Q2 2022 Buckle Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the second quarter earnings release Conference. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session instructions will be given at that time.
If you should require assistance during the call. Please press Star then zero.
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 .
Adam Aker Sun.
Vice President of finance and corporate controller.
And Brady Fritz Senior Vice President General Counsel and corporate security.
As they review the operating results for the second quarter, which ended July 30th 2022.
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 legislation 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 for securities and Exchange Commission.
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Oh, I'm, sorry forward looking statements, even if experience or future changes make it clear that the projected results expressed or implied there in will not be realized. Additionally, the company does not authorize the reproduction.
Or just Jason Mentation of transcriptions 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.
As a reminder, today's conference is being recorded and I'd now 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 19, 2022 press release reported that net income for the 13 week second quarter ended July 32022 was $15 1 million.
$1 one per share on a diluted basis, which compares to net income of $51 4 million or $1 four per diluted share for the prior year 13 week second quarter ended July 31 2021.
Year to date net income for the 26 week period ended July 32022 was $105 4 million.
Our $2 13 per share on a diluted basis compared to net income of $108 7 million or $2 20 per share on a diluted basis for the prior year 26 week period ended July 31 2021.
Net sales for the 13 week second quarter increased two 3%.
$302 million compared to net sales of $295 1 million for the prior year 13 week second quarter.
Comparable store sales for the quarter increased one 6% in comparison to the same 13 week period in the prior year and online sales increased six 5% to $46 2 million.
Year to date net sales increased two 8% to $611 million for the 26 week fiscal period ended July 32022, compared to net sales of $594 2 million for the prior year 26 week fiscal period ended July 31 2021.
Comparable store sales for the year to date period were up two 6% in comparison to the same 26 week period in the prior year and our online sales increased three 5% to $106 million.
For the quarter <unk> increased approximately 5% the average unit retail increased approximately three 5% and the average transaction value increased about 4%.
Year to date.
<unk> decreased approximately 5% the average unit retail increased approximately two 5% and the average transaction value increased approximately 2%.
Gross margin for the quarter was 48, 2% up slightly from 48, 1% in the second quarter of 2021.
Year to date gross margin was 48, 7% consistent with the same period last year.
Merchandise margins for the quarter were flat and Theyre down 10 basis points for the year to date period.
Selling general and administrative expenses for the quarter were 26, 4% of sales compared to 25, 1% for the second quarter of 2021 year.
Year to date SG&A was 26% of net sales compared to 24, 5% for the same period last year.
The second quarter increase was due to a 135 basis point increase in store labor related expenses. In addition to increases across several other SG&A expense categories, which had a 55 basis point impact and were partially offset by a 60 basis point decrease in incentive compensation accruals.
Our operating margin for the quarter was 21, 8% compared to 23% for the second quarter of 2021 and for the year to date period. Our operating margin was 22, 7% compared to 24, 2% for the same period last year.
Income tax 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 $50 1 million for fiscal 2022 compared to $51 4 million for fiscal 2021.
Income tax expense as a percentage of pre tax income for both the current and prior year year to date periods was also 24, 5%, bringing year to date net income to a $105 4 million for 2022 compared to $108 7 million for 2021.
Our press release also included a balance sheet as of July 32022, which included the following inventory of $128 5 million and total cash and investments of $304 8 million.
Second quarter inventory comparisons for the last several years included $95 3 million at the end of Q2 2021 of $116 5 million in Q2, 2020, and $129 1 million for Q2 2019.
We ended the quarter with $106 4 million in fixed assets net of accumulated depreciation our capital expenditures for the quarter were $7 8 million and depreciation expense was $4 7 million.
For the year to date period capital expenditures were $14 9 million and depreciation expense was $9 2 million.
Year to date capital spending is broken down as follows.
<unk> thousand $14 7 million for new store construction store, Remodels and technology upgrades and <unk> 2 million for capital spending at the corporate headquarters and distribution Center.
During the quarter, we opened two new stores and completed seven full remodels five of which were relocations into new outdoor shopping centers.
This brings our year to date totals to two new stores 13 full remodels at one store closure.
For the remainder of the year, we anticipate completing 11 additional full remodeling projects and opening two additional new stores.
Based on current store plans, we still expect our capital expenditures to be in the range of $22 million to $27 million, which includes both planned store projects and it investments.
Buckle ended the quarter with 441 retail stores in 42 states compared to 442 stores in 42 states at the end of the second quarter of fiscal 2021.
And now I will turn it over to Adam Akerson, Vice President of Finance.
Tom when.
Women's merchandise sales for the fiscal quarter or up approximately 1% against the prior year fiscal quarter.
For the quarter, our women's business was approximately 44, 5% of sales compared to 45% in the prior year.
Average denim price points increased from $74 65 in the second quarter of fiscal 2021 to $77 80 in the second quarter of fiscal 2022, while overall overall average women's price points increased about four 5% from $40 to $41 85.
On the men's side merchandise sales for the fiscal quarter were up 2% against the prior year fiscal quarter, representing approximately 55, 5% of total sales compared to 55% in the prior year.
Average denim price points increased from $85.10 in the second quarter of fiscal 2021 to $87 60 in the second quarter of fiscal 2022.
<unk> for the quarter overall average men's price points increased approximately 3% from $45 85 to <unk> 4700 30.
On a combined basis accessory sales for the fiscal quarter were up approximately eight 5% against the prior year fiscal quarter and footwear sales were up about 5%. These two categories accounted for approximately 11% and eight 5% respectively.
Second quarter, net sales, which compares to 10% and 8% for each in the second quarter of fiscal 2021.
For the quarter average price points for both our accessory and shoe categories were up approximately five 5%.
For the quarter denim accounted for approximately 32% of sales and tops accounted for approximately 35%, which compares to 33, 5% and 31% respectively for each in the second quarter of fiscal 2021.
We continue to be encouraged about the guest response to our youth business for the quarter youth with our fastest growing category with approximately 37% year over year growth and representing about 3% of total sales for the quarter.
Overall, we were very pleased with the strong performance in both our men's and women's business for the quarter on top of a record performance a year ago.
We continue to build our build back our inventory levels and ended the quarter with a more balanced presentation across our many lifestyle and price points are.
Our buying team has continued to do a great job building, our private label business with private private label represented 40% of total sales for the quarter compared with 37% in the second quarter of 2021.
Mark down inventory continues to be clean we are excited about our selection moving into the fall and holiday seasons.
And with that we welcome your questions. Thank you.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press one then zero at this time.
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Once again please press one then zero if you'd like to ask a question.
And there are no questions.
Oh, one moment.
We do have a question.
From Kyle Kavanaugh.
But.
Uh huh.
Eight capital. Please go ahead.
Yes.
Good morning, Tom can you hear me.
Yes, we can hear you how are you today.
I was just wondering if you could comment on inventories year over year increase.
Explain it a little more in and then just comment if you could comment on the environment and we would expect.
Promotional environment to get more intense considering all the news that's been coming out between target Walmart sort of everything a lot of retailers.
Hey, good morning, Kyle it's Dennis Thank you.
Okay.
Our dollar inventory is up 35% but is.
Basically at the same level as 2019.
And our units.
Tori.
Yes.
About half of that as of the dollars more like 18%.
And with all of our sales being in the high 40% over 2019.
We feel that we.
We are very comfortable and we have increased inventories.
In categories that we were running extremely low last year as well as we increased some of our used inventories.
You know as we continue to learn and develop that business.
Going forward.
Yeah.
Great. Thank you so much I appreciate it.
Have a good day.
Yeah.
Our next question comes from Peter Bro Chi with Broached capital Partners. Please go ahead.
Yes, good morning, and congrats guys on continuing to make progress against a monster comps from last year. My question is.
Whether or not you see any opportunity to get some operating leverage in the back half of the year as maybe your price points catch up here.
Labor and SG&A.
Cost increases.
Good morning, Peter.
Thank you.
We won't project.
That we're going to get additional there.
R.
Operating margin is extremely high and we've been able to continue that and we feel good about it but.
We're not going to speculate that we can improve on it.
I think this is Tom theater. The challenge there is really I mean store labor is the area, where we're seeing an increase in where we saw the increase in the second quarter and that continues probably for the back half of the year that we were running so lean a year ago that I mean, we were at historically low levels of payroll and especially at store level payroll. So now even though we're up a 100 <unk>.
35 basis points year over year were still down.
North of 260 basis points compared back to 19, so I mean again, it's a really difficult compare on the SG&A side for the rest of the year.
Gotcha.
Congrats on another great quarter and doing a great job guys.
Thank you. Thank you very much.
If there are any additional questions. Please press one zero at this time.
We have a question from John <unk> with Canaccord. Please go ahead.
Oh, good morning, and a solid quarter congratulations.
I was just curious on the youth initiative.
What's driving that and what exactly are you targeting in terms of.
Age range in that kind of thing.
Yeah.
You know, we've we've improved our denim selection too to show youth and Thats been received well and we've expanded some of our gals top switch.
You know us.
And a plus as well and we're just.
Having more gas find out that we are.
Carrying us.
Being well received there.
And part of our expansion.
Moving stores and Remodels and some cases, where we're taking more space to give us room to present to you.
So that combination of things has been beneficial and we hope to grow.
On that as well as we go forward.
And what age range are you targeting there.
Uh huh.
Probably that are seven to 13 14 age, but its more in sizing.
We get requests for smaller sizes in that.
And.
So, but probably the sweet spots at eight to 12 year old.
Oh, Okay is.
The merchandise available in all stores and online.
It's available online Sydney.
Probably 75%.
All of our stores at different levels of inventory and we still have.
For stores that are our new stores only.
Uh huh.
That we've seen nice results for back to school.
Okay. So afford dedicated you sure.
Great what about sourcing can you source merchandise from the same vendors you use for the.
The core business.
Probably the majority we can although.
Uh huh.
With the testing and such that does limit us to certain vendors that can.
No.
Handle that correctly.
Okay.
And do you anticipate having it in all stores by when.
Well review the back to school season, and then.
Probably not be any change on that until we review for the next back to school season is when we look at adding potentially more stores.
Okay, so you'll get to that coming back to school before you.
Pursuit for further on it.
Correct, Okay alright.
Alright.
Thank you very much thanks.
Thanks Scott.
If there are any additional questions. Please press one zero at this time.
And there are no further questions.
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