Q3 2024 The Buckle Inc Earnings Call
Speaker 1: You have joined the meeting as an attendee and will be muted throughout the meeting.
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Speaker 2: Good morning. Thank you for standing by and welcome to Buckle's third quarter earnings release webcast. We'll be starting shortly.
Good morning, Thank you for standing by and welcome to the bulk was third quarter earnings release webcast, we'll be starting shortly.
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Speaker 2: Good morning, and thank you for standing by. Welcome to Buckles third quarter earnings release webcast. As a reminder, all participants are currently in a listen only mode. A question and answer session will be conducted following the company's prepared remarks with instructions given at that time.
Good morning, and thank you for standing by welcome to the bulk was third quarter earnings release webcast.
As a reminder, all participants are currently in a listen only mode. A question and answer session will be conducted following the company's prepared remarks with instructions given at that time.
Speaker 2: Members of Buchholz Management on the call today are Dennis Nelson, President and CEO , Tom Hecox, Senior Vice President of Finance, Treasurer, and CFO .
Members of bulk with management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance Treasurer and CFO.
Speaker 2: Adam Akerson, Vice President of Finance and Corporate Controller, Brady Fritz, Senior Vice President, General Counsel, and Corporate Security.
Auto maker, King Vice President of Finance and corporate controller Brady.
Brady free senior Vice President General Counsel and corporate Securities.
Speaker 2: As they review operating results for the third quarter, which ended October 28, 2023, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following safe harbors.
As they review operating results for the third quarter, which ended October 28, 2023, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following safe Harbor statement.
Speaker 2: 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 statement.
Safe Harbor statement under the private 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 statement.
Speaker 2: Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission.
Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission.
Speaker 2: 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.
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 would not be realized.
Speaker 2: Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its express written consent.
Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without express written consent.
Speaker 2: Any unauthorized reproductions or recordings of the cause should not be relied upon as the information may be inaccurate.
Any unauthorized reproductions or recordings of the cause should not be relied upon as the information may be inaccurate.
Speaker 2: As a reminder, today's webcast is being recorded. And I'd now like to turn the conference over to your host, Tom Meecaw. Good morning, and thanks for.
As a reminder, today's webcast is being recorded.
And I'd now like to turn the conference over to your host Tom Heacock.
Good morning, and thanks for being with US this morning.
Speaker 3: Our November 17, 2023 press release reported that net income for the 13-week third quarter, which ended October 28, 2023, was $51.8 million, or $1.04 per share on a diluted basis, which compares to net income of $61.4 million, or $1.24 per share on a diluted basis, for the prior year 13-week third quarter, which ended October 29, 2022.
Our November 17, 2023 press release reported that net income for the 13 week third quarter, which ended October 28, 2023 was $51 8 million or $1 four per share on a diluted basis, which compares to net income of $61 4 million or $1 24 per share on a diluted basis.
For the prior year 13 week third quarter, which ended October 29 2022.
Speaker 3: Year-to-date net income for the 39-week period ended October 28, 2023, was $140.3 million, or $2.81 per share on a diluted basis, compared to net income of $166.8 million, or $3.37 per share on a diluted basis for the prior year 39-week period ended October 29, 2022.
Year to date net income for the 39 week period ended October 28, 2023 was $140 3 million or $2 81 per share on a diluted basis compared to net income of $166 8 million or $3 37 per share on a diluted basis for the prior year 39 week period.
Ended October 29, 2022.
Speaker 3: Net sales for the 13-week third quarter decreased 8.7 percent to $303.5 million compared to net sales of $332.3 million for the prior year 13-week third quarter.
Net sales for the 13 week third quarter decreased eight 7% to $303 5 million compared to net sales of $332 3 million for the prior year 13 week third quarter.
Speaker 3: Comparable store sales for the quarter decreased 9.2% in comparison to the same 13 week period in the prior year and our online sales decreased 16.2% to 46.1 million.
Comparable store sales for the quarter decreased nine 2% in comparison to the same 13 week period in the prior year and our online sales decreased 16, 2% to $46 1 million.
Speaker 3: Year-to-date net sales decreased 6.9 percent to $878.7 million for the 39-week fiscal period ended October 28, 2023, compared to net sales of $943.4 million for the prior year 39-week fiscal period, which ended October 29, 2022.
Year to date net sales decreased six 9% to $878 7 million for the 39 week fiscal period ended October 28, 23, compared to net sales of $943 4 million for the prior year 39 week fiscal period, which ended October 29 2022.
Speaker 3: Comparable store sales for the year-to-date period were down 7.3% in comparison to the same 39-week period in the prior year, and our online sales decreased 9.4% to $141 million.
Comparable store sales for the year to date period were down seven 3% in comparison to the same 39 week period in the prior year and our online sales decreased nine 4% to $141 million.
Speaker 3: For the quarter, UPTs decreased approximately 0.5%. The average unit retail increased about 0.5%. And the average transaction value increased slightly.
For the quarter <unk> decreased approximately a half percent.
The average unit retail increased about 5%.
And the average transaction value increased slightly.
Speaker 3: Year-to-date our UPTs were flat, the average unit retail increased approximately a half percent, and the average transaction value increased also about a half a percent.
Year to date, our <unk> were flat the average unit retail increased approximately a half percent and the average transaction value increased also about a half a percent.
Speaker 3: Gross margin for the quarter was 48.5%, down 130 basis points from 49.8% in the 3rd quarter of 2022. The current quarter decline is the result of deleveraged buying, distribution, and occupancy expense, as merchandise margins were flat for the quarter.
Gross margin for the quarter was 48, 5% down 130 basis points from 49, 8% in the third quarter of 2022.
The current quarter decline is the result of deleverage buying distribution and occupancy expense as merchandise margins were flat for the quarter.
Speaker 3: Year-to-date gross margin was 47.7%, down 140 basis points from 49.1% in the prior year, with the year-to-date decline being the result of 110 basis points of deleveraged buying, distribution, and occupancy expense, along with a 30 basis point decline in merchandise margins.
Year to date gross margin was 47, 7% down 140 basis points from 49, 1% in the prior year with the year to date decline being the result of 110 basis points of deleverage buying distribution and occupancy expense along with a 30 basis point decline in merchandise margins.
Speaker 3: Selling general administrative expenses for the quarter were 27.4% of net sales compared to 25.9% for the third quarter of 2022 and year-to-date SG&A was 27.8% of sales compared to 26% for the same period last year.
Selling general administrative expenses for the quarter were 27, 4% of net sales compared to 25, 9% for the third quarter of 2022 and year to date SG&A was 27, 8% of sales compared to 26% for the same period last year.
Speaker 3: The third quarter increase was due to a 130 basis point increase in store labor-related expenses, a 30 basis point increase in G&A salaries, a 30 basis point increase in equity compensation expense, and a 20 basis point increase in marketing spend.
The third quarter increase was due to a 130 basis point increase in store labor related expenses.
A 30 basis point increase in G&A salaries.
30 basis point increase in equity compensation expense and a 20 basis point increase in marketing spend.
Speaker 3: These increases were partially offset by a 50 basis point decrease in incentive compensation accruals and a 10 basis point decrease in certain other SG&A expense categories.
These increases were partially offset by a 50 basis point decrease in incentive compensation accruals and a 10 basis point decrease in certain other SG&A expense categories.
Speaker 3: Our operating margin for the quarter was 21.1% compared to 23.9% for the third quarter of fiscal 2022, and for the year-to-date period, our operating margin was 19.9% compared to 23.1% for the same period last year.
Our operating margin for the quarter was 21, 1% compared to 23, 9% for the third quarter of fiscal 2022 and for the year to date period. Our operating margin was 19, 9% compared to 23, 1% for the same period last year.
Speaker 3: Income tax expense as a percentage of pre-tax net income for both the current and prior year fiscal quarter was 24.5%, bringing third quarter net income to $51.8 million for 2023 compared to $61.4 million for 2022.
Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24, 5%, bringing third quarter net income to $51 8 million for 2023 compared to $61 4 million for 2022.
Speaker 3: Income tax expense as a percentage of pre-tax net income for both the current and prior year-to-date periods was also 24.5%, bringing year-to-date net income to $140.3 million for fiscal 2023, compared to $166.8 million for fiscal 2022.
Income tax expense as a percentage of pretax net income for both the current and prior year year to date periods was also 24, 5%, bringing year to date net income to $140 3 million for fiscal 2023 compared to $166 8 million for fiscal 2022.
Speaker 3: Our press release also included a balance sheet as of October 28, 2023, which included the following. Inventory of 152.3M, which was essentially flat with inventory levels at the same time a year ago. And 357.6M of total cash and investment.
Our press release also included a balance sheet as of October 28, 2023, which included the following inventory of $152 3 million, which was essentially flat with inventory levels at the same time a year ago.
$357 6 million of total cash and investments.
Speaker 3: We ended the quarter with $124.1 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $10.1 million, and depreciation expense was $5 million.
We ended the quarter with $124 1 million in fixed assets net of accumulated depreciation our capital expenditures for the quarter were $10 1 million and depreciation expense was $5 million.
Speaker 3: For the year-to-date period, capital expenditures were $28 million and depreciation expense was $14.9 million.
For the year to date period capital expenditures were 28 million and depreciation expense was $14 9 million.
Speaker 3: Our year-to-date capital spending was broken down as follows. $27 million for new store constructions, door remodels, and technology upgrades, and $1 million for capital spending at the corporate headquarters and distribution center.
Our year to date capital spending was broken down as follows $27 million for new store construction store, Remodels and technology upgrades and $1 million for capital spending at the corporate headquarters and distribution Center.
Speaker 3: During the quarter, we opened 3 new stores and completed 4 full store remodels, 2 of which were relocations into new outdoor shopping centers. Additionally, we opened 2 new stores earlier this month in Park City, Utah and Bristol, Tennessee, and completed 1 additional full store remodel, which brings our year to date counts to 7 new stores, 15 full remodels and 3 store closures.
During the quarter, we opened three new stores and completed four full store remodels two of which were relocations into new outdoor shopping centers.
Additionally, we opened two new stores earlier this month in Park City, Utah in Bristol, Tennessee, and completed one additional full store remodel, which brings our year to date count to seven new stores 15, full remodels and three store closures for.
Speaker 3: For the remainder of the year, we anticipate opening two additional new stores and completing four more full remodeling projects.
For the remainder of the year, we anticipate opening two additional new stores and completing four more full remodeling projects.
Speaker 3: Buckle ended the quarter with 443 retail stores in 42 states compared with 441 stores in 42 states at the end of the third quarter last year. And now we'll turn it over to Adam Ackerson, our Vice President of Finance.
Buckle ended the quarter with 443 retail stores in 42 states compared with 441 stores in 42 states at the end of the third quarter of last year and now I will turn it over to Adam Akerson, Our vice President of finance.
Thanks, and good morning.
Speaker 3: Women's merchandise sales for the quarter were down about 10.5% against the prior year and represented approximately 45.5% of sales compared to 46.5% in the prior year.
Women's merchandise sales for the quarter were down about 10, 5% against the prior year and represented approximately 45, 5% of sales compared to 46, 5% in the prior year.
Speaker 3: Average denim price points increased from $78.55 in the third quarter of fiscal 22.
Average denim price points increased from $78 55 in the third quarter of fiscal 'twenty two to.
Speaker 3: to $79.50 in the third quarter of fiscal 23, while overall average women price points increased about 1% from $48.80 to $49.35.
To $79.50 in the third quarter of fiscal 'twenty three while overall average women's price points increased about 1% from $48 80 to $49 35.
Speaker 3: On the men's side, merchandise sales for the quarter were down about 7% against the prior year, representing approximately 54.5% of total sales compared to 53.5% in the prior year.
On the men's side merchandise sales for the quarter were down about 7% against the prior year.
Representing approximately 54, 5% of total sales compared to 53, 5% in the prior year.
Speaker 3: Average denim price points increased from $87.25 in the third quarter of fiscal 22 to $87.95 in the third quarter of fiscal 23.
Average denim price points increased from $87 25 in the third quarter of fiscal 'twenty two.
To $87 95 in the third quarter of fiscal 'twenty three.
Speaker 3: For the quarter, overall average men's price points increased approximately 2% from $51.80 to $52.85.
For the quarter overall average men's price points increased approximately 2% from $51 80 to $52 85.
Speaker 3: On a combined basis, accessory sales for the quarter were down approximately 5% against the prior year, while footwear sales were down about 31%.
On a combined basis accessory sales for the quarter were down approximately 5% against the prior year, while footwear sales were down about 31% leased.
Speaker 3: These two categories account for approximately 10% and 6% respectively of third quarter net sales, which compares to 9.5% and 7.5% for each in the third quarter of fiscal 22.
These two categories accounted for approximately 10% and 6% respectively of third quarter net sales, which.
Which compares to 95% and seven 5% for each in the third quarter of fiscal 'twenty two.
Speaker 3: For the quarter, average accessory price points were up approximately two and a half percent and average footwear price points were up about eight and a half percent.
For the quarter average accessory price points were up approximately two 5% and average footwear price points were up about eight 5%.
Speaker 3: Denim accounted for approximately 43.5% of sales, and tops accounted for approximately 30.5%, which compares to 42.5% and 30.5% for each in the third quarter of fiscal 22.
Denim Mckenna for approximately 43, 5% of sales and tops accounted for approximately 35%.
This compares to 42, 5% and 35% for each in the third quarter of fiscal 'twenty two.
Speaker 3: For both our men's and women's business, better performing categories included our short sleeve and shorts business, in addition to lightweight long sleeves, as the weather remained unseasonably warm across much of the country.
For both our men's and women's business better performing categories included our short sleeve and shorts business. In addition to lightweight long sleeves as the weather remained unseasonably warm across much of the country.
Speaker 3: Given slower sell through than some of our more traditional fall assortments, we were pleased with our ability to keep both inventory levels and merchandise margins flat year over year.
Given slower sell throughs in some of our more traditional fall Assortments, we were pleased with our ability to keep both inventory levels and merchandise margins flat year over year.
Speaker 3: Our Q3 comparisons also continue to be challenged with declines in our Hey Dude volume, particularly on the men's side.
Our Q3 comparisons also continued to be challenged with declines in our hey, Dude volume, particularly on the men's side.
Speaker 3: Third quarter net sales for our men's business without hey dude, we're down 4.1%
Third quarter net sales for our men's business without Hey, Dude, we're down four 1%.
Speaker 3: We remain encouraged by the growth and performance in our youth business, with the combined youth business growing approximately 2% for the quarter, building on a growth of 26.5% a year ago. For more information visit www.fema.gov
We remain encouraged by the growth and performance in our youth business with the combined youth business growing approximately 2% for the quarter building on growth of 26, 5% a year ago.
Speaker 3: We were also pleased with the continued growth in our private brands with private label representing 47% of sales versus 46% in the third quarter of fiscal 22. And with that, we welcome your questions.
We were also pleased with the continued growth in our private brands with private label, representing 47% of sales versus 46% in the third quarter of fiscal 'twenty two.
And with that we welcome your questions.
Speaker 2: Thank you. As a reminder for participants, if you would like to ask a question, please raise your hand in the Zoom app. Prior to us asking your questions, please state your name and firm affiliation.
Thank you as a reminder for participants if you would like to ask a question. Please raise your hand and the zoom app.
Asking your questions. Please state your name and firm with aviation.
Speaker 2: Our first question is from Mauricio Serna. Mauricio, I'm going to go ahead and give you permission to unmute.
Our first question is from Mauricio Serna, Mauricio I'm going to go ahead and give you permission to aneel.
Speaker 4: Great. Good morning. Hopefully you can hear me. This is Mauricio Serna from UBS. Just wanted to ask about, you know, I know like in Q4, I think you have an additional week in the quarter. So I just want to make sure, like, you know, I suppose there's a contribution to sales, but also wanted to understand if that tends to be historically good or bad or margin. And then on
Great.
Hopefully you can hear me this is Mario <unk> from UBS.
Just wanted to ask about you know and I know that in Q4, and then you have an additional week.
In the quarter. So I just wanted to make sure like.
Excellent.
There is a contribution to sales, but also wanted to understand that that tends to be historically, good or bad or margin and then on.
Speaker 4: On the comp sales for, you know, for for this quarter, the three Q, you know, I noted that it deteriorated like every month was weaker than the previous one. So I just wanted to, you know, ask if there's anything that you would call out maybe from.
On the comps panels for you know for that for.
For this quarter.
Q yeah.
Did that deteriorate in every month was weaker than the previous one so I just wanted to.
As if there is anything that you would call out maybe for Mike <unk>.
Speaker 4: fashion standpoint, that is, do you think this is causing this, you know, weakening performance? And I would probably think that it's also probably relatively weaker compared to Pierce. Thank you.
<unk> standpoint that is do you think is causing this you know weakening performance.
We think that it's also probably.
Routing the weekend compared to peers.
Speaker 5: Good morning and thank you. The 5th week. We would project sales of approximately 17 million for that week.
Good morning, and thank you.
The first week, we would project.
Sales of.
Approximately $17 million for that week.
Speaker 5: And then for the comp sales, I mean, you know, we're going against two of our best years ever. And I think, as was mentioned in the script, the unseasonably warm weather probably had more of an effect on people getting out and just traffic in the stores.
And then for the comp sales that mean.
Building against two of our.
Best years ever.
And I think as was mentioned in the script the unseasonably warm weather.
They had more of a fact on people getting out and just traffic in the stores.
Speaker 5: You know, as we travel our stores, the teams seem very excited and the product's looking very good and.
As we travel our stores the teams seem very excited and the product's looking very good and.
Speaker 5: So I think from that standpoint, our fashion, we are on target and just looking to build the traffic.
So I think from that standpoint, our fashion, we are on target and just looking to build the traffic.
Speaker 4: Got it. And sorry, I don't know if you can you tell us like if the additional week is that good for for the margins or how does that affect the.
Got it sorry.
You can you tell us.
The additional week of that good for or the margins or how does that affect.
Company's margin.
Speaker 3: Yeah, that is a better margin week just without being fully loaded for some of the costs that are, I mean, not not allocated for that week. So, like, a rent or different things are not fully. I guess it is a better margin week than than a typical week for January . Thank you.
Yes that is a better margin, we just without being fully loaded for some of the costs that are I mean, not allocate for that week, so like a rent or different things are not pulled out because it does it has a better margin week than a typical week for January.
Got it. Thank you so much thank you.
Speaker 6: Okay, our next question is from John break. John , I'm going to go ahead and give you permission to unmute.
Okay. Our next question is from John <unk>, John I'm going to go ahead and give you permission to on mute.
John you should have received a prompt on mute.
Okay.
Okay. It looks like John is not on mute.
Yeah.
Speaker 2: Okay, it looks like we have a follow up questions from a ratio center. I'll go ahead and give you permission to unmute.
Okay. It looks like we have a follow up question from Mauricio Serna I'll go ahead and give Maurice you permission to.
Speaker 4: Thanks again. Yeah, I just had a couple of follow ups. I guess, like, if I look into the results, the selling expenses, I noticed that it was down 5%. Just want to understand, like, what were the, I mean, drivers behind that. And then I know that you talked about the inventory being in good shape.
Got it.
Yes.
Thanks again.
A couple of follow ups I guess like if I look into the results the selling expenses I noted that it was down 5% just wanted to understand what I mean.
The drivers behind that and then I know that you talked about inventory being in good shape.
Speaker 4: Uh, maybe you could elaborate a little bit more on that. Like, how do you feel about that? Especially as we came into the holiday season, like, I know, like, December is a particularly important month for you.
Maybe you can elaborate a little bit more on that like how do you feel about that especially as we head into the holiday season.
December is a particularly important month for yourself.
Speaker 4: you know, how do you feel about inventory and I guess the consumer at this point? Uh, I have
You feel about inventory in.
Consumer at this point.
Ahead of the holiday season. Thank you.
Speaker 7: Mauricio, this is Tom. I'll take the first question and turn it over to Dennis for the second question. But really, the driver when you look at SG&A, a lot of those are people-related, so compensation, benefits, costs. The decrease quarter over quarter for the selling expense was really around accruals for incentive compensation, which is consistent with the trend that we've seen so far this year.
Mario This is Tom I'll take the first question and turn it over to Dennis for the second collection, but really the driver when you look at SG&A a lot of those are people related so compensation benefits costs.
The decrease quarter over quarter for the selling expense was really around the accruals for incentive compensation, which is consistent with the trend that we've seen so far this year.
On the inventory.
Speaker 5: We feel pretty good about that. I would say we have
We feel pretty good about that.
I'd say we have.
Speaker 5: Normal markdown cadence right now, and we'll just be offering a few specials over the black Friday weekend. You know, the youth and gals has had some nice growth. So we have some of the increase there.
Normal markdown cadence right now and we will just the offer and a few specials over the.
The Black Friday weekend.
The youth and Gals has had some nice growth. So we have some of the increase there.
Speaker 5: But our selection and our private brands in denim, we feel really good about. And the
But our selection in our private brands.
In denim.
We feel really good about.
<unk>.
The.
Speaker 5: you know, the fall winter inventory where you are comfortable with as we go into holiday and expect to see to see a good season.
And fall winter inventory.
We are comfortable with as we go into holiday and expect to see a good season.
Thanks, so much thank you.
Speaker 2: Okay, there are no further questions in queue as a reminder. If you would like to ask a question, please raise your hand in the zoom app.
Okay. If there are no further questions in queue. As a reminder, if you would like to ask a question. Please raise your hand zoom app.
Yeah.
Speaker 2: Okay, there are no further questions. I will now turn the call back over to buckle for any closing remarks.
Okay. There are no further questions I will now turn the call back over to buckle for any closing remarks.
Speaker 7: We thank everyone for their participation today and everybody have a wonderful, wonderful weekend and enjoy your week next week.
Well, we thank everyone for their participation today and everybody have a wonderful wonderful weekend and enjoy your week next week.
Yeah.
Goodbye.