Q1 2021 Buckle Inc Earnings Call
Ladies and gentlemen, good morning, Thank you for standing by and welcome to the Buckle 'twenty 'twenty, 1 first quarter earnings release members of the Buckles management on the call today are Dennis Nelson President and CEO Tom.
He Cox senior Vice President of Finance, Treasurer, and CFO, Kelly Mosaic Vice President of women's merchandising, Bob Carlberg, Senior Vice President of men's merchandising Brady.
Brady Fritz Vice President General Counsel, and corporate Security Secretary of excuse me as they review the operating results for the first quarter, which ended may 1st they would like to reiterate their policy of not giving future sales or earnings guidance and have the following safe Harbor Harbor statement Safe Harbor statement under the <unk>.
<unk> 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, the cash.
Company's future performance and financial results may differ material materially from those expressed or implied in 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 policy does not.
Undertake to publicly update or revise any forward looking statements, even if the experience of our future change changes make it clear that any projected results expressed or implied there and will not be realized. Additionally, the company does not authorize the reproduction or dissemination of transcripts on.
Our audio recordings of the company's quarterly conference calls without its express.
On a written consent any unauthorized reproductions of recording of the call should not be relied on.
Relied upon as the information may maybe inaccurate.
And at this time I'd like to turn the conference over to our host Mr. Tom Heacock. Please go ahead.
Good morning, and thanks for joining us this morning.
Our may 'twenty, 1 'twenty 'twenty, 1 press release reported that net income for the 13 week first quarter ended May 1.2021 was $57.3 million per $1.16 per share on a diluted basis, which compares to a net loss of $11.8 million or 24 cents per share on a diluted basis for the price.
The year of 13 week first quarter ended may 2nd 2020.
And net income of $15.1 million or <unk> 31 per share on a diluted basis for the first quarter of fiscal 2019.
Net sales for the 13 week first quarter increased 159, 2% to $299.1 million from net sales of $115.4 million for the prior year of 13 week first quarter.
Compared to the first quarter of fiscal 2019, net sales increased 48, 6% from sales of $201.3 million.
Online sales for the quarter were $53.7 million, an increase of 67, 3% compared to $32.1 million in the first quarter of 2020, and an increase of 120% compared to $24.4 million in the first quarter of 2019.
Again compared to the first quarter of fiscal 2019 U P. Ts decreased approximately a half percent. The average unit retail increased approximately 4.5 per cent and the average transaction value increased about 3.5%.
Gross margin for the quarter was 49, 3% compared to 23, 2% in the first quarter of 2020 and 38, 1% in the first quarter of 2019.
The increase in gross margin compared to 2019 was the result of a 315 basis point improvement in merchandise margin, coupled with significantly leveraged occupancy buying and distribution costs as a result of the strong sales performance for the quarter.
Selling general and administrative expenses for the quarter were 24% of net sales compared to 37, 2% for the first quarter of 2020, and 28, 8% per the first quarter of 2019.
The reduction compared to 2019 is the result of of 560 basis point improvement in store labor related expenses, and a 50 basis point reduction in travel costs, along with 190 basis points of leverage across several other SG&A expenses.
These savings were partially offset.
And by of 200, 205 basis point increase related to incentive compensation accruals of 75 basis point increase in shipping costs due to our continued strong e-commerce performance.
A 20 basis point increase of equity compensation expense and a 20 basis point increase of marketing related expenses.
Our operating margin for the quarter was 25, 3% compared to negative 14% for the first quarter of fiscal 2020 at 9.3% for the first quarter of 2019.
Our effective tax rate was 24, 5% for the first quarter of each of the 3 years, bringing first quarter net income to $57.3 million for 2021 compared to a net loss of $11.8 million for 2020, and net income of $15.1 million for 2019.
Our press release also included of balance sheet as of May of <unk> 2021, which included the following inventory of $89 million, which was down from inventory of $121.7 million as of May <unk> 2020 and of $120.8 million as of May 4.2019.
And total cash and investments of $412.9 million.
We ended the quarter with $100 million in fixed assets net of accumulated depreciation our capital expenditures for the quarter were $4.6 million and depreciation expense was $4.8 million here.
Year to date capital spending is broken down as follows.
$4.1 million for new store construction store, Remodels and technology upgrades and <unk> $5 million per capital spending at the corporate headquarters and distribution Center.
During the quarter, we completed 5 full remodels all of which were relocations into new outdoor shopping centers and we also closed 1 store per.
For the year, we plan on opening 1 new use store completing 6 additional full remodel projects and also have 1 planned store closure of later this month.
Based on current store plans, we still 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 quarter with 442 retail stores in 42 states compared to 446 stores in 42 states at the end of the first quarter of fiscal 2020.
And now I'll 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.
Please note that due to the disruption in the prior year all sales comparisons will be against the first quarter of 2019.
Women's merchandise sales for the fiscal quarter were up approximately 46, 5% against the first quarter of fiscal 2019.
For the quarter, our women's business was approximately 49% of sales.
Average denim price points of the corner or $76.20.
Compared to $75.85 on the first quarter of 2020 and $76.70 in the first quarter of fiscal 2019.
Overall price points for the quarter or $45.50 compared to $44 in Q1 of 2020 and $42.65 in the first quarter of 2019.
And of reviewing our first quarter results, we continue to be pleased with how the women's product is resonating with our guests and our teammate.
Denim continues to perform nicely in a wide variety of hit from traditional to fashion.
Finishes from clean to busted.
Fabrics from Super stretch to rigid and bottom openings from skinny to flare.
Our full length denim alternatives and crops and shorts also continued to perform well as we all gradually transition to more out of the home living at least a nice uptick to our fashion type mix of graphic Tees fashion, and casual footwear and accessories as guests licks book to step out with their best fashion up forward.
Our private label footprint continues to expand in all categories, creating 1 of a kind of product fit for our guests. Our regular price business continues to drive sales with our markdown inventory representing a smaller percentage of the total at all.
On the exclusive product mix combined with more regular price sales have had a positive impact on our merchandise margin.
In addition, with the enhancements to our omni channel experience, we saw nice gains in our online business are at the quarter.
At the sales performance, beating our plan at team worked extremely hard throughout the quarter, just filling any gaps in product flow by chasing end season available good from our valued partners as well as working through early shipments where applicable.
Those at once goods in conjunction with a steady flow of new planned spring inventory continue to set our stores up with fresh product for our guests.
We continue to plan for a healthy flow of newness through the second quarter to prepare our stores for the back to school season, and with that I'll turn it over to Bob Carlberg Senior Vice President of men's merchandising to discuss the performance of our men's merchandise category.
Thank you Kelly men's merchandise sales for the fiscal quarter were at 48, 5% in comparison to the first quarter of fiscal 2019 for the quarter. Our men's business was approximately 51% of net sales average denim price points of the quarter was $86.20 compared to $84.85 in the first quarter of 2020 at <unk>.
$86.70 in the first quarter of fiscal 2019.
Overall price points for the quarter were $50.20 compared to $50 at 95 from Q1, 2020 and $50.60 in Q1.2019.
Q1 was a great quarter, where all departments were up compared to 2019 denim provided at our largest growth in dollars of footwear of youth showing the largest percentage gain the strong denim performance was across the board with particular strength in VK and salvage at both of which are exclusive to the buckle Rock Revival also had an amazing quarter on our street brands continued their growth at growth is.
As a percent of the total assortment.
And accessories hats, Oakley sunglasses and fragrance led the way.
The team has been working quickly to replenish our inventory position throughout Q1 and into Q2, given the incredible guest response to new receipts going all the way back to Q3 of 2020. Our team just did an incredible job of working with our brands and sources to get enough product to sustain an incredible quarter of growth our usual low level of markdown inventory is even lower giving us the ability to manage.
Risks, while we work to add more inventory our strong partnerships with the granting of sources put us first in line to get product made and delivered faster than our competitors.
During the quarter there were many challenges in the supply chain overall, but we have been able to deliver most product on time with only a small percentage of product being 2 plus weeks late now.
Now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 50% against the first quarter of fiscal 2019.
At where sales were up about 118, 5% each.
These 2 categories accounted for approximately 8.5 and 11% respectively of first quarter net sales.
This compares to 8.5% and 7.5 per cent for each in the first quarter of fiscal 2019.
Average accessory price points, we're at approximately 6%, while average footwear price points were down about 2% compared to the first quarter of fiscal 2019.
Again on a combined basis for the quarter denim accounted for approximately 42% of sales and tops accounted for approximately 26%. This compares to <unk> 46, and 27.5 per cent for each in the first in the first quarter of fiscal 2020 and $42.5 at 30% in the first quarter of fiscal 2019.
For the quarter, our private label business represented approximately 38 per cent of sales and with that we welcome your questions. Thank you.
Ladies and gentlemen on the phone lines. If you wish to ask a question today. Please press 1 followed by at the zero.
And you can take yourself out of the queue by simply pressing the 1 zero of command again again for questions. Please press 1 followed by the zero.
And our first question will come from the line of Steve Marotta, representing C. L. King <unk> Associates. Please go ahead Sir.
Good morning, everybody at just like to speak a little bit about the supply chain. You mentioned some places it's running about 2 weeks behind can you talk a little bit about maybe where it was at the beginning of the quarter, where it is now and when do you think the point of this year, where we'll reach equilibrium.
Hey, good morning, Steve. Thank you for the question Bob do you want to address the men's product first.
Sure. We've thought we kind of moved I think quicker than others and had things on order earlier to kind of already take into account. The fact that there would be some changes in shipping that we knew about ahead of time. So overall I don't think it's gonna habit of material impact on our deliveries going forward and we should be building inventory in the next couple.
Of months.
Kelly do you have anything to add.
No I mean, I would echo what Bob said, we had fairly very little impact from the first quarter. A few partners ran into some challenges, but overall at Philly fared fairly well and we'll continue to do so that's aimed at forward.
Steve I might have helped debt.
Yes.
Might add debt you know at the very strong fourth quarter as well as the.
Huge gains at.
In March and April its been a good problem for us to have and the good news is.
All of the product we're bringing in now is continues to be fresh.
And we have good sales history of the past 6 months to develop product on.
That's helpful can you talk about your online penetration.
Maybe in its current form as latest as you can I don't know if you wanted to at the whole quarter or whether you want to take April as a proxy of months, but where is at at this moment in time are you seeing.
Hum.
More strength in bricks and mortar as retail is reopening or is up on a dollar basis I'm, assuming digital is holding its own and maybe you could just talk a little bit about the puts and takes there.
Yes.
I believe April Tom was the brick and mortar was up 38% is that correct I think for the whole quarter on and that's part of the story, we've seen growth in both both online and in the stores I mean seeing guests really really excited to be back in the stores for the whole quarter all of our in store sales were up over 35% which was incredible.
And coupled with our online growth, we have some difficult comparisons for online growth to a year ago for the periods, where the stores were closed.
But for the whole first quarter I mean, our online sales of about 18% of sales and.
And that's certainly a level, we feel comfortable with and 1 of continued to grow I think our best guess at it and we're seeing a lot of growth as omni channel guests of our guests at our shopping both in store and online and are seeing nice growth there along with obviously, new guests and reactivated guests. So a lot of good things with our online business and in store.
That's very helpful. Thank you.
Okay.
And as a reminder to ask questions. Please press 1 followed by zero at this time.
Speakers I'm not getting anybody else queuing up right now.
Theres no questions. We can we'll wrap it up quickly today and give everyone. Some time back and hope everyone enjoys the day and has a wonderful weekend. Thank you very much we did get 1 more person to queue up right at the end of their would you like to take that.
Sure.
Mr. Wang Please go ahead Sir.
Alright, good morning, Thanks for taking my question.
So many of your peer I already talked about at the big impact from the stimulus checks.
Just wondering if you have a way of measure how big of that impact is in March and April sales and ammonium literally going into the second half of the year, you mentioned back to school and there's a whole lot of D C than 2.
Assuming we are not getting at a more seamless checks.
Now how do you think about at the sales trend of are they going to be continuing to going upwards compared to in 2019. What are you thinking of Oh of planning to do to drive that uptrend.
Just wanted to get some thoughts from you guys. Thank you.
But I believe the.
The trend, we won't try to predict the future of debt.
Since the fourth quarter of 19 at and even before we had a lot of very good things going on in our company. Our teams our merchandising teams of that great product.
And response from the guests that our sales teams have been trading at an excellent experience.
Our marketing continues to improve the team has made the shopping online.
Even more.
Satisfying for everyone and.
So we're.
Were just real excited on what everyone's accomplished over the last year and a half and are looking forward to the future.
Alright, thank you.
Thank you.
Our next question will come from the line of Kyle Kavanaugh, representing Palisade capital. Please go ahead, Mr. Kevin on.
Good morning, everybody.
Thanks.
Good day.
I had a question about the you know clearly of our environment is still.
No different at dinner, where on the other side of last year and you're seeing all of the benefits that are coming along with that and some of that's coming through on your margins on you.
You referenced some of the benefits, you're getting whether or not at <unk>.
Rich and dosing margins on full price selling in and then also I think on their call of last time you referenced.
Real estate was a benefit of you were able to negotiate at some of your real estate dynamics as well. So I'm just curious I know you don't want on a forecast like sales trends going forward, but I'm curious about the productivity of the company and the ability to sustain margins going forward.
Is there of some of these benefits you're receiving right now.
Stable or some of them weren't gonna be give them back because we even normalize in the second half of this year or into 'twenty..2 I was wondering if you can expand upon those sorts of a little bit.
Yeah, I think that's hard to say and thank you for the question Kyle I mean in terms of merchandize margin and then looking at markdown inventory at the end of the quarter of I mean, where Bob and Kelly of both called out were particularly low. So we're always seeking improvements in merchandise margin looking what we can do from a sourcing perspective.
But difficult to project and that's been the answer for the last.
I mean, several years and we've maintained merchandize margin of at a really high level and continue to build on those.
As of the rest of the cost structure of looking at a lot of the areas, where we got a benefit when you talked about rent we have worked to reduce rents over the last several years. They are seeing the benefit of that and that will continue out into the future.
In terms of in terms of of will reduce rents were also looking for opportunities to move stores out of underperforming malls into outdoor power centers lifestyle centers, that's been a positive thing both for rent and.
And then the presentation of product in those stores on the results of those stores. So at 5 of those remodels on the first quarter I think 3 last year, and we'll continue with that strategy going forward.
The other big pieces of store labor and that's been a big focus going back for for several years, we've had a nice improvement there I don't think we will continue to see at at the level. We did on the first quarter and with sales for outfitting plan I mean, it was really of course.
The holiday level of of.
Business and then certainly we werent staffed of holiday and so the teams have been hiring and working hard and running really fast to take care of our guests, but I don't think we would expect that same level of of leverage on store payroll, but but certainly we will continue to be as far as we can and we'll see hopefully see some leverage and continue to focus on that.
Got you.
Just a couple more questions are you able to give you a tragic.
Traffic on the in line stores.
I know you gave a sense of kind of comparable store sales I mean actually you didn't give comparison.
But could you give traffic levels.
For the quarter.
We don't have traffic counters in our stores. So it's difficult and we don't have specific traffic metrics to share.
For our stores.
Okay.
And then with your your vendors are.
I'm just kind of.
Are they seeing any supply chain or.
Do you know or what is kind of what has been the you know I'm. Just curious you said you have enough sales.
Data announcement of a forecast from.
Where do you want to go and merchandize, but.
You know at this early so I'm just is it just kind of.
Is everything so well because you know you're very low inventories and you know everything is new to the customer or or is it actually like of fashion trends that exist right now.
Some of the dynamics around that.
I think it's pretty much product focused I mean, as Kelly mentioned in her presentation. There is a lot of a lot of fun exciting things going on in the gals denim area with different silhouettes.
At denim shorts working well.
The variety of tops and such has been very well received that's been great and the men side.
Denim has been very good as well.
The short.
Short business.
Their selection has been very well received as well as our net business in both categories have been excellent.
The footwear has been on trend.
So.
The team has just done a very good job in our staff on the stores have been getting behind it.
Yeah, all of our vendors for the most part.
We will be helping us catch up.
Have certain challenges nationally at.
As the production goes but overall, we think we'll be in good shape as we continue through the season.
And just 1 last question on the Labor side would you characterize yourself as you know.
Staffed well enough for today's environment, and then as it removes zero per year do you need to increase staff within the stores or online or both.
Okay.
I'd say on the majority of our stores.
They are in pretty good shape on the staffing needs certainly as we go to the back half of the year, we're always looking to add people and there might be certain markets said, it's more of a challenge than others.
So we've got a great working environment and exciting company end.
And it can be competitive so.
We don't see that as a huge problem.
Can I ask are you paying them.
Minimum wage or or have you moved your labor skills at all.
Now we've raised our base wage and then its commission so.
This.
Yes, some of the new teammates will be guaranteed minimum or they're a base plus commission, which at risk better and then we have more experienced staff that would be at higher levels.
Okay.
Much of everybody I appreciate it thank you.
And we do a.
I have a follow up from Mr.
We have a question now from Mr. Hillenbrand.
Cause at a private investor. Please go ahead.
Your line is open Mr Hilton Brad.
Thank you.
Just like to get some information on the growth of your online sales and how your net margins on line or compared to your to your sales in store.
And then just what's the trends of Ben as far as that goes.
Yes.
In terms of margins, they're pretty comparable there's not a lot of difference on the product of the merchandize margins of the of the goods that we have online on what we have in store and in terms of of growth that we've seen a big part of the story is the omni capabilities that we've added over the last several years.
And exposing all of our in store inventory to be available for sale online and so ship from store.
Has been a big part of our online growth and again really expanding the inventory of giving the guests of better selection of product, reducing stock outs online and that's been a big driver.
Okay that answered questions.
Okay.
It does yes.
Okay.
Yeah.
Operator, do we have more questions.
Okay.
And.
There was no other participants queued up at this time gentlemen.
Okay. Thank you.
Would you like to conclude the call.
Now I'll wrap it up unless we get on even more of a last minute questions, but thank you everybody for participating and have a wonderful day.
Ladies and gentlemen does conclude your conference for today. Thank you for your participation using the AT&T executive teleconference. You may now disconnect.
Okay.
Yeah.
1 woman at speakers.
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