted basis, compared to net income of $57.3 million or $1.16 per share on a diluted basis for the prior year 13-week first quarter, which ended May 1, 2021. Net sales for the 13-week first quarter increased 3.3% to $309.1 million from net sales of $299.1 million for the prior year 13-week first quarter. Comparable store sales for the quarter increased 3.7% and online sales were $54.3 million, an increase of 1.1%, compared to $53.7 million in the first quarter of 2021. For the quarter, UPTs decreased approximately 2%. The average unit retail increased approximately 1.5% and the average transaction value decreased about 0.5%. Gross margin for the quarter was 49.2% compared to 49.3% in the first quarter of 2021, with the current quarter decreased the result of a 20 basis point decline in merchandise margins and a 20 basis point increase in store distribution freight costs, partially offset by a 30 basis points of leverage occupancy costs. Selling, general and administrative expenses for the quarter were 25.6% of sales, compared to 24% for the first quarter of 2021. The current quarter increase was the result of a 140 basis point increase in store labor-related expenses, a 30 basis point increase in e-commerce freight costs and a 25 basis point increase in marketing and certain other SG&A expense categories. These increases were partially offset by a 35 basis point decrease in incentive compensation accruals. Our operating margin for the quarter was 23.6%, compared to 25.3% for the first quarter of fiscal 2021. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing first quarter net income to $55.3 million for fiscal 2022 versus $57.3 million for fiscal 2021. Our press release also included a balance sheet as of April 30, 2022, which included the following: inventory of $121.2 million and total cash and investments of $283.1 million. First quarter inventory comparisons for the last several years include $89 million at the end of Q1 2021, $121.7 million in 2020 and $120.8 million in 2019. We ended the quarter with $103.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $7.1 million and depreciation expense was $4.5 million. Year-to-date capital spending is broken down as follows: $7 million for new store construction, store remodels and technology upgrades and $0.1 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed six full remodels, all of which were relocations into new outdoor shopping centers and also closed one store. For the year, we plan on opening 5 new stores and completing 10 to 15 additional full remodeling projects. Based on current store plans, we still expect our capital expenditures for the year to be in the range of $22 million to $27 million, which includes both planned store projects and IT investments. Buckle ended the quarter with 439 retail stores in 42 states, compared to 442 stores in 42 states at the end of the first quarter of 2021. And with that, I'll now turn it over to Adam Akerson, our Vice President of Finance. Adam Akerson: Thanks, Tom. Throughout the first quarter, our buying team delivered a steady flow of newness that continued to be well received by our guests. Women's merchandise sales for the fiscal quarter were up approximately 2.5% against the prior year fiscal quarter. For the quarter, our women's business was approximately 48.5% of sales, compared to 49% in the prior year. Average denim price points increased from $76.20 in the first quarter of fiscal 2021 to $76.60 in the first quarter of fiscal 2022, while overall average women's price points decreased slightly from $45.50 to $45.45. On the men's side, merchandise sales for the fiscal quarter were up 4% against the prior year fiscal quarter, representing approximately 51.5% of total sales, compared to 51% in the prior year. Average denim price points decreased from $86.20 in the first quarter of fiscal 2021 to $86 in the first quarter of fiscal 2022. For the quarter, overall average men's price points increased approximately 1% from $50.20 to $50.75. On a combined basis, accessory sales for the fiscal quarter were up approximately 8% against the prior year fiscal quarter, and footwear sales were up about 12%. These two categories accounted for approximately 9% and 12%, respectively. Our first quarter net sales, which compares to 8.5% and 11% for each in the first quarter of fiscal 2021. Average accessory price points were down approximately 2.5%, while average footwear price points were up about 3%. For the quarter, denim accounted for approximately 40% of sales and tops accounted for approximately 27.5%, which compares to 42% and 26% for each in the first quarter of fiscal 2021. During the quarter, our private label business grew to 42.5% of total sales compared with 38% in the first quarter of 2021. As Tom alluded, we finished the quarter with inventory for both our men's and women's departments in a much more comparable pre-2021 levels as we move into summer and back-to-school. We continue to be encouraged by the health of our guest file, we began the year with over 33% more 12-month active guests than the previous year, and we continue to grow that file during the first quarter of 2022. Complementing this growth, we have also been able to maintain a high retention rate of over 50% of our guests. With that, we welcome your questions. Thank you. Operator: Our first question is coming in from the line of Peter Brotchie with Brotchie Capital Management. Please go ahead. Peter Brotchie: Yes. Good morning. So general question on your core demographic. My impression is that they skew a little younger and are likely to have more discretionary income and perhaps maybe less affected than, say, a typical family of 4 by the current inflationary pressures. And on a related note, I think you're -- and correct me if I'm wrong, but your denim price points may actually be lower than they were, say, 2014 or earlier in the 10s. And so I'm just wondering if you can add any color to your ability to pass through any cost pressures that you're seeing in terms of coming from the manufacturers of the clothing itself and shipping costs? And then, I guess, are you still seeing elevated shipping costs in terms of pressure there? Dennis Nelson: Good morning, Peter. The -- your assumption on our guests is in the -- maybe the '90s, early 2000s was a younger guest, we still sell very well. And with us adding use to junior high, high school, college age, but we've also kind of grown up with a lot of our guests from the early days where we probably have as many or more 25-, 30-year olds and older shoppiness as well. As far as the 2014 earlier days, there was a time where we were selling a large amount of branded denim that would sell anywhere from $120 to $160 plus. It was a big part of our business. And as that trend kind of evolved over the last few years, we've done an excellent job of continuing to sell some of our guest favorite brands, but also developed our own private brands, and that has become a very strong part of our business, and offering great value. A lot of them are around $70, and we have kind of our premium brands that would be in the $85 range. So we've grown that substantially. Costs are up just slightly on those when there's maybe 3% to 5% increase in retails on some of that product. But we think we offer a great value, great quality and our team has done an excellent job of continuing to develop our denim business. Peter Brotchie: Thanks very much for that. That's great color. So -- but you -- do you see any pushback on that 3% to 5% increase in the price points? It wouldn't seem that way from your report? Dennis Nelson: No, I'd say through first quarter, we have not seen any question about that. And actually, as we build up our denim inventory, we've added sizes where people wanted either smaller sizes, larger sizes, some longer-end themes or shorter-end themes. So we're trying to cover more guests and satisfy them that way. But yes, the team -- we're very excited. The first quarter was great. It was off just slightly off an incredible record performance last year. Our teams are doing very well at -- we focus on being the best specialty store we can be and everybody is doing a nice job of continuing to build on that. Peter Brotchie: Yes, that's fantastic. And just on the shipping costs, are you still seeing elevated pressure there? Tom Heacock: We are, and that was one of the areas we called out in the, I mean, the narrative that we're seeing pressure there in a couple of different ways. Some of it is inbound. So in the product cost, and that's part of the reason, again, coming off record merchandise margins, where merchandise margins were down 20 basis points. Some of that's input costs, but a lot of that is freight in. That's a part of the inventory. We also called out and saw some pressure on distribution. So packages coming from our distribution center going to stores. That was an increase as well, which is a function of increased rates, but then also increased receipts, a lot more packages, a lot more newness and excitement going through the stores. And then the last bucket is online orders, and increases there are kind of the same thing, an increase in packages with our online growth and the way we're shipping and then also increased rates. So we are seeing some pressure there. But to date, it's manageable. Peter Brotchie: Okay. Thanks very much. Congrats on being able to build up record numbers from '21 and Q1 '22 here. Thanks again. Dennis Nelson: Thank you, Peter. Operator: Our next question comes from Jon Braatz with Kansas City Capital. Please go ahead. Jon Braatz: Good morning, everyone. Dennis and Tom, can you speak to a little bit about the occupancy cost, you're still beginning -- still leveraging those costs and it's been going on for a while. And is there a point where we begin to see that leveling off and that not helping the margins as much as it has been? Dennis Nelson: Well, we're very excited about a lot of our relocations into outdoor power strips or different -- or a variety of locations. We're in the smaller mid-markets, we've moved out of malls that have not kept up the draw for us. For such a destination store that we've been able to relocate and still drive nice traffic. And we're excited about that. We have a lot of projects going and we'll continue that through next year as well. So how much leverage we'll have in the future, I don't want to predict, but we're -- we think we have a great real estate strategy, and our team there is doing an outstanding job of working with our landlords and developers and we're building off our ability to drive business and be a draw where we're kind of a mini anchor in a lot of these situations. Jon Braatz: Okay. Okay. Dennis, how choppy has the deliveries been from overseas? Are you getting things on a timely basis? And secondly, really here in the Midwest, the summer hasn't materialized yet. Are you seeing any impact on sort of summer sales as a result of the mild temperature still? Dennis Nelson: Well, the first quarter, we're planning out an extra 4 to 8 weeks, depending on the category, and first quarter was pretty good to us. There's always exceptions and some delays on a few things. But overall, we had great delivery on product and our vendors are doing a nice job working with us. First quarter, in certain parts of our company, maybe had a little adverse effect on some of the short selling, but it was very strong a year ago, that first quarter. But we feel really good about our selection of summer product and as we move into the summer season. Jon Braatz: Okay. Thank you. Operator: We're not seeing any additional questions in the queue. Please continue. Tom Heacock: If there no further questions, we can wrap up the call for today. So thank you, everybody, for joining us, and have a wonderful rest of the day. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation and for using AT&T conferencing service. You may now disconnect.
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.
