Q1 2020 Earnings Call
Ladies and gentlemen, thank you first [laughter] bio welcome typical first quarter earnings release at this time all participants are in listen only mode. Later, we will conduct a question and answer session. If you need assistance during the call press.
Sorry zero and as a reminder, this conference is being recorded members of Buckled management on the call today, our Dennis Nelson President and CEO.
Tom Hancock Senior Vice President.
Treasurer, and CFO, Kelli Molczyk, Vice president of women's merchandising.
Carlberg Senior Vice President of men's merchandising and Brady Fritz General Counsel and corporate Secretary as they review the operating results for the first quarter, which ended may 2nd 2020, they would like to reiterate their policy of not getting feature cells or earnings guidance on how 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 involved material risk and 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 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.
Company does not undertake to publicly update or revise any.
Any forward looking statements, even if experience or future changes make it clear that any projected results expressed or implied there and will not be realized.
Additionally, the company does not authorized reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without it.
Breast written consent any unauthorized reproductions or recordings other calls should not be relied upon at the information may be an accurate.
I would now like to turn the conference over to Dennis Nelson. Please go ahead.
Well good morning, and thank you for join Us.
Goes without saying that this is the most challenging quarter, we ever faced the corner started strong as we continued the positive trend the same store sales growth by posting a 6.3% comp.
And online sales growth of 33.2% for February.
These trends were largely achieved by continuing to deliver fashion right product combined with the expertise of our teams in the stores.
To answer that data driven marketing campaigns and continued investment in our omni channel experience.
Then the Golden 19, pandemic struck which introduced a new set of challenges to overcome.
Through it all I'm incredibly proud of our teams responded.
Our teammates reacted admirably as we made it difficult decision to furlough over 90% of our workforce and reduce salaries for many remaining at work.
Our teammates recognize it is through shared sacrifice that we will be able to maintain the financial security and flexibility necessary to navigate this trying time and emerge ready to capitalize on opportunities ahead.
Hi, making these difficult decisions, we are able to reduce compensation and benefit related expenses by over 13.5 million for the quarter with additional savings continuing into the second quarter.
Our buying teams worked very closely with our branded and private label vendor partners to extend payment terms cancel and reduce orders as well as alter the timing unsold inventory.
This allowed us to finished the quarter with inventory up just slightly limited the amount of potential markdown inventory and maximized, our open to buys or future selling periods.
Our real estate team through Gregor relations ships and good faith was able to achieve substantial rent deferrals with our landlords.
Our marketing technology teams.
Developed and deliberate appropriate and relevant content, keeping our guest engaged with the brand as their shopping patterns change.
In addition, these teams work to develop innovative solutions to enhance our omni channel experience.
Including the addition of curbside pickup functionality to both our in store App and online store.
Through these efforts are online businesses continued to grow both with existing and new to file guest.
Our distribution and online fulfillment games, a managed to stay on top of the increased ecommerce demand despite operating with reduced staffing to maintain proper social distancing.
Our corporate office teams have worked tirelessly to respond to teammate and guest inquiries research Federal state and local health guidelines and prepare the stores with the necessary supplies and protocols to reopen quickly and safely.
As a result, we've been able to successfully reopened over 75% of our locations through today.
Finally, our James in the stores are adapting to the new realities retail providing our guests with most enjoyable shopping experience, while working to protect the health and safety of everyone in our stores.
We are encouraged by the early results of stores of reopened and we will continue to evolve the store experience to meet our guest expectations.
And so on take this opportunity to send my deepest appreciation to the thousands of buckled teammates for their collective efforts and thoughtfully positioning and preparing us for the success as we emerged from this pandemic.
I would also like to express my sincere gratitude to our vendors and landlords are continuing to be valued partners.
And with that I'll like to turn this over to Tom.
Good morning, and thanks for being with US this morning.
Our may 22nd 2020 press release reported a net loss for the 13 week first quarter ended may 2nd 2020 of 11.8 million or 20 cents 24 cents per share on a diluted basis compared to net income of 15.1 million or 31 cents per share on a diluted basis for the prior year 13 week.
First quarter ended may 4th 2019.
Net sales for the 13 week first quarter decreased 42.7% to 115.4 million compared to net sales of 201.3 million for the prior year 13 week first quarter.
Online sales for the quarter increased 31.5% to 32.1 million compared to net sales of 24.4 million for the prior year 13 week fiscal period.
Gross margin for the quarter was 23.2% down from 38.1% in the prior year first quarter.
The year over year decrease was the result of 110 basis point decline in merchandise margins, which was largely the result of an increase in our reserve for inventory markdowns and obsolescence and de leverage occupancy buying and distribution expenses as a result of the store closures.
Yes, DNA expenses for the quarter were 37.2% of sales compared to 28.8% for the same period a year ago.
On a dollar basis SDMA declined 14.9 million from 57.9 million in the first quarter of 2019 to 43 million for the first quarter fiscal 2020.
The decline was achieved by reducing compensation and benefit related expenses by 13, and a half million along with reducing certain other operating expenses, including travel and store supplies.
These reductions were partially offset by increased shipping costs, resulting from our strong online growth.
Increased marketing expenses and store related impairment charges.
Other income for the quarter was point 6 million compared to $1.3 million for the first quarter of 2019.
The income tax benefit as a percentage of the pre tax net loss for the quarter was 24.5 per cent compared to income tax expense of 24.5% for the first quarter fiscal 2019.
Bringing first quarter net loss to 11.8 million for fiscal 2020 compared to net income of 15.1 million for fiscal 2019.
Our press release also included a balance sheet as of May 2nd 2020, which included the following.
Inventory of 121.7 million, which was up just slightly from inventory of 120.8 million as of May four 2019.
And total cash and investments of 218.6 million, which compares to 249.4 million at the end of fiscal 2019, and 253.3 million as of May four 2019.
We ended the quarter with 110.1 million in fixed assets net of accumulated depreciation.
Our capital expenditures for the quarter were 2.2 million and depreciation expense was 5.5 million.
Year to date capital spending is broken down as follows $1.5 million per store Remodels and technology upgrades and point 7 million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we closed two stores and completed one full remodel for the remainder of the year. We plan on opening one new store and two new buckle, you stores as well as well as completing three additional full store remodels.
Based on current store plans, we still expect our capital expenditures to be in the range of seven to 10 million, which includes both planned store projects and IP investments.
Buckle ended the quarter with 446 retail stores and 42 states compared with 449 stores and 42 state that the ended the first quarter fiscal 2019.
With respect to transactional metrics and category information you Pts for the quarter decreased about 1%.
The average unit retail increased approximately 1.5%.
The average transaction value increased approximately a half percent.
Average men's denim price points decreased from $86 than 70 cents in the first quarter fiscal 2019.
$84, an 85 cents in the first quarter fiscal 2020, while overall men's price points increased approximately a half percent from $50.60 to $50 a 95 cents.
Similarly women's denim price points decreased from $76.70 in the first quarter of 2019 to $75. An 85 cents in the first quarter of 2020 overall women's price points increased approximately 3% from $42.65 to $44.
On a combined basis for the quarter denim accounted for approximately 46% of sales and top accounted for approximately 27.5%.
Which compares to 42.5% and 30% for each in the first quarter of 2019.
In addition, our private label penetration continues to grow and represented 38.5% of sales for the quarter.
And with that we welcome your questions.
Ladies and gentlemen, if you would like to ask a question press one zero on your telephone keypad.
Once again, if you have a question press one zero at this time.
We will begin to line.
Yes.
Please go ahead.
Hi, Thank you for taking my question.
Good luck to take into your gross margin performance.
Thank you for outlining the inventory reserve charge in the quarter are there other colvin related impacts to call out what you view is more onetime in nature and would you expect inventory reserve charges in the second quarter as well. Additionally, how are you thinking about your promotional cadence ahead, given the competitive backdrop and your inventory position.
On the the first part of the question then I'll, let Dennis take the second part on the first part really the only impact was.
Related to the markdown reserve looking at merchandise margins and selling I mean, those were strong and continued strong through the quarter.
Merchandise margins continue to be positive through February and March and then were down just slightly in April but overall for the quarter actual merchandise margins were positive.
Absent the additional adjustment to the reserve for obsolescence and Mark Downs, which was again.
Just a few categories of seasonal product, where we miss some of that spring selling season and are carrying that over a little lighter than we normally would.
Yes, and good morning.
We were fortunate or the team have done a really nice job as we went through a strong February we were setting with.
Very nice gross margins merchandise margins as well as very little markdown activity as we went into March and.
And then with the adjustments that the team worked with our vendors in such as I mentioned in our script.
We feel.
Very good for our inventory situation.
And it's very early but we've been encouraged and we've had a good start in the stores. So.
At this time, we're not projecting.
More write downs, and we think we're delivering a lot of fresh.
Product that the gas you're excited about.
And so at this point, we do not have aggressive markdowns.
Planned.
Yes.
Thanks, and if I could ask a follow up question.
Scott in a little more detail how traffic trends in your open stores have fared versus expectations for on a more quantitative basis. I know you mentioned being encouraged by early results and what might you anticipate for the timeline, but getting the rest of the fleet back open.
Lower Bob.
Okay.
This week were about 330 stores, we expect by June one or at least my best guess is well be 90% opened by the first first of June or slightly better.
Yes, we added a 105 stores. The first week of May 115 last week and Weve added 74 this week.
To get to that total from the.
A few test stores, we did early in April that we were able to do.
And so.
It's really.
No as I mentioned, we're encouraged but it's hard to.
Specify or Theres, a lot of variations of what's going on so or or or such where if a neighboring story is an open but there isn't driving distance of another store, we've seen a nice bump from that.
So.
We feel about as good as we can be as we start start this next week.
Okay.
Next we will go on the line of Steve Marotta.
And associates.
Good morning, everybody you mentioned earlier on the call curbside pickup capabilities can you talk about if that's in all stores and are there other digital amenities that you're providing for your customers in order to potentially avoid.
Specific trip inside of a store again I guess what else are you doing digitally in order to service the customer.
Yes, curbside, we can do in in about every store.
But it's a very small part of our business at this point, but we have some projects going forward that.
Would be able to improve that experience and be more beneficial if if thats.
Where their demand of our guest is that.
We're still seeing a lot of our guests want to be in the store.
To see the product the selection and such.
Tom do you have anything else to add on that I don't think so I think that I mean, thats been a continual focus for a while through the back half of last year first part of this year and I think it's even more important now to be flexible and be able to offer the gas options of what product expanding the selection of product within store being available online and then giving them a whole bunch of delivery options whether they are.
Oh on curbside pickup.
Pickup in store or ship to their house.
So continual evolution there.
And I know you mentioned that you believe 90% of your stores will be opened by June 1st or that's a target and is very difficult question to answer I understand but do you have any targets in your mind when productivity you might be normalized do you see that.
On or around September 1st or December 1st or not till next year what are your thoughts there.
No that's a tough one.
Yes.
We're certain that theres, probably going to be more uncertainty and so we're just trying to make the best out of every day and our teams are really excited to be back at the stores and seeing their guest and the guests coming in right now.
Our excited to be out and be shopping again. So we just hope that continues and maybe get stronger as we get in further into the season, then people will get more comfortable to come out.
Helpful. Thank you thanks, Dave.
Next we will go the line of John Brad Kansas City.
Go ahead.
Good morning, Dennis Tom.
Good morning.
Denim is a rather basic items do you think.
When we when we emerged fully from from from Alcobra 19 that denim would be a better performer than let's say other apparel.
Well I know the.
Soft company and casual wear has been the talk.
This last month or so.
But.
We're still seeing the some very nice.
Interest or early results on our denim.
We we worked very hard on having the quality of the fit the fabric.
We're very comfortable a lot of our guest have their favorite brand and.
And like the idea of.
The quality fabrics and uniqueness and exclusive.
Exclusive product that we have so.
Denim has been strong all away for the last 50 years for US we see a continuing.
Okay, Good and Dennis you mentioned or Tom mentioned that you're getting some rent relief when you open up the stores and maybe only doing 25% of normal.
Sales or 30% or whatever.
Are you still responsible that for the full rent payment or.
Are you negotiating.
With the landlords.
On the land on the rental payments sort of in its entirety.
Yes, I think our.
Our working with our landlords right now or in a confidential status. So I can't really give you much color on that okay. All right. Thank you all right. Thank you.
Yep.
And if there any additional questions press one zero at this time.
Okay.
Well go to the line of Jennifer Taylor with Mac. Please go ahead.
Hi, good morning, and thank you for taking the question.
And we'll ever fingers crossed the environment improves here certainly.
I am wondering I know it.
Yeah sure all reasonable reasons not to lose forward on comp sales.
There is a chance that you could give a little color as we move floor. It just on your guest count per store.
As they just as a metric just to see how many people are out in certain areas.
Holistically across across the store base.
So we understand just where it was used to be a year ago, mainly all realize numbers are going to be spotty and down and be moving around based on all kinds of.
Activities that I was just wondering if there might be away.
We can get a almost or utilization rate if you will.
What was normal for the store versus.
Thank you heard him or something like that.
Jennifer.
We don't have traffic counters in our stores. So I don't really have any metrics to share there.
And like to say the majority of our stores have only been open two to three weeks at the most we will release our may sales in June as we traditionally do and.
Hopefully that'll give you.
A feel of our business.
Yes, that's fine thank you.
Thank you.
If there any other questions press one zero at this time.
There are no further questions.
But there are no further questions. We'll we'll conclude conclude the call for today and thank everyone for participating and wish you all.
Great All day weekend, whatever that looks like so thank you everybody.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
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