Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Buckles third quarter earnings release at this point all participant lines are in listen only mode. There will be an opportunity for your questions and instructions will be given at that time, if you need any assistance during the call. Please press star zero on an operating one let's just do you.
Offline as a reminder, today's call is being recorded.
Members of Buckled management on the call today, our Dennis Nelson, President and CEO , Tom Heacock, Senior Vice President Finance, Treasurer, and CFO Kelli Molczyk, Vice President of women's merchandising bomb Carlberg Senior Vice President of men's merchandising and Brainy Fritz General Counsel in corporate Center.
Jerry.
As a review the operating results for the third quarter, which ended in November 2nd 2019.
He would like to reiterate their policy of not giving future sales your earnings guidance and following the Safe Harbor statement, which is under the private Securities Litigation Reform Act of 1995.
All forward looking statements made by the company involved material risks uncertainties and are subject to change based on factors, which maybe 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 describing the company's filings with the Securities 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 then any projected results expressed or implied there and will not be realized.
Additionally, the company does not authorized to reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without expressed written consent.
Any unauthorized reproductions or recordings of the calls should not be relied upon as the information may be inaccurate.
That being settled the only call Mr. Tom Heacock. Please go ahead Sir.
Good morning, and thanks for joining us this morning.
Our November 20 Soc in 2019 press release reported a net income for the 13 weeks third quarter ended November 2nd 2019.
$26 million for 53 cents per share on a diluted basis.
Compared to net income of 20.5 million or 42 cents per share on a diluted basis for the prior year 13 weeks third quarter that ended November 3rd 2018.
Year to date net income for the 39 week period ended November 2nd 2019.
57, and a half million or dollar 18 per share on a diluted basis compared to net income of 54 and a half million.
$1.12 per share on a diluted basis for the prior year 39 week period ended November 3rd 2018.
Net sales for the 13 weeks third quarter increased 4.2%.
224.1 million compared to net sales of 215.1 million for the prior year 13 week third quarter.
Parable store sales for the quarter increased 4.7% in comparison to the same 13 week period in the prior year, an online sales increased 5.4% the 26.9 million.
Year to date and that sales increased 1.3% to 629 point Threemillion for the 39 week fiscal period ended November stuck in 2019 compared to net sales of 621.1 million for the prior year 39 week fiscal period, which ended November 3rd 2018.
Comparable store sales for the year to date period were up 1.8% compared to the same 39 week or in the prior year and online sales increased 6.6% to 74.4 million.
For the quarter U.P.T. has increased approximately 1% the average unit retail decreased approximately 1.5% and the average transaction value decreased about a half per se.
To date, you P. Tees increased approximately two and a half first that the average unit retail decreased approximately 3% and the average transaction value decreased approximately <unk> percent.
Gross margin for the quarter was 41.7%.
170 basis points from 40 person in the prior year third quarter.
Year over year increase was the result of 60 basis point improvement in merchandise margin, along with 110 basis point improvement as a percentage of sales in occupancy buying and distribution costs.
For the year to date period gross margin was 39.6% up approximately 20 basis points from 39.4% for the same period last year.
The increase was the result of about 30 basis point improvement in occupancy buying and distribution costs.
Partially offset by a 10 basis point reduction in merchandise margin.
Selling expenses for the quarter were 22.9% I'm not sales compared with 23, and a half or something that sales for the third quarter fiscal 2018.
The improvement was primarily the result of reduce store payroll expense during the quarter.
Year to date selling expenses remained flat with the prior year at 23.3% of sale.
General administrative expenses for the quarter were 4% I'm not sales compared with 4.3% on net sales for the third quarter last year.
Year to date, GE and <unk> expenses remained flat what the prior year, a 4.9% of net sales.
Our operating margin for the quarter was 14.8% compared to 12.2% for the third quarter fiscal 2018 and for the year to date period or operating margin was 11.4% compared to 11.2% for the same period last year.
Other income for the quarter was 1.1 million compared to 1.3 million for the third quarter fiscal 2018, and other income for the year to date period was 4.4 million compared with 3.8 million last year.
Income tax expense as a percentage of pretax net income for the quarter was 24 and a half per cent compared with 25.9% for the third quarter fiscal 2018, bringing third quarter net income to 26 million for fiscal 2019.
Compared with 20.5 million for fiscal 2018.
Year to date income tax expense was also 24 and a half are sent a pretax net income versus 25.9% for fiscal 2018, bringing year to date net income to 57 and a half million.
For fiscal 2019, compared with 54, and a half million for fiscal 2018.
Our press release also included the balance sheet as as of November 2nd 2019, which included the following.
Inventory of 138.9 million, which was down approximately 4.5% from inventory of 145.5 million as of November Threerd, 2018, and total cash and investments.
A few hundred 61.5 million, which compares to 238.8 million at the end of fiscal 2018, and 241.8 million as of November 3rd 2018.
At quarter end inventory on a comparable store basis was down approximately 3.5%.
Total markdown inventory was down compared to the prior year.
We ended the quarter with $117.8 million in fixed out that's net of accumulated depreciation.
Our capital expenditures for the quarter or 1.3 million and depreciation expense was five point sixmillion.
For the year to date period capital expenditures were five and a half million and depreciation expense was 18 million.
Year to date capital spending is broken down as follows.
5 million for store build out remodeling and technology upgrades.
And a half million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we didn't open any new stores are complete and these bull store Remodels, we plan to complete to store Remodels during November bringing our year to date count the five full remodels and one new store.
Based on current plans, we now expect our capital expenditures to be in the range of seven to 9 million for the year, which includes both planned store projects and IP investments.
Buckle ended the quarter with 449 retail stores and 42 state compared to 453 stores and 43 state that the ended the third quarter last year.
Additionally, our total square footage was 2.32 million square feet as of the ended the quarter compared to 2.337 million square feet at the same time a year ago.
And now I'll turn it over to Kelli Molczyk, Vice president of women's merchandising.
Thanks, Tom I'd like to start by highlighting the performance of our women's merchandise categories for the quarter women's merchandise sales for the fiscal quarter were up approximately 3% against the prior year fiscal quarter.
Average denim pricepoint decreased from $74, a 90 cents <unk> third quarter fiscal 2018 to $73 35, <unk> third quarter fiscal 2019.
For the quarter, our winning business was approximately 48.5% net sales compared to 49 and half percent last year, an average last price points decreased about 2.5% from $42, a 75 cents to $41 70.
During the quarter, we achieved positive results across several several of our key category for data on the introduction of new fit darker finishes an extension of a broader assortment of bottom up net gain momentum overall, our expanded offering and fit bottom helping rises in theme and waist sizes across all brands.
Resonated well with our gap, we saw growth in our private label that assortment. In addition to continued growth in our only at buckle exclusively bell outside brand.
Well price point that I was under $80 to continue to make up a large percentage of our overall denim, but now we did narrow the gap on our average denim price points from Q2.
To tie into our denim performing we partnered with the American cancer Society as the official sponsor of down days for the month of October or we donated one dollar for every pair Ben sold from participating brand.
Approximately $400000 would be donated to the ace yet to support their research and programming effort.
Or when its top guests preferences are centered around soft hand fabric warm fall color palette and simplified styling.
Fashion sweaters and Cardigan within our private label brands as well as many other outside brands continue to be well received.
Or when it footwear, our expansion into more easy a casual look and branded functional aided in our growth at the category. We did see these two categories replaced by early short fashion to fail first.
Were assessed juries several different categories continued to perform well by depart by diversifying our selection and look and in some areas streamlining our by segment it specific market.
Overall, we were pleased with how we manage inventory through the quarter, reducing markdowns and improving overall margin.
It's all in those categories, we sustained improvement in our overall sellthrough throughout the quarter on inventory with where inventories position. We feel we are more nimble as Glenn fashion continued to change any ball.
And with that I will turn it over to Bob Carlberg, Senior Vice President and then first and I think to discuss the performance of our men's merchandise category.
Kelly merchandise sales in the fiscal quarter were up 6% in comparison to prior year fiscal quarter average denim price points increase from 80 to 90 in the third quarter fiscal 2018 80 to 95 in the.
Fiscal 2019.
For the quarter, our men's business is approximately 51.5% of net sales.
Fair to 50.5% last year and average men's price points decreased approximately 1.5% $50.40 to $49 is 65 cents.
We're pleased that third quarter marked our eighth consecutive quarter growth for men's product all categories, except outerwear were up the outerwear decline with slight and planned as we slowed sweaters and outerwear a bit later this year. We believe we found the right slows the where guests is buying these categories will continue in that route going forward.
Footwear continues to be our strongest growth category with particular strength in Haiti fueled by a large portion of exclusive styles along with our great selection of those results for our two tests you source were positive and we plan on keeping them open both your ramp overall, our fall assortment was well received by both our teammates in our gas.
I need to be proud of the team's ability to continually develop exclusive product. It keeps our styles unique in the mark marketplace. This allows us to maintain strong regular price business, even with the downward pressure most everywhere else now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 7% against the prior year fiscal quarter.
Footwear sales were up about 24.5%. These two categories accounted for approximately 8.5, and 8%, 8% respectively of third quarter net sales. This compares to 8% is 7% for each in the third quarter fiscal 2018.
Average accessory price points were down approximately 7% an average footwear price points were down about 8.5%.
Again on a combined basis for the quarter denim accounted for approximately 42.5% of sales ops accounted for approximately 34%. This compares to 43% and 34.5% for each in the third quarter fiscal 2018.
Private label business continues to grow and represented just over 40% of sales for the quarter.
With that we welcome your questions.
Ladies and gentlemen, if he would like to ask a question. Please press star one you'll hear a town indicated when placed in the queue. If your question gets answer any wish to remove yourself in the queue. Please press the pound key again star one final question.
And first line of Tiffany can I know with Deutsche Bank. Please go ahead.
Hi, Thanks for taking my questions would you do get to the gross margin performance this quarter to break down the key drivers behind the merchandise margin improvement. Despite average price point still coming down for example, how didn't mix play a role in the margin increase Additionally, with your leverage and gross margin a bit better than we might have expected can you comment on higher leverage point has.
Evolved and if you think further improvements could be ahead. Thank you.
Good morning definitely thank you.
I believe our margin improvement was just by the management of our inventory and reduced markdowns.
Actually in the ladies area.
And then is held up very nicely. So yeah, we were.
Please with the inventory management and the.
And the sell through at regular price in the response from our team and guest on the product.
On the leverage our sales management team took a different approach to.
Managing payrolls in the stores and that was a effective to reduce.
Some of our sales payroll expense in the stores still that was a benefit there on the leverage.
Definitely on the gross margin side, you know historically that was closer to mid single digits. Another much lower number today, we brought rent down in certain markets and worked really hard there. So it's probably closer to 1% or just under to get leverage on the gross margin side.
All right and a follow up question, what's your inventory down to 45% versus sales up 4% would you elaborate on how you feel on that front headed into the holiday season is levels and the quality of inventories where you'd like it and also if you're approaching the holiday, including Black Friday any differently overall than usual.
Given the shorter window between Thanksgiving and Christmas.
Oh, we.
We are.
In good shape on or inventory markdowns are reduced.
And a lot of the product is new arrivals. So we're excited to.
Present that to our guest and we have.
No different I mean, our approach to the holiday season is consistent with the years previous.
Right. Thank you very much thank you.
And next go to a Steve Marotta with CL King <unk> Associates. Please go ahead.
Morning, everybody can you. Please review womens average gennum price reduction in the third quarter I missed that Oh right.
But.
Yes, Steve will have Kelly respond to that.
Oh, sorry about that it was actually.
They did price decreased from 42.75 to 41 I think he was next our out the denim Oh that's right.
[noise], how they that I'm pricepoint, sorry, 74.9, a third quarter last year to 73.35.
Is that we are wanting yes.
I know that average enterprises and a significant headwind.
<unk> comp that seems to be abating. So much somewhat is there anything on the horizon you could talk about in differentials are denim on a year over year basis, and where price points.
I think those prices are headed and why.
See this Dennis I'd say the price points would probably be consistent with the third quarter, Oh, we still sell some higher price point down but not at the same volume as before but.
We've got a nice inventory of denim and.
I'll expect expect those price points to be pretty consistent with the last quarter.
Can you remind us where you are in omni channel.
Endeavors.
Oh lower consistently working on a.
Opportunities there. We've we've just started the test and certain amount of stores a ship from store to the guest a which has been beneficial.
And.
Just a early this fall we we brought on a new senior.
Director of marketing.
We think will be beneficial as wells in improving on our CRM.
Hi use that we updated earlier in the year. So we think.
We have several smaller projects that we think will be good for us.
And lastly, can you comment a little bit about traffic trends.
The third quarter and and.
How much stabilization you saw there and obviously <unk> said that you can talk about.
<unk>.
Without specifically comment.
Obviously, yeah.
We've done a good job in our stores is studying this up as a destination location for signed in our favorite dams and alphabet some sachin.
So I don't know in the in the past quarter.
If the traffic was a much different but I think our teams are doing a good job.
Oh, we've added a a lead left.
Two well the teams can contact the guest on product you invite a man on on their favorite merchandise.
So we benefited from that so it's just a.
Working with the teams on that then and also a we've always felt that the best advertisement in our.
For our stores is a word of mouth from our loyal guest and that's working well.
Helpful. Thank you.
Thank you.
Ladies and gentlemen, just a quick reminder, if you ever question. Please press star one and done that's going to David Berman with Merriman capital. Please go ahead.
Hi, guys.
Good morning, David it's good to see a back [laughter] you know it's interesting I'm looking at your sales to image ratios and you'll say <unk> tons, you're always had good because that's the first quota in about eight or nine way youre. It would be sales are growing faster than it would trees and that's really good.
Thank you well what have you folks have you you must have been disappointed all just because I know you always focused anybody to the past what sort of changed was it more just the topline.
Uh huh.
I think of the topline I think we continue to.
Invest in our teams our store leaders, who are promoted from within and I think they continually oh doing a great job and building gas that but I think the.
I think are still store product the stores are excited about the new merchandise the denim.
You know we've added Kirby fits in the gals denim men or an expanded the styles in house brands and the men's continues as Bob mentioned no eight quarters of.
Oh gains in the men's product and we have a very good men's business, where a lot of people's kind of given up on that so just a combination of good things that you know the teams in the.
Merchandise teams and the store teams are working hard to do and proven that just you know came together this last quarter.
So do you think that you'll continue to keep the inventory's low I mean, they are you.
Good luck on a go no itron.
Keep that focus.
Well I don't think any of our goals and change you know, sometimes there's more opportunities for.
Going after some product and stuff, but you know we've always.
Worked hard to.
Keep our inventories in line and I think.
Part of that before was you know those much higher denim prices, we used to do.
Yeah with the sales there you know kind of made a difference. So I think we're just kinda catching up with with how many years, we've had to go against the identity crisis.
Okay.
Well good let's say more this congratulations thank you so nice to hear from me again, Thank you David Yeah.
And next and we have a question from Richard Dearnley with a long for partners. Please go ahead.
Good morning, a relatively new to your company the online store increase <unk> is relatively modest I mean, if if the initiative is new.
It would seem like the base would be news so the the games would be.
Hmm somewhat more dramatic than 5%.
But I don't understand the base, so yeah, well when you know substantial growth or for many years and such and then it leveled out and we had a solid a gain this quarter and and I believe E. Com was 12% of our company sales.
This quarter, which I believe is a high for us.
And we continue to work at that also we probably had less promotional goods.
Online so that might have factored a little bit in the game.
Okay.
And then looking that Oh <unk> the last.
10 years or so it looks as though a corporate policy is to about pay out of the net income for the year and dividends is is that a policy or does that just happened.
Well each year, usually in the past its been December the board reviews.
Its thoughts on the dividends and Uh huh.
I don't think we look at any past history in making those decisions.
Okay. Thank you yeah.
And to the presenters on the call we have no further questions in queue.
<unk>.
Well Theres no additional questions. We can wrap up the call today, we thank everybody for joining us in their participation and wish everybody a wonderful holiday week next week.
Ladies and gentlemen that does conclude your conference call for today. Thank you for your participation you may now disconnect.
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