Q4 2020 Buckle Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Buckles fourth quarter earnings release for the conference all participant lines are in a listen only mode. However, there will be an opportunity to ask questions. You mean press. One then zero at any point during the call. The police yourself into the queue. As a reminder, today's call is being recorded.
Courted member.
Members of the Buckles management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance Treasurer, and CFO, Kelly Mahlstick, Vice President of women's merchandising, Bob Carlberg, Senior Vice President of men's merchandising and Brady Fritz General Counsel and corporate Secretary.
As they review the operating results for the fourth quarter, which ended January 30th.
I'd like to reiterate their policy of not giving future sales or earnings guidance and have the following safe Harbor statement, which is 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 factors, which may be beyond the company's control accordingly.
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 calls should not be relied upon as the information may be inaccurate with.
With that I'll turn the call over to Mr. Dennis Nelson. Please go ahead Sir.
Good morning, and thank you all for joining us I want to start by expressing my sincere gratitude to all our teammates in leaders throughout the country.
I am proud of the way, we came together through such a difficult year.
Despite all the challenges we managed to keep our guests and team safe.
Continued delivering exciting exciting new product and made good on our promise to provide the most enjoyable shopping experience possible.
Of course, we did not do this alone.
Also want to thank our vendor partners, who worked with us throughout the past year to adjust move.
Expediate orders to allow us for a full on fresh product presentation in each store.
I greatly appreciate your continued partnership and look forward to 2021 and beyond.
And to our guests. Thank you for your continued trust and loyalty.
[noise], finishing twenty-twenty with net sales growth is incredible is and is not something I thought possible. This time a year ago.
I am excited about the strong response, both in store and online during the back half of the year.
Which could not have been achieved without the relentless focus and dedication of our talented teams in the stores and at our home office.
The growth and progress we made despite such a challenging year has me optimistic about our ability to capitalize on the opportunities ahead.
I will now turn it over to our CFO Tom Heacock.
Good morning, and thanks for joining us.
Our March 12, 2021 press release reported that net income for the 13 week fourth quarter ended January 32021 was $65 6 million per $1 33 per share on a diluted basis compared to net income of 47 million or <unk> 96 per share on a diluted basis for the prior year.
There are 13 week fourth quarter, which ended February one 2020.
Net income for the 52 week fiscal year ended January 30th 2021 was $130 1 million or $2 66 per share on a diluted basis compared to net income of $104 4 million or $2 14 per share on a diluted basis for the prior year, a 52 week period ended February.
<unk> 2020.
Net sales for the 13 week fourth quarter increased 17, 7% to $318 8 million compared to net sales of $271 million per the prior year 13 week fourth quarter.
Comparable store sales for the quarter increased 18% in comparison to the same 13 week period in the prior year and our online sales increased 81, 5% to $66 2 million.
Net sales for the 52 week fiscal year increased <unk>, one per cent to $901 3 million compared to net sales of $903 million per the prior your prior year 52 week fiscal year.
Comparable store sales for the year were up <unk>, 4% in comparison to the same 52 week period in the prior year and our online sales increased 72% to $196 million.
For the quarter <unk> decreased approximately a half percent.
The average unit retail increased approximately two 5% and the average transaction value increased approximately 2%.
Year to date <unk> decreased approximately 5% the average unit retail increased approximately two 5% and the average transaction value increased approximately two 5%.
Gross margin for the quarter was 51, 3% up 390 basis points from 47, 4% in the prior year fourth quarter.
The year over year increase was the result of 120 basis point improvement in merchandise margins and 270 270 basis points of leverage occupancy buying and distribution costs.
Given the strong top line performance for the quarter.
For the year gross margin was 44, 5% up 260 basis points from 41, 9% for the prior year.
The year over year increase was the result of a 140 basis point improvement in merchandise margins of 95 basis point reduction in occupancy costs, and a 25 basis point reduction in buying and distribution costs.
Selling general and administrative expenses for the quarter were 24, 8% of net sales compared to 25, 3% for the same period a year ago.
The year over year reduction is the result of 135 basis point improvement in store labor related expenses, and 135 basis point reduction across several other SG&A expenses, which includes health insurance and other benefit related costs as well as travel spend.
These savings were partially offset by an 80 basis point increase in shipping costs due to our continued strong e-commerce performance and 140 basis point increase related to incentive compensation accruals.
SG&A expenses for the year to date period were 25, 8% of net sales compared to 27, 3% for the same period a year ago. The.
The year over year reduction is the result of a 240 basis point improvement in store labor related expenses, and a 100 basis point reduction across several other SG&A expenses, which again includes health insurance and other benefit related costs as well as travel spend.
These savings were partially offset by 100 basis point increase in shipping costs through our strong E Commerce performance and a 90 basis point increase related to incentive compensation accruals.
Our operating margin for the quarter was 26, 5% compared to 22, 1% for the fourth quarter of fiscal 2919, and our year to date for the year to date period, our operating margin was 18, 7% compared to 14, 6% for the same period last year.
Other income for the quarter was <unk> 9 million compared to $1 8 million for the fourth quarter of fiscal 2019, and other income for the year to date period was $2 9 million compared to $6 2 million in the prior year.
Income tax expense as a percentage of pretax net income for the quarter was 23, 2% compared to 23, 8% for the fourth quarter of fiscal 2019, bringing fourth quarter net income to $65 6 million for fiscal 2020 compared to $47 million in fiscal 2019.
For the full year income tax expense was 23, 9% of pre tax net income compared to 24, 2% in 2019, bringing year to date net income to a $130 1 million for fiscal 2020 versus $104 4 million for fiscal 2019.
Our press release also included a balance sheet as of January 32021, which included the following inventory of $101 1 million, which was down approximately 16, 7% from inventory of $121 3 million as of February one 2020.
And total cash and investments of $340 5 million, which was after payment of $128 5 million in dividends during the year and compares to $249 4 million at the end of fiscal 2019.
We ended the quarter with $100 4 million in fixed assets net of accumulated depreciation our capital expenditures for the quarter were 3 million and depreciation expense was $5 2 million.
For the year to date period capital expenditures were $7 7 million and depreciation expense was $20 9 million.
Year to date capital spending is broken down as follows $5 5 million for new store construction store, Remodels and technology upgrades and $2 2 million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we completed one full remodel and closed three stores, which brings our full year count to three new stores four full remodels and eight store closures. We also closed one additional store store right. After the end of the fiscal year.
For fiscal 2021, we currently plan on opening one new store and completing between eight and 12 full remodeling projects.
Just on current store plans, we expect our capital expenditures to be in the range of $10 million to $15 million, which includes both planned store projects and it investments.
Buckle ended the year with 443 retail stores in 42 states.
Compared to 448 stores in 42 states at the end of fiscal 2019.
Now I will turn it over to Kelly <unk>, Vice President of women's merchandising.
Thanks, Tom I would 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 20% against the prior year fiscal quarter for.
For the quarter, our women's business was approximately 44, 5% of net sales compared to 43, 5% in the prior year.
Average denim price points decreased from $76 in the fourth quarter of fiscal 2019 to $75 20 in the fourth quarter of fiscal 2020, while overall women's price points increased about 5% from $43 50 to $45 65.
Yes.
Q4 was an exciting time for our women's business with casual wear categories of denim soft and simplified net sweaters loungewear and she is driving our growth.
Our denim we continue to see a nice response to our private label and exclusive to buckle branded mix with strength across a wide variety of bottom openings rises and brands. The team continues to do a great job developing and Redeveloping index of Lux finishes and fits that resonate with a broad range of guests as we can.
<unk> of all our fit for everybody focus.
Comfort and casual tops loungewear and fashion sweaters fared well with the success, we had in denim and in our branded casual shoe in the category and accessories, great giftable, such as fragrance hats bag and don't slip away.
We expanded our youth business to more doors during the quarter and continue to see a nice growth in our denim and top categories.
Exclusive products developed for our younger guests keeps our mix is very different and aligns nicely with what mom and dad may also be buying within our stores.
Congestion at the ports impacted the timing of product flow throughout the quarter, However, and proud of the way our team continued delivering new and exciting products through the holiday season.
New year, we ended the year in a comfortable inventory position with reduced markdowns, resulting in strong margins and leaving us in a good position moving into 2021.
With that I'll turn it over to Bob Carlberg, Senior Vice President of men's merchandising to discuss the performance there.
Todays category.
Thank you Kelly men's merchandise sales for the fiscal quarter were up 14, 5% in comparison to the prior year fiscal quarter for the quarter. Our men's business was approximately 55, 5% of net sales compared to 56, 5% in the prior year.
Average denim price points increased from $82 80 in the fourth quarter of fiscal 2019 to $83 15 in the fourth quarter of fiscal 2020.
While overall men's price points decreased about 1% from 50 $160 to $50 95.
Men's had a strong Q4 denim net successories footwear and youth all showed nice growth over last year inventories are in great shape to maintain our low markdown cadence sweaters and outerwear in particular were well managed and set up for us to be almost all fresh for the fall holiday 'twenty, one and denim VK rock salvage and street denim led the way or.
Street denim provided fresh looks with color in Australia, new audience to our stores.
Net were led by our graphic Tees and hedged both having strong newness and great balance across the brands.
I'd like to Echo Kelly's comments on youth as boys also expanded stores and selection spun to have this additional product to capture a younger audience and help our loyal guests outfit their children as well as themselves.
It had a nice response to our spring summer deliveries from both our guests and teammates all teams did an amazing job to finish out the year, but wanted to say thank you to our men's teams as they did an extraordinary job of managing the challenges of Covid and related transportation issues.
Now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 14% against the prior year fiscal quarter and footwear sales were up about 58%.
These two categories accounted for approximately nine and 11, 5% respectively of fourth quarter net sales. This.
This compares to nine 5% and eight 5% per each in the fourth quarter of fiscal 2019.
Average accessory price points were up approximately 5% while average footwear price points were down about three five.
Again on a combined basis for the quarter denim accounted for approximately 42% of sales and tops accounted for approximately 29, 5%. This.
This compares to 44% and 31, 5% for each in the fourth quarter of fiscal 2019.
Our private label business represented approximately 43% of sales for the quarter and 39, 5% per the year.
With 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 to remove yourself from the queue. Please repeat the ones you know command.
Okay.
And first of all the line of Steve Marotta with C. L. King <unk> Associates. Please go ahead.
Good morning, everybody just wanted to ask a little bit about inventory levels being down 17% can you talk a little bit about the aggregate.
Level of port issues that you've experienced you experienced in the quarter that you might still be experiencing what do you think inventory levels would have been otherwise if you had received the items in on and.
A more timely basis towards your plan.
Good morning, Steve.
Thank you for your question.
Yes.
Ballpark in that on average we're about two weeks late on receiving goods give or take on different categories.
Which would have helped the inventory level at some point.
But our response.
We've been excited about is the response in the stores has kept the sales going.
The pressure on catching up on inventory, but it's the.
The good situation to have and we think the teams are approaching that very well and.
It's.
Making for nice turns in.
We think we'll be able to catch up on that.
Over the next couple of months.
Thank you and the last question I had has to do with rent abatements or.
Deferrals or hour hour reductions can you talk a little bit about how that may have affected.
Permanently altered your expense structure to date. Thank you.
Most of the deferrals that we worked with the landlords on.
<unk> been paid now there might be a little bit left.
Over the next few months.
But we appreciated working with that early on when we didn't have any idea what was going on we are having.
A reduction in rents overall in the company.
And we're also.
Very focused on evaluating our locations.
And the strategy of.
Where do we want to have our top store is do we keep them in the malls do we reposition into other centers or Standalone <unk>.
And so we've been very busy.
Over the last year and a half of reviewing this and have continued to do sell and we think theres a lot of good opportunities that way.
To update some of our stores and improve the locations were in.
That's helpful. Thank you.
Yes.
And once again, ladies and gentlemen, if you do have a question. Please press one net zero.
And we do have a question from Jon Braatz with Kansas City Capital. Please go ahead.
Hi, everyone.
Dennis.
Obviously <unk> to 'twenty two.
It was an odd year.
Good to get it behind us, but when you look at your overall your cost structure.
Going forward.
How do you how do you think that compares.
Where you were in 2019, obviously your mix has changed a little bit and you've got some rent the rent relief and so on but in aggregate.
Are you operating will you be operating at a lower lower cost structure.
Yes, I think we've made some improvements and progress on on some of our processes and structure, which will we will improve our cost basis.
Travel will probably.
We will have that expanse or maybe their health insurance, where there was.
Last this past year.
Maybe more normalized although that would probably be less travel then a couple of years ago.
So we are very focused on constant improvement among our teams and what we're doing in <unk>.
I think this past year, just may be sped up a few of those processes. So we're optimistic.
Dick about controlling expenses and growing our business as we move forward.
Whats your thoughts on store.
Store Labor I know you when you reopened Europe.
When you reopened to you had a lower no.
A lower number of employees and you typically do but are you back to sort of a normal level of.
Of employee compensation at the store level.
Now, let's say in several of our stores that are closer to the level. They were although even the year before we would have improved on our payroll in the stores. The one big factor Thats been helpful and we don't see changing much as the new hours.
Most of the stores, where they used to be nine or 10 in the morning till nine at night and such a lot of now opened net 10 or 11 in the morning and close at seven or eight at night. So that's been a benefit that way too.
Okay Alright.
And lastly.
February was a very difficult weather months.
To say the least.
Any thoughts on how weather impacted your your February numbers.
Okay.
I don't have any specific details Jon but yes.
With all our stores in Texas, Oklahoma, Arkansas, as well as the lot of the southeast parts were definitely affected in a challenged the stores there for a period of time okay.
Right. Thank you very much.
Thank you.
And allowing a few moments Mr Nelson and no further questions coming in.
And Tom.
But there are no further questions, we'll wrap up the call and thank everyone for participating and everyone have a wonderful day and wonderful weekend.
Ladies and gentlemen that does conclude your conference. Thank you for your participation you may now disconnect.
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