Q3 2024 The Buckle Inc Earnings Call
Good morning. Thank you for standing by and welcome to buckles, third quarter earnings release webcast.
As a reminder, all participants are currently in listen-only mode.
A question and answer session will be conducted following the company's prepared remarks with instructions. Giving at that time.
Members of buckles Management. On the call today are Dennis Nelson, president and CEO. Tom heacock senior Vice President of Finance Treasurer and CFO Adam Akerson Vice President of Finance and corporate controller and Brady Fritz senior, vice president general counsel and corporate secretary.
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As a reminder, today's webcast is being recorded and now I would like to turn the conference over to your host. Tom heacock.
Good morning and thanks for joining us this morning.
our November 22nd 2024, press release reported that net income for the 13w week, third quarter, which ended November 2nd 2024
Was 44.2 million or 88 cents per share on the diluted basis compared to net income of 51.8 million or dollar 14 per share on the diluted basis for the prior year. 13 week, third quarter, that ended October 28th 2023.
Year to date. Net income for the 39 week period. End of November. 2nd 2024 was 118.3 million or $2.35 cents per share on a diluted basis.
Which compares to net income of 140.3 million or $2.81 per share on a diluted basis for the prior year 39. Week period, ended October 28th 2023
Net sales for the 13w. Week, third quarter decreased 3.2% to 293.6 million compared to net sales of 303.5 million for the prior year. 13 week, third quarter,
Comparable store sales for the 13w. Week fiscal quarter decreased 0.7% in comparison to the same 13 week period. A year ago and our online sales increase 1.1% to 46.6 million for the 13w week, fiscal quarter, which compares to 46.1 million for the prior year, 13 week, fiscal quarter,
compared to the same 13 weeks a year ago, our online sales, increased 1.7%,
Year to date. Net sales decreased 4.6% to 838.5 million compared to net sales of 878.7 million for the prior year. 39, week, fiscal period.
Comparable, store sales for the year-to-date period. Decreased 5.4% in comparison to the same 39 week period in the prior year and our online sales decreased 9.2% to 128 million for the year-to-date period which compares to 141 million for the prior year. 39, week, fiscal period.
compared to the same 39 weeks a year ago, our online sales decreased 8.9%,
For the quarter UPS, decrease approximately 1%. The average unit retail increased approximately 1 and a half percent and the average transaction value increased about a half percent.
Year to date, upts decreased approximately 2 and a half percent. The average unit retail increased approximately 3 and a half percent and the average transaction value increased approximately. 1%
gross margin for the quarter was 47.7% down, 80 basis points from 80 48.5 in the third quarter of 2023 with the current quarter of decline, being the result of a 100 basis, point decrease in occupants or increase in occupancy costs, along with a 35 basis, point increase in distribution and buying costs.
Which were partially offset by a 55 basis. Point Improvement in merchandise, margins.
Year-to-date gross margin was 46.9%. Also down 80 B basis points from 47.7% in the prior year.
The year to date decline was the result of 110 basis. Point increase in occupancy costs, along with a 25 basis, point increase in distribution and buying costs.
Which were partially offset by a 55 basis. Point Improvement in merchandise, margins.
Selling General administrative expenses for the core to work. 29.1% of net sales compared to 27.4% for the third quarter last year. And for the year to date sgna was 29.6% of net sales compared to 27.8% for the same period last year.
the third quarter increase was due to a 90 basis, point increase in stored labor related expenses,
A 35 basis point increase related to digital Commerce Investments.
A 30 basis point increase in GNA, salaries, and a 50 basis point increase in other sgna, expense categories, and these increases were partially outset by a 35 basis point decrease in incentive compensation across.
Our operating margin for the quarter was 18.6% compared to 21.1% for the third quarter of fiscal 2023 and for the year-to-date period. Our operating margin was 17.3% compared to 19.9% for the same period last year.
Income tax expense is a percentage of pre-tax net income for both the current. And prior year fiscal quarter was 24 and a half percent bringing third quarter, net income to 44.2 million for fiscal 2024 compared to 51.8 million for fiscal 2023.
Income tax expense. That's a percentage of pre-tax that info. Net income for both the current. And prior year year to date periods was also 24.5% bringing year-to-date net income to 118.3 million for fiscal 2024 compared to 140.3 million for fiscal 2023.
Our press release also included a balance sheet as of November 2nd 2024, which included the following inventory of 149.4 million which was down 1.9% from the same time, a year ago and 352.7 million of total cash and Investments.
We ended the quarter with 143 million in fixed assets. Net of accumulated, depreciation.
Our Capital expenditures for the quarter, were 10.2 million and depreciation, expense was 5.5 million.
For the year to date. Period. Capital expenditures were 32.5 million and depreciation. Expense was 16.6 million.
Year to date Capital spending is broken down as follows 31.7 million for a new store construction store, remodels and Technology upgrades and 0.8 million for Capital spending at the corporate headquarters in distribution center.
During the quarter. We opened 5 new stores and completed 1 full remodel which brings our year-to-date counts to 7, new stores, 13 full remodels and 6 store closures for the remainder of the year. We plan on opening 1, additional new store and completing 7 additional full remodel projects, 6 of which will be relocations into new outdoor shopping centers.
Buckle ended the quarter with 445 retail stores and 42 states which compares to 443 stores in 42 States at the end of the third quarter of fiscal 2023. And now I'll turn it over to Adam Akerson, Vice President of Finance.
Thanks.
And good morning. Let me start by saying that we are pleased with the performance of the business during the quarter, especially considering the unseasonably. Warm start to the fall selling season across much of the country.
Our women's merchandise sales for the quarter were down about a half a percent against the prior year. Fiscal quarter in represented approximately, 47% of sales on a 13 week, comparable basis, women's merchandise, sales increased, approximately 3%,
Highlighting the women's growth for the quarter was a 9% increase in denim.
The strength in women's denim was most notable in our private brands with private label. Denim growing mid teens,
Average denim price points increased from 79.50 in the third quarter of fiscal 2023 to 81.15% of fiscal 2024, while average overall price points, increase about 1% from 49.35.
To 49.95.
During the quarter, our Women's Business. Also saw a nice nice increases in our net, tops accessories, and fashion bottoms.
On the men's side, merchandise sales for the quarter, were down about 5 and a half percent against the prior year, fiscal quarter representing approximately 53% of total sales.
On a 13 week comparable basis, men's merchandise, sales were down approximately 2 and a half percent.
Our men's business for the quarter was more impacted by warmer temperatures with a slower transition into cold weather categories.
We continued to be pleased with the performance of short, sleeve and graphic tees along with our greatest assortment of hats, fragrance, and other accessories.
While overall denim on the men's side was down about 1% private label. Denim grew low, single digits,
Average denim, price points increase from 87.95 in the third quarter of fiscal 23 to 88.10 in the third quarter of fiscal 24.
For the quarter. Overall average men's price points, increased approximately 2 and a half percent from 52.85 to 54.30.
On a combined basis basis accessory sales for the 13e quarter were up approximately 3% against the prior year 13, week comparable period. While Footwear sales were down about 17%.
These 2 categories and accounted for approximately 10% in 5% respectively of third quarter, net sales.
Which compares to 10% and 6% for each in the third quarter of fiscal 23.
For the quarter average accessory price points were down slightly while average Footwear price points were up about 7%.
Also want to combine basis our youth business had a strong back-to-school selling season. Total youth sales, increased approximately 2 and a half percent.
With strong performance in Denim and graphics.
For the quarter denim, accounted for approximately 46% of sales in tops accounted for approximately 29.5%.
Which compares to 43 and a half percent in 30.5% for each in the third quarter of fiscal 23.
Driven by the growth in private label denim. We continue to increase our private label penetration during the quarter with private label representing 48.5% of sales versus 47% in the third quarter of 2023.
as Tom mentioned in his remarks, we continue to make investments in our digital channels during the quarter,
We are excited to see these Investments starting to impact the guest experience along with several key metrics across the e-commerce Channel, with a return to growth for the quarter.
And with that, we welcome your questions.
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our first question is from,
Mauricio Serna.
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Great. Uh, good morning. This is Modi from UBS research. Uh, thanks for taking my question. Uh sorry I think I missed this part when you were uh talking about the gross margin drivers. I think I I I I I heard that. You mentioned the merchandise margins were up 55 basis points year over year and I think that's a bit of a deceleration uh compared to what you had seen in the second quarter. So maybe I first I wanted to make sure that was the number. Maybe it it maybe could elaborate a little bit more on what drove about that slowdown in terms of the merchandise margin and also I guess that that thing in its it it implies the buying occupancy and and distribution costs to leverage was a little bit higher than the prior quarter. So
A little bit of detail behind that will be very helpful. Thank you.
Yeah, thank you Mauricio. Good morning. Just walking through the numbers for, for gross margin for the quarter. Uh, it was a 100 basis points of increase in occupancy costs. 35 basis points of increase in distribution and buying and then that was offset by 55 basis, points of improvement in merchandise, margins and on the merchandise margin side. I mean, really that number is consistent both quarter and year to date. So, similar to the trend that we've seen through the first part of the year, uh, you know, comparisons are a little bit different for for each of the quarters last year. So I think that's a big driver if it did decelerate from, from Q2. And and really the drivers of the growth, there are some more to what it's been you know year to date as well that growth and private label. I mean really, really strong Trends with our private label, denim Brands again that that private label up to 48 and a half percent, has been a big driver of margin improvements and then also a mixed shift Footwear is a little bit more lower margin category so as we've that's that's a smaller part of our business. That that's been a creative Dem margins and I know Dennis has more to add. But but those are the, the primary drivers
Nothing to add.
Thank you.
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I see you, raise your hand.
Yes uh thank you just have a follow-up question on the store count. I think you just want to make sure I got this right. I think you end the quarter with 445 stores and you plan to open 1. So I think that's where from a net.
Uh, store opening for the year that would take you to 2 or 2 openings. Uh, I just was wondering, like how you thinking about, you know, expansion in terms of of
Like net store additions over the next couple of years, just giving where the Retail Landscape is right now. Thank you.
Uh, good morning. Um, we were estimating 7 or 8 new stores next year.
And um, you know, we have some situations where there'll be some store closings. So best guess at the moment would be uh net 2 or 3 added over uh 2025.
And we plan to uh relocate and remodel probably another dozen stores uh this next year and also we'll continue to have smaller updates and re uh remodels in uh probably another 12 to 15 stores next year as well.
I understand, thank you so much.
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And now we have a question from Nancy.
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A quick question on the remodel.
Post Remodel and and sort of how that uh the pace at which you're seeing any kind of change in sales.
Uh, thank you Nancy. Uh, it's a little difficult, just to give a a set number. Uh, we have several stores that are performing very well and just need an update to continue their performance, uh, on the, uh,
At what we call open store remodels to change out counter and and freshen the store. Uh, so kind of based on previous, uh, experience. Uh, you know, it could be uh, low double digits, uh, give or take. Uh, when we move from a existing mall to an outdoor power center, uh, we could see anywhere from uh, low double digits or better. Um, and here again, it kind of depends, we have a lot of these stores that were putting in better positions for the future. Although they are performing well presently. So there's no real set number that I could give you across the board.
Okay, thank you.
Thank you.
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I see another question from Nancy, you are now able to unmute
Sorry about that. Our Lord. You have for you, sorry about that. No worries, no worries, appreciate it.
There are no further questions. We can, we can conclude the call early today. Thank you. Thank you, everybody for participating and enjoy. Enjoy the weekend and have a great holiday next week.
Goodbye.