Q2 2021 Buckle Inc Earnings Call
Yeah.
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the 2021 second quarter earnings release call. At this time all participants are in a listen only mode. And later you will have an opportunity to ask questions instructions will be given at that time. If you should require assistance. During the call you May Press Star and then zero as a reminder, the conference.
Is being recorded member.
Members of Buckles management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance Treasurer, and CFO, Kelly <unk>, Vice President of women's merchandising, Bob Carlberg, Senior Vice President of men's merchandising and Brady Fritz Vice President General Counsel and corporate.
Secretary as they review the operating results for the second quarter, which ended July 31st they would like to reiterate their policy of not giving future sales or earnings guidance and have 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 involve material risks and uncertainties and are subject to change based on factors, which may be 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 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 there in 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.
I would like to turn the conference over to your host Tom Heacock. Please go ahead.
Good morning, and thanks for joining us this morning.
Our August 20th 2021 press release reported that net income for the 13 week second quarter ended July 31, 2021 was $51.4 million or $1 four per share on a diluted basis, which compares to net income of $34.7 million or <unk> 71 per share on a diluted basis for the prior year.
Weak second quarter, which ended August one 2020.
Year to date net income for the 26 week period ended July 31, 2021 was $108.7 million.
Our $2.20 per share on a diluted basis compared to net income of $22.9 million or <unk> 47 per share on a diluted basis for the prior year 26 week period ended August one 2020.
Net sales for the 13 week second quarter increased 36, 6% to $295.1 million from net sales of $216 million for the prior year 13 week second quarter.
Compared to the second quarter of fiscal 2019, net sales increased 44, 8% from net sales of $203.8 million.
Online sales for the quarter were $43.4 million a decrease of five 5% compared to $46 million in the second quarter of 2020.
An increase of 88, 1% compared to $23.1 million in the second quarter of 2019.
Year to date net sales increased 79, 3% to $594.2 million from net sales of $331.4 million for the prior year 26 week fiscal period.
<unk> first 2020.
Compared to the same 26 week fiscal period in 2019 net sales increased 46, 7% from net sales of $405.1 million.
Online sales for the year to date period were $97.2 million, an increase of 24, 5% compared to $78.1 million for the same 26 week fiscal period in 2020, and an increase of 104, 5% compared to $47.5 million for the same 26 week fiscal period in 2019.
Team.
For the quarter <unk> decreased approximately six 5% the average unit retail increased approximately two 5% and the average transaction value decreased about 4%.
Gross margin for the quarter was 48, 1% up from 43, 2% in the second quarter of 2020.
Our year to date gross margin was 48, 7% compared to 36, 3% for the same period last year.
The second quarter increase in gross margin was the result of a 50 basis point improvement in merchandise margins, coupled with 440 basis points of leverage 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 25, 1% of sales.
Third to 22, 1% for the second quarter of 2020.
And our year to date SG&A was 24, 5% of net sales down from 27, 4% for the same period last year.
The second quarter increase was due to a 250 basis point increase in incentive compensation accruals and 130 basis point increase in store labor related expenses.
Which were partially offset by a 70 basis point decrease in shipping costs.
10 basis points of leverage across several other SG&A categories.
Our operating margin for the quarter was 23% compared to 21, 1% for the second quarter of fiscal 2020 and for the year to date period, our operating margin was 24, 2% compared to eight 9% for the same period last year.
Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24, 5%, bringing second quarter net income to $51.4 million for 2021 compared to $34.7 million for 2020.
Our income tax expense as a percentage of pretax net income for both the current and prior year to year to date periods was also 24, 5%.
And year to date net income to $108.7 million for 2021 compared to $22.9 million for fiscal 2020.
Our press release also included a balance sheet as of July 31, which included the following inventory of $95.3 million, which was down from inventory of $116.5 million as of August one 2020, and total cash and investments of $434.9 million.
We ended the quarter with $99.7 million in fixed assets net of accumulated depreciation.
Our capital expenditures for the quarter were $4.6 million and depreciation expense was $4.9 million.
For the year to date period capital expenditures were $9.2 million and depreciation expense was $9.7 million.
Our year to date capital spending was broken down as follows $8.6 million for new store construction store Remodels and technology upgrades and <unk> 6 million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we opened one new use store completed two full remodels, both of which were relocations into new outdoor shopping centers and closed one store. This brings our year to date totals to one new store seven full remodels and two store closures.
For the remainder of the year, we anticipate completing six additional full remodeling projects.
On current store plans, we now expect our capital expenditures to be in the range of $12 million to $15 million, which includes both planned store projects and IC investments.
Local ended the quarter with 442 retail stores in 42 states compared with 446 stores in 42 states at the end of the second quarter of fiscal 2020.
Now I'll turn it over to Kelly <unk>, Vice President of women's merchandising.
Thanks, Tom.
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 31, 5% against the prior year quarter.
For the quarter, our women's business was approximately 45% of sales compared to 46, 5% in the prior year.
Average denim price points increased from $74.60 in the second quarter of fiscal 2020 to $74.65 in the second quarter of fiscal 'twenty 2021.
And overall average women's price points increased about three 5% from $103%.
$240.
What an exciting quarter as we saw continued strong responses to new product in every category are in denim across all brands and classification drove our growth we've worked hard to balance our core fits and stretch fabrics with new fashion fit and rigid average which has significantly expanded.
The variety in our denim selection.
Our private label denim continues to represent a larger share of our mix and was a key contributor and driving our dental sales for the quarter.
Outside of denim, our offering in shorts and a variety of fabrics, including denim.
And Nick were also strong as guests continue their buy now wear now purchasing pattern.
The second quarter also brought fashion shifts as guest re emerge from their homes will return to normal activities and moved away from the simple and casual items and fashion tops dresses and two piece that graphic tees fashion footwear and accessories.
With the expanded number of brands and lifestyles, we now offer in our stores. We are excited about the opportunities are created.
Continue both capturing new guests and engaging our loyal guests.
Our youth business also saw a nice lift in sales throughout the quarter.
Kids started back to school our teams have done an amazing job of putting buckle use on the map through both our four freestanding locations.
Along with an expanded assortment and our regular stores.
We've added used top to bottom assortment to another 75.
Buffalo stores, which takes us to 350 stores with the presence of youth product.
Despite supply chain challenges during the quarter. The team continues to work very closely with our brand partners on creative solutions to minimize the impact to our women's business. This.
This will be an ongoing focus for us as things continue to evolve over the coming months.
I would like to sincerely. Thank all of our vendors and brand partners that are working extremely hard for backhaul as well as our teams here in the office and our distribution center and in our stores for continuing to keep buckle at the forefront of fashion and with that I'll turn it over to Bob Carlberg, Senior Vice President of men's merchandising to discuss.
The performance of men's merchandise categories.
Thanks, Kelly men's merchandise sales for the fiscal quarter were up 45% against the prior year fiscal quarter for the quarter. Our men's business was approximately 55% of net sales compared to 53, 5% in the prior year.
Average denim price points decreased from 80.785 in the second quarter of fiscal 2020 to $85.10 in the second quarter of fiscal 2021.
Our overall average men's price points increased slightly from 45, 8% to $45.85.
Q2 was another standout quarters, we delivered fresh new product for our guests.
I'm glad our men's dollar increase with continued strength in our private brand BK BK, you still be our largest along with strong trends in rock revival on our Street brand.
Net Cherokee, especially graphic Tees showed incredible growth driven by the best balance of brands lifestyles colors and graphics that I've ever seen our teams do a great job of Curating looks from all American to country to street to West coast, enabling our teammates to serve any age and lifestyle.
Georgia and accessories were our next largest growth department shorts were very strong overall as we expanded our elastic waist business without losing our flat, Brian and longtime good cargo business.
Almost all accessory categories performed well led by hats fragrance in Oakley glasses.
<unk> growth has been fun to see not only in our four youth only doors, but the expansion in our full line stores has also been very successful.
It's much smaller dollars, but I'm excited to say that our bottom our button front business is back and growing I.
I can't say enough to thank our sales and support teammates as well as our guests for all they have done to make this happen.
Made the best of a challenging year for both building and sourcing product as you can see from our results.
Now turning to results on a combined basis accessory sales for the fiscal quarter were up approximately 43% against the prior year fiscal quarter, while footwear sales were up about 14, 5%. These.
These two categories accounted for approximately 10, and 8% respectively of second quarter net sales. This compares to 10% and nine 5% for each in the second quarter of fiscal 2020.
Our average accessory price points were up approximately five 5% average footwear price points were up about two.
Again on a combined basis for the quarter denim accounted for approximately 33, 5% of sales tops accounted for approximately 31%. This compares to 67% for each in the second quarter of fiscal 2020.
For the quarter, our private label business represented approximately 30% of sales and with that we welcome your questions. Thank you.
Ladies and gentlemen, if you wish to ask a question on today's call you May press, one and then zero. If you are using a speakerphone. Please pick up the handset before pressing the numbers and once again if you do have a question on today's call you May press, one and then zero at this time.
Our first question comes from the line of Peter <unk> from <unk> Capital. Your line is open. Please go ahead.
Yes. Good morning, Thanks for taking my call.
I realize that you guys don't give guidance.
Don't necessarily.
I think.
I think that the growth that you've experienced recently is.
Completely.
Related to the stimulus payments.
Payments that we've seen but I wonder if you could comment on the sustainability of the recent growth.
Based upon what Youre seeing.
Good morning, Peter.
Well, we feel really good about what we have going online with.
With our stores and our online.
The one thing we've noticed as we've added over 40% new guests over this past year.
In addition, we've are relocating some lar.
Mall stores in the outdoor.
Power centers and lifestyle centers, which we've had very good response.
But especially proud of our teams.
Always take a specialty store approach and we have a.
Great Great talent in our stores that provide an excellent experience for our guests and enjoyable.
And our merchandise teams, we continually hear they know and understand our gas better than than anyone else or vendors work with.
And that's why we've been able to provide.
On target fashion that is selling.
Very quickly.
Regular price markdowns or.
Definitely down.
There are some challenges with the.
Supply line, but that's been going on for a year and a half.
And what we see.
See a plus for us there's a lot of our product is exclusive.
In addition to private label with our brands a lot of exclusive products that our guests.
We'll look forward to buy if if it's not available.
Weeks that we see them continually shopping us to come in and find.
Their favorite denim fits and selection of product.
Okay, great. Thanks, very much yet so that the supply chain the shipping costs.
Seems to be elevated for everybody and that was my my next question. So thanks for addressing that but coming into holiday.
You don't see that as a big problem, then or how do you feel about that.
Like I said Theres challenges just like there has been with the shutdown in Vietnam, we're going to have some.
Deliveries that are later.
What's been beneficial as we've had success now for.
Since things reopened for a long time, so we've been our teams have been planning with our vendors. They have a long term great working relationship with our partners.
So they go out of their way to help us as as well as we're always working with them to develop more product.
And so.
There arent going to be some expense saves, but I think we managed a lot of that pretty well and and figure it out opportunities as we've gone along so.
We think we think we can.
Manny jar, our business very well and it.
There could be some periods of time that will not be as strong as others, but we're very feel very good about.
What our company is doing and the support we have at the home office for our stores and our merchandise teams.
Great well, thanks, very much for taking my questions and congratulations on an outstanding quarter.
Thank you Peter have a good day.
Our next question comes from the line of Steve Marotta from C. L. King <unk> Associates. Please go ahead. Your line is open.
Morning, Thank you for taking my question Dennis.
Dennis I have a question and again I know that you don't provide quarter to date guidance, nor any sort of future guidance, but chatter is that and within the retail channel August has slowed a little bit from the pace in June and July.
And with that as a backdrop and again not specific to the buckle is it.
No no no. This is this is a bit reverse logic, but is it the worst thing in the world if demand slows a little bit to a better match what is the fee.
Flow of goods currently which is obviously a little bit tricky.
In other words demand is significantly outstripping supply at this moment.
The supply chain is probably not getting any better how would it be again, the worst thing in the world if demand slows a little bit in order to better align those two.
Well, we don't like to put off what we can sell today, but the.
If there is any slowness.
Preceding that and that helps us catch up then I guess that is a small in.
That's helpful. Thank you.
Yes.
And ladies and gentlemen, if there are any additional questions. You May press, one and then zero at this time.
Once again any additional questions you May press, one and then zero.
We do have a question from the line of Kyle Kavanaugh from Palisade capital. Your line is open. Please go ahead.
Hi, Dennis how are you.
Hey, good morning.
Morning.
Just curious I don't know if you could you just comment on the.
The online sales you know year over year dynamic and then also the leverage of occupancy was that just sales growth or did you also have a rents.
And it's been going on the rent side as well.
Well on the online business.
You know last year I think.
We had two months up.
100%, another one around 90 or 88.
I'll be in a 5% this quarter.
I don't see that particularly shocking, especially seeing how our guests we're going back to more of them are going back to the stores and having great response there.
Uh huh.
And on the occupancy I think the largest part.
Was the growth in sales although we've.
Feel very good about our renewals there and.
Where our store leases are as we go forward.
Great. Thanks, Dennis.
Thank you.
Our next question comes from the line of Dave You wrong from you Vol investments. Your line is open. Please go ahead.
Hi. Thank you. This is Dave I have a question or the insider ownership was dominant aspect of buckle has been significant insider ownership, especially by the founder Daniel and you've done it.
This is a great word of confidence in the business, but Dennis you have been the steady Eddy with Gol's take more or less remain stable over many many years.
I look at 2020 proxy statements you had more than two 2 million shares which is.
Nearly six 6%.
70 ships.
But if I ask what the recent SEC form four filings you have enjoying a very significant amount of shares on a regular business.
Oh this year, you have sold more than 36% of your total ownership.
Now your ownership.
If I do the calculation right is that all for duvelisib compared to $6 six listen just dwell gets a few months back.
I'm just wondering if there is any but didn't know what was behind this expenses selling should we expect any in the retirement news changes at buckle in the near future.
Well they the.
<unk>.
I've been working on some estate planning and we have no now no announcements.
At this time.
Okay. Thank you.
Okay.
One moment for our next question.
Okay.
Okay.
Our next question comes from the line of David Berman from Berman Capital. Your line is open. Please go ahead.
Thank you I I get us.
Good morning, David.
On a tier basis sales up 45% and image is actually down 26%.
Similar to the law school I've never seen anything like this before.
One of the things that you've always been good at doing is turning your inventory cost.
And I think last few years that slowed a little bit.
Uh huh.
Okay. It just like a permanent improvement in returns on the business. If you wanted to keep at this level.
Curious what whenever you want to have your inventory going forward.
Well, it's not a level of inventory that we want to maintain we we know we're missing some sales.
At this level.
Just difficult to catch up on the inventories.
With the growth of our sales.
Being in the.
36, and higher percent the first quarter.
As far as planning and then with some disruptions in the supply change.
You know also adds to complications so yes.
Where we're planning out than we expected to get closer to a normal level by this fall and now lets Vietnam, it might take a little bit longer but.
We still have some great selection and.
No.
A substantial part of our.
Planned inventory coming in so.
The team is doing their best and planning to get that.
Level up.
With the sale was up so strong the smartphone.
Inventory why wouldn't this be what you prefer.
Like what do you.
Because the margin was obviously you saw it went along with it.
Well you know, we don't want to disappoint some of our guests and if we're close to this level then I guess.
You know.
We need to be happy about that.
Hope to improve on that a little bit, but still keeping a high high turns.
Yeah, well done thanks very much.
Thank you.
And we have a follow up question from the line of Kyle Kavanaugh. Your line is open. Please go ahead.
I was just.
Wondering if you could comment on this.
The environment within the mall, maybe if the competitive environment, what's the landscapers, how it's different now you know whether or not there is you know less competition.
Some of your sales gains or market share gains or just the catch up from from you know everybody being.
Cooped up so just curious if you can comment on the landscape competitive environment.
Well regarding the malls are different shopping areas.
We were in.
The.
Shall number of very good malls that has a good traffic and they are great for US. We've also found malls that are no longer the best shopping experience for our guests in a center, where we moved the power centers and we've been very happy with that.
We still have some outdoor lifestyle centers that are that we've improved our location and such so we look at the.
Each community in and where the best shopping experience is an end to.
You know set us up for the future in these opportunities.
And I think.
You know the it seems like.
We're gaining extra market share more gaster seeing.
That they can shop us where they used to think they were too old or we didn't have their sizes or our price points used to be too high.
Back in the low eight to 15 range when when a lot of our denims were $120.860.
Maybe lost some gas and shop as Stan and now there are CNS.
Maybe in the 75 to $80 average price, even though we have a wide selection of prices.
That that we're very affordable and we have great quality and and and we are selling their favorite close whether it's brands or fits.
And so I think we've separated ourselves where we are now a great destination store for denim, especially but also so many different lifestyles that people like that our selection is just great and with our sales teams. The experience in the store is excellent. So we think we're winning over fans that way and we will.
Continue to work at that.
And just a little follow up on the online strategy is there.
The current changes are kind of emphasis or priorities right now with their online strategy.
We're continuing to try to better serve our guest on it with other payment methods and our marketing team continues.
<unk> continues to hire hire staff wear.
We can make it a better shopping experience and and.
As such so.
We're certainly continuing to look on how to improve that just like we do the rest of the company.
Alright, thanks very much.
Yes. Thank you.
And there are no further questions in the queue.
Okay.
There are no questions, we can wrap up the call today and thank everyone for participating in and enjoy the rest of the day. Thank you very much.
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