The Buckle, Inc. (BKE) on Q4 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Buckle’s Fourth Quarter Earnings Release. At this time, all participants are in a listen-only mode. Laer, we will conduct a question-and-answer session and instructions will be 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 the operating results for the fourth quarter, which ended January 29, 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 involves 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. 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 recordings of the call should not be relied upon as the information may be inaccurate. With that, I’ll turn the conference over to our host, Dennis Nelson. Please go ahead, sir. Dennis Nelson: Good morning, and thank you all for joining this. Before turning it over to Tom, I would like to start by thanking our nearly 8,000 teammates for their tireless efforts over the past year and congratulating them on such a truly incredible year. The grit and determination despite the ongoing disruptions is the bedrock at Buckle, and I’m confident we are positioned for continued success in the years to come. This outstanding year also could not have been possible without the support of our branded and private label vendors. We are grateful for our continued partnerships as we deliver high-quality product despite numerous challenges. To our guests, thank you for your continued trust and loyalty. I also want to sincerely thank all the new guests we have welcomed over the past year. We cherish every opportunity to serve our guests and provide the most enjoyable shopping experience possible. I will now turn it over to our CFO, Tom Heacock. Tom Heacock: Good morning, and thanks for being with us this morning. Our March 11, 2022 press release reported that net income for the 13-week fourth quarter, which ended January 29, 2022, was $83.9 million, or $1.69 per share on a diluted basis, which compares to net income of $65.6 million, or $1.33 per share on a diluted basis for the prior year 13-week fourth quarter, which ended January 30, 2021. Net income for the 52-week fiscal year ended January 29, 2022 was $254.8 million, or $5.16 per share on a diluted basis compared to net income of $130.1, or $2.66 per share on a diluted basis for the prior year 52-weeks fiscal year ended January 30, 2021. Net sales for the 13-week fourth quarter increase 19.5% to $380.9 million compared to net sales of $318.8 million for the prior year 13-week fourth quarter. Comparable store sales for the quarter increased 20% in comparison to the same 13-week period in the prior year. And online sales increased 10.5% to $73.1 million. Net sales for the 52-week fiscal year increased 43.6% to $1.295 billion compared to net sales of $901.3 million in the prior year 52-week fiscal year. Comparable store sales for the year were up 43.8% in comparison to the same 52-week period in the prior year and online sales for the year increased 15.9% to $220.8 million. For the quarter, UPTs decreased approximately 2%, the average unit retail increased approximately 2.5%, and the average transaction value increased approximately 0.5%. For the full year, UPTs decreased approximately 2%, the average unit retail increased approximately 2%, and the average transaction value increased just slightly. Gross margin for the quarter was 53.1%, up 180 basis points from 51.3% in the fourth quarter of 2020. The fourth quarter increase in gross margin was the result of a 45 basis point improvement in merchandise margins, coupled with 135 basis points of leverage occupancy buying and distribution costs as a result of the strong sales performance for the quarter. Full year gross margin was 50.4% compared to 44.5% for fiscal 2020. The full year gross margin increase was the result of a 85 basis point improvement in merchandise margin and 505 basis points of leverage occupancy buying and distribution costs. Selling, general administrative expenses for the quarter were 24.3% of net sales, compared to 24.8% for the fourth quarter of 2020 with leverage across several SG&A expense categories, partially offset by increases in online freight costs and marketing investments. Full year SG&A was 24.5% of sales compared to 25.8% for fiscal 2020. Our operating margin for the quarter was 28.8% compared to 26.5% for the fourth quarter of fiscal 2020. For the full year, our operating margin was 25.9% compared to 18.7% in 2020. Income tax expense as a percentage of pre-tax net income for the fourth quarter was 24.7% compared to 23.2% for the fourth quarter last year, bringing fourth quarter net income to $83.9 million for 2021 compared to $65.6 million for 2020. For the full fiscal year, income tax expense was 24.6% of pre-tax net income, compared to 23.9% in 2020, bringing net income to $254.8 million for fiscal 2021 compared to $130.1 million for fiscal 2020. Our press release also included a balance sheet as of January 29, 2022, which includes the following: inventory of $102.1 million, which was up approximately 1% from inventory of $101.1 million as of January 30, 2021 and total cash and investments of $286.2 million, which was after payment of $347.8 million in dividends during the year. We ended the year with $100.5 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $6.9 million and depreciation expense was $4.7 million. For the year-to-date period, capital expenditures were $19.1 million and depreciation expense was $18.7 million. Full year capital spending is broken down as follows: $18.3 million for new store construction, store remodels and technology upgrades; and $0.8 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed five full remodels, four of which were relocations and a new outdoor shopping centers and closed one store. This brings our year-to-date totals to one new store, 15 full remodels and four store closures. Additionally, we closed one store following the first full day of fiscal 2022. For 2022, we currently plan on opening five new full line stores and completing 15 to 20 full remodel projects. Based on current store plans, we expect our capital expenditures to be in the range of $22 million to $27 million. Buckle ended the quarter with $440 retail stores in 42 states compared with 443 stores in 42 states at the end of the fourth quarter of fiscal 2020. And now, I’ll turn it over to Adam Akerson, our Vice President of Finance. Adam Akerson: Thank you, Tom. Women’s Merchandise sales for the fiscal quarter were up approximately 19.5% against the prior year fiscal quarter. For the quarter, our Women’s business was approximately 44.5% of sales, were stayed consistent with the prior year. Average denim price points decreased from $75.20 in the fourth quarter of fiscal 2020 to $74.45 in the fourth quarter of fiscal 2021, while overall average women’s price points increased about 5% from $45.65 to $47.90. On the Men’s side, merchandise sales for the fiscal quarter were up 19% against the prior year fiscal quarter, representing approximately 65.5% of total sales for both years. Average denim price points decreased from $83.15 in the fourth quarter of fiscal 2020 to $78.05 in the fourth quarter of fiscal 2021. For the quarter, overall average men’s price points increased slightly from $50.95 to $51.05. During the quarter, denim price points for their men’s and women’s businesses were negatively impacted by significantly limited inventory in our higher price point brands as a result of missed receipts due to nationwide shutdowns in Vietnam. On a combined basis, accessory sales for the fiscal quarter were approximately 27.5% in the prior year fiscal quarter and our footwear sales were up about 6%. These two categories accounted for approximate 9.5% and 10%, respectively, the fourth quarter net sales compares to 9% and 11.5% for each in the fourth quarter of fiscal 2020. Average accessory price points were up approximately 13% and average footwear price points were up about 3.5%. For the quarter, denim accounted for approximately 40.5% of sales and tops accounted for approximately 31.5%, which compares to 42% and 29.5% for each in the fourth quarter of fiscal 2020. During the quarter, our private label business grew to 48% of total sales compared to 43% in the fourth quarter of 2020. For the full year, our private label business accounted for approximately 42.5% of total sales versus 39.5% in fiscal 2020. Overall, we continue to see some lag in our prime deliveries due to COVID delays, or congestion and limited trucking availability. Despite these challenges, we still felt good about the amount of newness we were able to deliver for our guests, resulting in our outstanding performance for the quarter. Our buying teams continued to work diligently, both internally and with our vendor partners to adjust timelines and delivery dates, provide a strong in-store and online presentation. Our channel agnostic approach to inventory again proved successful. We have continued to allocate inventory based on its greatest propensity to sell. This strategy resulted in double-digit gains in nearly every category enabled us to finish the year with record low levels of markdowns. In addition to strong product trends, we are also encouraged by the growth of our guest file. For the year, we were able to grow our 12- month active guests by over 33%. Our omni-channel guests, who proved to be our most loyal and highest-performing guests, represented the fastest-growing segment during the quarter, all of which resulted in total transactions increasing by approximately 19% for the quarter and approximately 43.5% for the year. And with that, we welcome your questions. Operator: Our first question comes from the line of Peter Brotchie with Brotchie Capital. Please go ahead. Peter Brotchie: Good morning, and congratulations on a great quarter and year. Dennis, on previous calls I had asked whether or not you thought Buckle’s recent growth rates might be related to the stimulus payments and spending and you didn’t think there was really a high correlation there. And your recent February sales release certainly seems to build on that premise. I know you don’t give guidance, but I’m just wondering if you could add some color on the sustainability of the recent growth rates. For instance, I’m curious how much of February’s 33% growth rate was related to – excuse me, gift card redemptions? Dennis Nelson: Good morning, Peter. Thank you. Well, there certainly wouldn’t be some gift card redemptions. We’ve benefited some in February from the store closures, especially in Texas and throughout the South last year, February, when they had the very challenging winter and power was shut off and such. So we did benefit from that. But also from some of our relocations, as we continue to find opportunities to improve our sports situations, and just a total great effort from our merchandise and sales teams, building our denim business as well as other categories. So here, again, a combination of things, but I was very pleased with February. Peter Brotchie: Great. And then many of your peers, you spent heavily on airfreight in Q4 to mitigate the supply chain issues, and you seem to have been able to create some operating leverage despite those issues. Can you give us any color on whether or not you think the supply chain problems are easing here post-holiday Or what do you – what are your thoughts on the coming year in that regard? Dennis Nelson: Well, there’s still delays and such. Right now, things seem to be going better on the shipping and stuff. We did very little in air freights, as we continue to try to plan far enough out in advance to avoid that challenge. And so, we think it’s improving, but every day is a new day. So we’re just hoping for the best. Peter Brotchie: Okay, great. And that just to circle back on my first question. I think you just said, or on the call said that guest – the guest profile was up 33%. And so, in terms of sustainability, those are new guests, but in terms of their frequency, the visits to the store and repeat visits. Can you add any color there? Do you think that those are our long-term guests that are going to continue to frequent the stores? Dennis Nelson: Well, we think our sales team and our service and our stores are just – is just terrific. And so we think we’ll capture a lot of those as long-term guests. Adam, do you have any more details on that question? Adam Akerson: I mean, as far as –as we looked at the guest file, the new to file guests are performing as good as we would expect or what some of our loyal guests are more long-term guests are performing. So there’s not a significant fall off in terms of recency and frequency for those guests. Peter Brotchie: All right. Thanks a bunch, guys. Dennis Nelson: Yep, thank you. Operator: Our next question comes from Jon Braatz from Kansas City Capital. Please go ahead. Jon Braatz: Good morning, everyone. Dennis Nelson: Good morning, Jon. Jon Braatz: Dennis, I think I’ve heard – if I heard correctly, you plan on opening five new stores in 2022, this would be the first additional stores or added new stores since 2015 first increase. What are you seeing in the marketplace? Have you seen some changes? What changes are you seeing that support this new store growth? Dennis Nelson: Well, we found certain markets that have developed and are growing that we think would be ideal stores for ourselves, as well as there’s some growing markets in some of our established smart cities that we think there’s additional space for us, especially as we have had success in outdoor shopping centers and power centers and on some of our relocation. So we’re taking advantage of that. Now out of those five, there might be a couple that eventually we close a store that is somewhat close to the new ones. That’ll be – we’ll just have to wait and see how that all plays out. Jon Braatz: Do you think that this increase has some legs? Do you see that continuing into the out years? Dennis Nelson: Well, we’re always looking for opportunities. And as our business grows, and there’s certain markets that we haven’t been aggressive at that, we might take another look at as other stores in certain regions continue to do better. So there’s that possibility, but we’re not forecasting anything there. Jon Braatz: Okay. I assume – maybe I shouldn’t assume, but lease rates are pretty favorable on the new stores? Dennis Nelson: Yeah, we’re pretty comfortable with them, or we wouldn’t be doing them. Yeah. Jon Braatz: Yeah. Okay. All right. Thank you. Dennis Nelson: Yep. Operator: Our next question comes from John Deysher from Pinnacle. Please go ahead. John Deysher: Good morning, everyone, and congratulations on a solid year. Dennis Nelson: Thank you. John Deysher: Just curious, the Vietnam supply issue that impacted your ability to import higher priced product, has that been resolved at this point? Or what’s the status of that? Dennis Nelson: Yeah that – since November, that’s – production has become more consistent and shipping. We’re still trying to catch up on certain products and to deliver some of our denim, there could be some delay on some shorts from that production as they tried to get the full length denim out first, but we’re expecting it to be pretty steady as we go forward and excited to have that product back online. John Deysher: Okay. And overall, has the – during the pandemic, has the base of vendors changed dramatically? In other words, are you – have you left certain vendors behind and picked up new ones? Or kind of broadly speaking, how has that all shaken out over the last couple of years? Dennis Nelson: I’d say most of our vendors are long-term vendors that we have great relationships with and are very successful at developing quality product at a good price. And there’s always changes. There’s been some new vendors branded that have been nice for our business and also, especially in the girl’s top business, there’s always changes going on there, but the majority are consistent from years before. John Deysher: Okay. Got it. That’s it. Thanks very much. Dennis Nelson: Okay. Thank you. Operator: And our next question comes from the line of Jenifer Taylor, MAC Funds. Please go ahead. Jenifer Taylor: Hi, good morning, and thank you. Nice quarter and year. Most of my questions have been answered, but I did want to just talk about some of the management and operational changes and some nice promotions it looks like. And I’m just wondering if you could elaborate a little bit on that sort of expansion, natural progression in terms of individuals or any way you’d like to talk about that. Dennis Nelson: Okay. Well, thank you, Jenifer. On our men’s buying team, our Co-Vice Presidents, Cari Crocker and Jennifer Morrow, both then with the Buckle at least 15 years, if not more, and have been actively involved in the development of product and working with Bob. Operator: I believe you may have muted yourself. We no longer can hear you speaking. And as the whole sign still connected, we no longer can hear you speaking on the conference. And this is AT&T operator back with you. It looks like you’re back connected. Are there any other questions? If so please press one, then zero. Now at this time, there are no more questions. Dennis Nelson: Thank you. I apologize. Our phone line here in currently dropped, so we apologize for the disruption. We’re happy to answer more questions if there are any, or I’m not sure where it cut out. But Jenifer, we’re happy to follow-up if we didn’t answer your question. Operator: I can open your line. Thank you. And Jenifer’s line is now open. Jenifer Taylor: Hi, all. You did drop out. But we can – if you – I think you were just talking about the length and commitment of some of the promotion. So it sounds like a natural evolution of those careers. But just to – the only other tag on I had to that, just getting back to sort of the occupancy costs, if you don’t mind, it seems – it would seem to me that you actually should continue to get a little bit of leverage on that side. I don’t know if there’s any more color you can give on that just sort of as a trend line on an absolute cost basis? Adam Akerson: Yeah. On the rent side, we’ve done a nice job, Dennis and Brad working with landlords in abroad, I mean, base rents down, we’ve seen reductions in rent. So that’s where the most of the leverage has been over the last couple of years and that’s been an ongoing effort for several years. Now, some of that’s offset this year, obviously, in a lot of situations, we’re paying percentage rent. So we’ve seen some increases there with a strong business, but otherwise the rest of those rents outside of percentage rent would continue into the future. Jenifer Taylor: Okay. And is there – is the trend of percentage rents sort of up or down generally? Or does it really depend on your markets? Adam Akerson: Each situation is different. So it’s really based on that store sales and above some benchmarking once they get above that benchmark, we’re paying a percentage of sales as additional rent in those markets. So it’s entirely driven by top line in those stores. Jenifer Taylor: Okay. And not necessarily the outdoor space kind of environment versus the more traditional mall. There’s not any sort of alignment in terms of locations and…? Dennis Nelson: The majority of the outdoor centers, in most cases, do not have a percentage rent part of the lease. Jenifer Taylor: Okay. Okay, great. Well, that’s it for me. Thank you very much. And again, nice quarter, and the year. Dennis Nelson: Thank you very much. Operator: And at this time, there are no other questions in queue. Dennis Nelson: Well, thank you, everybody, for participating and we apologize for the technical difficulties and wish you all a great day. So thank you very much. Operator: Ladies and gentlemen, that concludes our conference for today. 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.
