Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Buckle fourth quarter earnings release Conference call. At this point all the participant lines Arnaud listen only mode. There will be an opportunity for your questions instructions will be given at that time, if you should require any assistance during.
Nicole Please press star zero, and operator will assist you offline as a reminder, today's call is being recorded and members of buckles 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, Bob Carlberg, Senior Vice President of men's merchandising and Brady Fritz General Counsel in corporate Secretary.
As the review the operating result for the fourth quarter, which ended February 1st 2020, they would likely reiterate their policy of not giving future sales or earnings guidance and have the following the safe Harbor statement.
Which can be found them to the private Securities Litigation Reform Act of 1995, all forward looking statements made by the company involved material risks and uncertainties in 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.
Lee from those expressed or implied in any such forward looking statements.
Such factors include but are not limited to those described 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 that any projected results expressed or implied there and will that be realized.
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With that I'll Telecom conference are Mr., Dennis Nelson President and CEO. Please go ahead Sir.
Good morning, and thank you for join US before we turn it over to Tom to walk through the financial results for the quarter I want to take this opportunity. Thank all our outstanding teammates for their hard work and contributions during the past year.
Our strong operating results during the quarter, which included comparable store sales growth of 3.3%.
And 270 basis points of operating margin expansion.
Completed a positive fiscal year and have the that's well positioned heading into 2020.
These results are a testament to the commitment and dedication of our many talented team mates.
You are mission of creating the most enjoyable shopping experience for our guests.
The fourth quarter highlights included a 160 basis points that merchandise margin improvement.
That's both our men's and women's merchandising teams did an outstanding job providing for our guests what the unique and exclusively selection at both branded and private label merchandise across.
Several product categories.
Allowing us to reduced markdowns and improve the sell through rate for the regular price product.
We also did a nice job managing operating expenses during the quarter, including a 75 basis point reduction in store labor expense even.
Even with the reduced payroll our sales team continuing continues to provide best in class service to our guest.
Making us their favorite specialty store.
With that I'll turn it over to Tom.
Good morning.
Our March 13, 2020 press release reported net income for the 13 week fourth quarter ended February Onest 2020 was 47 million or 96 cents per share on a diluted basis.
Which compares to net income of 41.1 million or 84 cents per share on a diluted basis for the prior year 13 week fourth quarter, which ended February 2nd 2019.
Year to date net income for the 52 week period ended February Onest, 2020 was 104.4 million or $2.14 per share on a diluted basis compared to net income of 95.6 million or $1.97 per share on diluted basis for the prior year 52 week fiscal year, which ended February.
Second 2019.
Net sales for the 13 week fourth quarter increase two and a half first that the 271 million compared to net sales of 264.4 million for the prior year 13 week fourth quarter.
Comparable store sales for the quarter increased 3.3% in comparison to the same 13 weaker in the prior year, an online sales increased 7.5% of 36.4 million.
Year to date net sales increased 1.7% the 900 point Threemillion for the 52 week fiscal year ended February Onest 2020, compared to net sales of $885.5 million for the prior year fit prior year 52 week fiscal period ended February 2nd 2019.
Comparable store sales for the year were up 2.2% in comparison to think 52 week period in the prior year, an online sales for the year increased 6.9% to 110.8 million.
For the quarter, you Ptcs increased approximately half persona. The average unit retail decreased approximately 1% and the average transaction value decreased about a half percent.
Year to date, you PTC increased approximately 2% the average unit retail decreased approximately 2.5% and the average transaction value decreased approximately half percent.
Gross margin for the quarter was 47.4% up 150 basis points from 45.9% in the prior year fourth quarter.
The year over year increase was the result of 160 basis point improvement in merchandise margin.
Partially offset by 10 basis point increase in occupancy buying and distribution costs.
For the year to date period gross margin was 41.9% up approximately 60 basis points from 41.3% for the same period last year.
Increase was the result of a 40 basis point improvement in merchandise margin.
Along with a 20 basis point improvement in occupancy buying and distribution costs.
Selling expenses as a percentage of net sales for the quarter were 21.4% compared to 21.8% in the fourth quarter of fiscal 2018.
The fourth quarter improvement is primarily attributable to a 55 basis point improvement in total store compensation expense.
Offset by increases in online fulfillment and certain other selling expenses.
Year to date, selling expenses were 22.7% of net sales compared to 22.8% in fiscal 2018.
The full year improvement was due to a 50, but 15 basis point improvement in store compensation expense offset by increases in online fulfillment and certain other selling expenses.
General administrative expenses for the quarter were 3.9% on that sales compared to 4.7% on net sales for the fourth quarter fiscal 2018 and for the year to date periods DNA expenses were 4.6% of sales compared to 4.9% for the fourth quarter fiscal 2018.
Our operating margin for the quarter was 22.1% compared to 19.4% in the fourth quarter fiscal 2018 and for the full year operating margin was 14.6 person compared to 13.6% for the same period last year.
Other income for the quarter was 1.8 million, which compares to 1.9 million for the fourth quarter in 2018 and other income for the year to date period was 6.2 million compared to 5.7 million last year.
Income tax expense as a percentage of pretax net income for the quarter was 23.8%.
Fair to 22.6% for the fourth quarter last year, bringing fourth quarter net income to 47 million for fiscal 2019 compared to 41.1 million for fiscal 2018.
Year to date income tax expense was 24.2% a pretax net income compared to 24.5% for fiscal 2018, bringing full year net income to 104.4 million for fiscal 2019 compared to 95.6 million in 2018.
Our press release also included a balance sheet as of February one 2020, which included the following.
Inventory of 121.3 million, which was down approximately 3% from inventory of 125.2 million at the end of fiscal 2018.
Total cash and investments of 249.4 million, which was after payment of 112.9 million in dividends during the year and compares to 238.8 million at the end of 2018.
At quarter end inventory on a comparable store basis was down approximately one and a half first but in total markdown inventory was lower compared to last year.
We ended the quarter with a 113.8 million in fixed assets net of accumulated depreciation.
Our capital expenditures for the quarter or 1.8 million and depreciation expense was 5.8 million.
For the year to date period capital expenditures were 7.3 million and depreciation expense was 23.8 million.
Year to date capital spending is broken down as follows.
6.4 million per store, Buildout remodeling and technology upgrades.
And 0.9 million for capital spending at the home office and distribution Center.
During the quarter, we opened one new Buckley use orange when falls, Idaho completed two full remodeling projects and close to stores, bringing our year to date count the two new stores five full remodels them for store closures.
For fiscal 2020, we have one new store and two new buckle, you stores planned and anticipate completing four full remodels.
By season, we anticipate one remodel completed for spring one first summer one before back to school in one before holiday.
So far in 2020, we have also closed two stores with no additional closings pointed at this time.
Based on current plans, we expect our capital expenditures for 2020 to be in the range of seven to 10 million, which includes both plan store project and IP investments.
Buckle ended the year with 448 retail stores and 42 states compared to 450 stores in 42 stays at the end of fiscal 2018.
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.
Against the prior year fiscal quarter.
Average denim price point decreased from $76.65 in the fourth quarter.
Fiscal 2018 to $76 in the fourth quarter fiscal 2019.
For the quarter, our women's business was approximately 43 and half percent net sales, which was consistent with the same quarter a year ago and average unit price points decreased about half percent from $43.75 to $43 and 50.
For the quarter women's products saw some nice increases in key categories denim performance improved largely driven by increased includes 70 with our fit selection our breadth of brands in luck and the reduction of markdown inventory. The team has done a nice job of continuing to focus on exclusivity first within our selection weather.
That being through our private label brands or development with outside brand partners, which continues to drive traffic to our stores as well dotcom.
Sweaters once again drove the largest gains in our top assortment, while our net selection remains strong with continued guess preferences around moderate price point simply stated fashion supersoft fabric and easy aware easy to pair silhouette.
First after you are very selection and south fragrance hair and specialty brace bracelets drove unit sales as well as dollars in that department and for footwear casual assortment alongside our functional and fashion business was welders, Steve throughout the quarter.
I continue to be proud of our teams management of inventory, especially to come off of our promotional time period for retail, but the reduction in markdown inventory. In addition, we continue to prove our improve our sell throughs in key categories, while working with cleaner inventory level.
At the start of a fresh guarantees and the response cylinder newness and product has been well received by our stores and gas.
Forward to a new year and the opportunities in stores and online Fairwind business.
Market continues to evolve, which is encouraging and we have a very talented and passionate team working hard to deliver the best wearable okay.
And with that I'll turn over to Bob Carlberg, Senior Vice President of men merchandising to discuss the performance of our men's merchandise category.
Thanks, Kelly men's merchandise sales for the fiscal quarter, we're at 3% in comparison to the prior year fiscal quarter.
Average down price points decreased from $83.20 in the fourth quarter fiscal 18 $82.80 in the fourth quarter fiscal 19 for the quarter. Our men's business was approximately 56.5% of net sales, which was consistent with the same quarter year ago, an average men's price points decreased approximately 1.5% from 52.
To 45.
The 160.
Proud of the way our team has continued to design develop and deliver high quality and unique merchandise the fourth quarter marked a ninth consecutive quarter of expansion in our men's business.
Categories that particular strength, where casuals outerwear accessories footwear in you.
Denim and button fronts were flat with sweaters, having a slight but plant decrease we did very little discounting during the quarter, resulting in continued strong margins inventories in good shape and in some cases slightly better than planned we're happy with the amount of markdown needed to clear fall and holiday goods in January and February which will allow us to keep fresh as we head into fall 2000.
Initial spring deliveries towards the end of December and January had an encouraging starting good comments from our sales team gas.
Now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 6.5% against the prior year fiscal quarter and footwear sales were up about 28.5%. These two categories accounted for approximately 9.5% and 8.5% respectively, a fourth quarter net sales.
This compares to 9% and 7% for each in the fourth quarter fiscal 18.
Average accessory price points were down approximately 4% and average gross footwear price points were down about 10.
Again on a combined basis for the quarter denim accounted for approximately 44% of sales tops accounted for approximately 31.5%.
This compares to 45% and 32% for each in the fourth quarter fiscal 2018.
On price our private label business continued to grow and represented approximately 43.5% of sales for the quarter and 39% through the year.
Excuse me also on dimension combined basis for the quarter denim accounted for approximately 44% as we get that I apologize that we welcome your questions. Thank you.
And ladies and gentlemen, if you would like to ask a question on the call. Please press one than zero on your telephone keypad.
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He has picked up your handset before press in the numbers. Once again, if you have question. He may press one than zero at this time.
And first of all line of Tiffany can I get with Deutsche Bank. Please go ahead.
Hi, Thanks for taking my questions.
Given your sourcing exposure to China can you talk to what you're currently seeing at your manufacturing partners over there and what kind of delays or impacts from a supply chain perspective, you might expect as we move through the year.
Well presently we're seeing maybe one to four weeks delay depending on the product.
From China on both demands and the ladies.
Probably predominantly in the denim categories and in the Gals tops were seeing.
Similar similar delays as well.
But our partners.
As last year, working with us through the tariff situation.
I think are doing a good job in addressing the needs the best everybody can.
Two.
Temper the impact of the.
Corona virus.
As a follow up question number of other retailers discuss flowing in store trends in recent days.
Any color around what you're seeing with respect to mall traffic as well as your online training because consumers are beginning to change their behavior stated the Corona Irish and Additionally, can you talk any measures you might be taking in preparation for any sustained slowdown at the mall.
No we don't comment on.
The future or.
Give out.
Updates on that we just do these sales reports.
Monthly.
But we are continually work with our partners and stay in touch with.
The deliveries.
And working on product in and staying in close contact for planning for the future if need be any changes.
Thank you very much.
Yep.
And just as a reminder, ladies and gentlemen, if you do have a question. Please press one then zero on your telephone keypad at this time.
And we'll line of as Steve Marotta with CL King <unk> Associates. Please go ahead.
Good morning, everybody can you remind us what your aggregate exposure to China is as a percent of Cogs say in the last fiscal year or even on a run rate basis Thats preferable.
I don't know if I have a 7% in the Lady side, I would say a lot of our brands and vendors.
We're continuing to explore other sourcing outside of China, we are still pretty dependent.
On Gals denim out of China as we've tried some of the other countries and.
And then not been able to achieve the quality.
And fit that we need in the ladies merchandise.
And Bob do you want to comment on the men sourcing.
Sure we did start to diversify sourcing about five or six years ago would you have denim being made.
Three other countries and in those cases.
Deliveries on time and in some cases, they were to deliver early which helps us mitigate the China challenge one other thing that we do on the sourcing as we ask that to be ship ready before CN why that's been in the past to take care the lag of delivery from CN why but it helped in this year because when the.
Production workers were the main reason that will then come back, but the office workers to pack and ship so that mitigated the delivery challenges that other people had.
And can you also update us on where you stand digitally what are the most recently completed initiatives and what do you expect to complete this year.
Well in the fourth quarter, we started doing ship from store and that had a nice impact on our E com business.
And we're continuing to work on that as well and with our E com.
Hi team and our marketing.
Director I will now have several initiatives to improve our E com side, and our social and so we're looking forward do.
Seeing that happen here in the next few months.
Helpful. Thank you.
Yes, Sir.
And we do a follow up from Tiffany Kanaga. Please go ahead.
Thanks for taking my next question with having taken a sharper Nash and considering your geographic footprint would you remind us what trends you historically seen with respect to your sales or traffic when oil has moved dramatically.
Well on the.
I'm not sure I can recall that far back, but it seems like the there is.
Some effect in certain markets.
But I think less so now then maybe several years ago. When it was very dependent on the oil.
Business and it seems like the Houston market in different ones have diversified so I think it would have a.
A little bit of a less effect in the majority of those oil markets than it used to be.
Thank you.
Hi, rich.
To the presenters on no further questions in queue.
But there are no further questions. So we can wrap up the call and we thank everybody for their participation and wish everyone. A wonderful rest today and a great weekend. Thank you very much.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
Well.
We're sorry your conference is ending now please hang up.