Q1 2025 The Buckle Inc Earnings Call

Good morning, Thank you for standing by and welcome to Bug was first quarter earnings release webcast.

Unknown Executive: Thank you for standing by and welcome to Buckle's first quarter earnings release webinar. 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.

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.

Unknown Executive: Members of Buckle's 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. Before beginning, the company would like to reiterate its policy of not providing future sales or earnings guidance. All forward-looking statements made on the call are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to risks and uncertainties described in the company's SEC filing.

Speaker Change: Members of bulk was 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 before beginning the company would like to reiterate it.

Policy of not providing future sales or earnings guidance.

Speaker Change: All forward looking statements made on the call are pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Actual results may differ materially due to risks and uncertainties described in the Companys SEC filings. The company undertakes no obligation to publicly update or revise these statements except as required by law. In addition.

Unknown Executive: The company undertakes no obligation to publicly update or revise these statements, except as required by law.

Unknown Executive: 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. Any unauthorized reproductions or recordings of the cause should not be relied upon as the information may be inaccurate.

Speaker Change: 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.

Speaker Change: Any unauthorized reproductions or recordings of the calls it should not be relied upon as the information may be inaccurate.

Tom Heacock: As a reminder, today's webcast is being recorded and now I'd like to turn the conference over to your host, Tom Heacock. Good morning, and thanks for joining us this morning. Our May 23 2025 press release report the net income for the 13 week first quarter ended May 3 2025 with 35.2 million or 70 cents per share on a diluted basis compared to net income of 34.8 million or 69 cents per share on a diluted basis for the prior year 13 week first quarter which ended May 4 2024. Net sales for the 13-week first quarter increased 3.7% to $272.1 million compared to net sales of $262.5 million for the prior year 13-week first quarter.

Speaker Change: As a reminder, today's webcast is being recorded and now and now I'd like to turn the conference over to your host Tom Heacock.

Tom Heacock: Good morning, and thanks for joining us this morning.

Speaker Change: Our may 23rd 2025 press release reported net income for the 13 week first quarter ended may three 2025 of $35 2 million or 70 cents per share on a diluted basis compared to net income of 34.8 million or <unk> 69 per share on a diluted basis for the prior year 13 week first quarter.

Speaker Change: Which ended May four 2024.

Speaker Change: Net sales for the 13 week first quarter increased 3.7% to 272.1 million compared to net sales of $262 5 million for the prior year 13 week first quarter.

Tom Heacock: Comparable source sales for the quarter increased 3% in comparison to the same 13-week period in the prior year, and our online sales increased 4.5% to $46.4 million. For the quarter, UPTs increased slightly, the average unit retail increased approximately 1%, and the average transaction value increased approximately one and a half percent. Gross margin for the quarter was 46.7%, a 70 basis point increase from 46% in the first quarter of last year, with the current quarter margin improvement being the result of a 60 basis point increase in merchandise margins, along with a 10 basis points of leverage buying distribution and occupancy expenses.

Speaker Change: Comparable store sales for the quarter increased 3% in comparison to the same 13 week period in the prior year and our online sales increased 4.5% to $46.4 million.

For the quarter U P. Ts increased slightly the average unit retail increased approximately 1% and the average transaction value increased approximately 1.5%.

Gross margin for the quarter was 46.7% a 70 basis point increase from 46% in the first quarter of last year with the current core margin improvement being the result of a 60 basis point increase in merchandise margins, along with a 10 basis points of leverage buying distribution and occupancy expenses.

Selling general and administrative expenses for the quarter were 30.7% of net sales compared to 29.8% for the first quarter of last year.

Tom Heacock: Selling General Administrative Expenses for the quarter were 30.7% of net sales compared to 29.8% for the first quarter of last year. And the first quarter increase was due to a 45 basis point increase in incentive compensation accruals. A 25 basis point increase in health insurance related costs. A 20 basis point increase in equity compensation expense and a 40 basis point increase in other SG&A expense categories. These increases were partially offset by a 25 basis point decrease in e-commerce shipping expenses. and a 15 basis point reduction in certain marketing expenses. Our operating margin for the quarter was 16% compared to 16.2% for the first quarter of fiscal 2024.

In the first quarter increase was due to a 45 basis point increase in incentive compensation accruals.

Speaker Change: A 25 basis point increase in health insurance related costs.

Speaker Change: A 20 basis point increase in equity compensation expense and a 40 basis point increase in other SG&A expense categories. These.

Speaker Change: These increases were partially offset by a 25 basis point decrease in E Commerce shipping expenses and.

Speaker Change: And a 15 basis point reduction in certain marketing expenses.

Our operating margin for the quarter was 16% compared to 16.2% for the first quarter of fiscal 2024.

Speaker Change: Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing first quarter net income to $35 2 million for fiscal 'twenty twenty-five compared to 34.8 million for fiscal 'twenty 'twenty four.

Tom Heacock: Income tax expense of the percentage of pre-tax net income for both the current and prior year fiscal quarter was 24.5%, bringing first quarter net income to $35.2 million for fiscal 2025, compared to $34.8 million for fiscal 2024.

Tom Heacock: Our press release also included a balance sheet as of May 3rd, 2025, which included the following. Inventory of $132.4 million, up 1.3% from the same time a year ago, and $320 million of total cash and investment. We ended the quarter with $152.1 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $11.4 million, and depreciation expense was $5.9 million. First quarter capital spending is broken down as follows. $10 million for new store construction, store remodels and technology upgrades, and $1.4 million for capital spending at the corporate headquarters and distribution center.

Our press release also included a balance sheet as of May three 2025, which included the following.

Speaker Change: Inventory of 132.4 million up one 3% from the same time, a year ago and $320 million of total cash and investments we.

We ended the quarter with $152 1 million in fixed assets net of accumulated depreciation.

Our capital expenditures for the quarter were $11 4 million and depreciation expense was $5 9 million.

First quarter capital spending is broken down as follows 10 million for new store construction store Remodels and technology upgrades and 1.4 million for capital spending at the corporate headquarters and distribution Center.

Tom Heacock: During the quarter, we completed five full store remodels, three of which were relocations into new outdoor shopping centers and closed two stores. For the remainder of the year, we anticipate opening seven new stores, completing 16 additional full remodel projects, and closing one youth store as it combines with our full line location as a part of a remodel. Buckle ended the quarter with 439 retail stores in 42 states, compared with 440 stores in 42 states at the end of the first quarter of last year.

During the quarter, we completed five full store remodels three of which were relocations into new outdoor shopping centers and closed two stores for the remainder of the year. We anticipate opening seven new stores completing 16 additional full remodel projects and closing one youth store as a combined with our full line location as a part of a re.

Speaker Change: Our model.

Speaker Change: Buckle ended the quarter with 439 retail stores in 42 states compared with 440 stores in 42 states at the end of the first quarter of last year and now I'll turn the call over to Adam Akerson, Vice President of Finance.

Adam Akerson: And now I'll turn the call over to Adam Akerson, Vice President of Finance. Thanks, Tom. And good morning. Our women's business continued its strong momentum from the back half of 2024 to the first quarter of 2025. With merchandise sales increasing about 10.5% against the prior year, and representing approximately 50% of sales, which compares to 47% last year. The strong results continue to be headlined by the performance of our denim category. For the quarter, women's denim increased approximately 11% with average denim price points increasing from $80.85 in the first quarter of fiscal 2024 to $84.85 in the first quarter of fiscal 2025.

Adam Akerson: Thanks, Tom and good morning, our women's business continued its strong momentum from the back half of 'twenty 'twenty four through the first quarter of 2025 with merchandise sales, increasing about 10, 5% against the prior year and representing approximately 50% of sales, which compares to 47% last year.

Speaker Change: The strong results continued to be headlined by the performance of our denim category.

Speaker Change: For the quarter women's denim and increased approximately 11% with average denim price points, increasing from $80.85 in the first quarter of fiscal 2024 to $84.85 in the first quarter of fiscal 2025.

Adam Akerson: This AUR increase is primarily the result of continued growth in our Buckle Black label, increasing its percentage of our total denim mix, along with strong performance of higher price point national brands. Complimenting our strong denim selection, our merchandising team did a great job delivering a balanced assortment of tops, shorts, dresses, outerwear, footwear, and accessories, which all delivered growth for the quarter. For the quarter, average women's price points increased about 2% from $48 to $49.5.

Speaker Change: This AUR increase is primarily the result of continued growth in our private and our buckle black label, increasing its percentage of our total denim denim mix along with strong performance of higher price point national brands.

Speaker Change: Complementing our strong denim selection, our merchandising team did a great job delivering a balanced assortment of tops shorts dresses outerwear footwear and accessories, which all delivered growth for the quarter.

Speaker Change: For the quarter average women's price points increased about 2% from $48 $9 five.

Speaker Change: On the men's side, we were pleased to see sequential improvement throughout the quarter, resulting in positive year over year sales in fiscal April for the quarter men's merchandise sales were down about two 5% against the prior year, representing approximately 50% of total sales compared to 53% in the prior year.

Adam Akerson: On the men's side, we were pleased to see sequential improvement throughout the quarter, resulting in positive year-over-year sales in fiscal April. For the quarter, men's merchandise sales were down about 2.5% against the prior year, representing approximately 50% of total sales, compared to 53% in the prior year. For the quarter, our men's denim category was down about a half a percent with private branded denim increasing about one percent. Average denim price points increased from $88.65 in the first quarter of 2024 to $89.70 in the first quarter of 2025. In other categories, we saw stronger performance in our tees, polos, denim shorts, and fragrance selection.

Speaker Change: For the quarter, our men's denim category was down about a half a percent with private branded denim increasing about 1%.

Speaker Change: Average denim price points increased from $88 65 in the first quarter of fiscal 2024 to $89.70 in the first quarter of 2025.

Speaker Change: In other categories, we saw stronger performance in our Ts polo's denim shorts and fragrance selections.

Adam Akerson: For the quarter, overall average men's price points increased approximately one and a half percent from $53.60 to $54.40.

Speaker Change: For the quarter overall average men's price points increased approximately one 5% from $53 60 to 50 to $54 40.

Speaker Change: On a combined basis accessory sales for the quarter increased approximately three 5% against the prior year, while footwear sales were down about 7%.

Adam Akerson: On a combined basis, accessory sales for the quarter increased approximately 3.5% against the prior year, while footwear sales were down about 7%. These two categories accounted for approximately 11% and 5.5%, respectively, of the first quarter net sales, which compares to 11% and 6% for each in the first quarter of fiscal 2024. For the quarter average accessory price points were up approximately 1% and average footwear price points were up about two and a half.

Speaker Change: These two categories accounted for approximately 11% and five 5% respectively of the first quarter net sales, which compares to 11% and 6% for each in the first quarter of fiscal 2024.

Speaker Change: For the quarter average accessory price points were up approximately 1% and average footwear price points were up about two 5%.

Speaker Change: Also on a combined basis, our youth business continued its growth during the quarter, increasing approximately 11, 5% year over year.

Adam Akerson: Also on a combined basis, our youth business continued its growth during the quarter, increasing approximately 11 and a half percent year over year. For the quarter, denim accounted for approximately 43.5% of sales and tops accounted for approximately 27%, which compares with 43% and 27.5% for each in the first quarter of 2024. As previously mentioned, we continue to see nice growth in our private brands across nearly every category. For the quarter, private label represented 47.5% of sales versus 46% in the first quarter of 2024.

Speaker Change: For the quarter denim accounted for approximately 43, 5% of sales and tops accounted for approximately 27%.

Speaker Change: Which compares with 43% and 27, 5% for each in the first quarter of 2024.

Speaker Change: As previously mentioned, we continued to see nice growth in our private brands across nearly every category.

Speaker Change: For the quarter private label represented 47, 5% of sales versus 46% in the first quarter of 2024.

Unknown Executive: With that, we welcome your questions. Thank you. As a reminder for participants, if you would like to ask a question, please raise your hand in the Zoom app.

Speaker Change: And with that we welcome your questions.

Speaker Change: Thank you as a reminder for participants if you would like to ask a question. Please raise your hand and the zoom app.

Unknown Executive: Prior to asking your questions, please state your name and firm affiliation.

Speaker Change: You're asking your questions. Please state your name and affiliation.

Unknown Executive: Our first question is from Mauricio. Mauricio, I'm going to go ahead and prompt you to unmute at this time. Great.

Mauricio: Our first question is from Mauricio Mauricio Medical ahead in pockets on mute at this time.

Mauricio Serna: Great. Good morning, guys, Mauricio Serna from UBS research.

Mauricio: Good morning. This is Mauricio Sarma from UBS Research. Just a couple of questions.

Mauricio: Just a couple of questions maybe could you elaborate a little bit more.

Mauricio: Maybe could you elaborate a little bit more on, you know, how are you thinking about China tariff and other tariff impact on your gross margin as we head into second quarter, you know, upcoming quarters, like, yeah, how do you think about that? And then on the report, you know, just one thing that sticked out just on the balance sheet, we see a big uptick, I think like 10% increase or so in the operating lease, you know, assets, right of use, just wanted to understand what was like the driver we had that behind that big increase.

Speaker Change: Hum.

Speaker Change: How are you thinking about.

Speaker Change: China tariffs are not Nino other tariffs impact on your gross margin I think would be heading to second quarter upcoming.

Speaker Change: Upcoming quarters Tonight.

Speaker Change: How are you thinking about that and then.

Speaker Change: On the report you know just one thing that ticked up just on the balance sheet, we see a big uptick I think like 10% increase or so in the upper operating these assets right of use just wanted to understand what was it like the dry rehab that behind that behind that big increase thank you.

Tom Heacock: Thank Good morning, Mauricio. Thank you for the question. We have vendors and brands where we have had no increases in our cost. As we look even forward to the second quarter, as well, we've had others that have low to mid single digit increases. So we think we're working with our vendors, managing the tariffs and our product has worked out well.

Mauricio Serna: And good morning Mauricio thank.

Tom Heacock: Thank you for the question.

Speaker Change: We have vendors and brands, where we have had no increases in our costs.

Speaker Change: As we look even forward to the second quarter as well as we've had others that have low to mid single digit increases. So we think we are.

Speaker Change: Working with our vendors.

Speaker Change: Many genes.

Speaker Change: The tariffs and our product.

Speaker Change: Has worked out well.

Speaker Change: Do you want to comment on and then Marcia was your second question just on the lease liability on the balance sheet is that what the question was.

Tom Heacock: And then Mauricio, was your second question just on the least liability on the balance sheet? Is that what the question was? Sorry, it looks like we lost Mauricio. But yeah, Mauricio, that's really just a function of new stores and remodels over the last 12 months. So every one of those at the inception of the lease would have both assets and liabilities that are recognized on the balance sheet.

Speaker Change: Okay.

Speaker Change: I'm sorry, it looks like we lost Murdo, but yes, Mauricio that's really just a function of new stores.

Speaker Change: And remodels over the last 12 months. So every one of those at the inception of the lease would have both assets and liabilities that are recognized on the balance sheet.

Speaker Change: Okay. There are no further questions in queue. As a reminder, if you would like to ask a question I believe our issue is raising his hand again then they go ahead and competency on mute.

Tom Heacock: Okay, there are no further questions in queue. As a reminder, if you would like to ask a question, oh, I believe Mauricio is raising his hand again, then go ahead and prompt him to unmute. Ah, great. Yeah, thanks. Thanks for taking a follow up. Maybe, could you talk about, you know, in the gross margin result, you know, this quarter saw a nice uptick on the merchant, like contribution from merchandise margin and like, what is driving that? And then, um, And then on the on the part that it's actually like the occupancy, it seems that you got a little bit of leverage.

Speaker Change: Great Yeah, Thanks, and thanks for taking a follow up maybe could you talk about you know and.

Speaker Change: Gross margin resolved this quarter saw a nice uptick.

Speaker Change: Uptick on the <unk>.

Speaker Change: <unk> contribution from merchandise margin and like.

Speaker Change: What is driving that and then.

Speaker Change: And then on the on the part of that is actually like the occupancy. It seems like you had a little bit of leverage I was just curious on that too because I think every call that maybe like in the first quarter, you kind of require a higher <unk>.

Tom Heacock: I was just curious on that, too, because I think I do recall that maybe like in the first quarter you kind of require a higher, you know, comp sales growth to kind of like leverage expense. And then just lastly, again, just following up on the tariff commentary, like anything that you're doing on your side in terms of like, you know, relocating the production or for your private labels, how are you dealing with the tariff for the private labels? I guess that's like the part that I'm just like concerned with. I recall that that particular business had a huge exposure to China.

Speaker Change: Comp sales growth to kind of like leverage expense and then just lastly, again just following up on the tariff commentary like anything that Youre doing on your side in terms of like.

Speaker Change: Relocating the production or for your private label, how are you dealing with the tariffs for the private labels I guess, that's like the part time and she's like concern because I recall against that that particular business had a huge exposure to China. Thank you.

Tom Heacock: Thank you. Correct. Yes, on the, as I mentioned, we're working closely with our vendors, they are sourcing other countries as well, as well as, you know, wanting to maintain our business and long history of working with key vendors, and helping us out on holding price and working ahead, as well as the first quarter, we're very excited about our ladies business, the trends have been very good, strong denim, but also all categories, we're having good self sell throughs at regular price. and the men's business is still 50% of our business. And we're having good sell throughs in all our key categories there.

Speaker Change: That's correct.

Speaker Change: Yes on the as I mentioned, we are working closely with our vendors they are sourcing to other countries as well as well as wanting.

Speaker Change: Wanting to maintain our business.

Speaker Change: And a long history of working with the key vendors and are helping.

Speaker Change: Helping us out on holding price and working ahead.

Tom Heacock: As well as the first quarter, we're very excited about our ladies business. The trends have been very good strong denim, but also all categories were having good self sell throughs at regular price.

Speaker Change: In the men's business is still 50% of our business that we're having.

Speaker Change: Good sell throughs.

Speaker Change: In all our key categories, there and we're feeling really good about the inventory.

Tom Heacock: And we're feeling really good about the inventory.

Speaker Change: Do you want to comment on the other and then Mercury I think your second questions were about merchandise margin drivers during the quarter and really that's a function of what we've seen continued growth there but increase in private label is a big driver and we saw an increase there again in the first quarter and then also a strong regular price selling.

Tom Heacock: You want to comment on the other? Yeah, Mauricio, I think your second questions were about merchandise margin drivers during the quarter, and really that's a function. I mean, we've seen continued growth there, but increase in private label is a big driver, and we saw an increase there again in the first quarter, and then also strong regular price selling during the quarter. So both of those were contributing factors to the 60 basis point increase. And then on the leverage that we saw, which was about 10 basis points for Q1, looking at total occupancy cost for Q1, we're up about 3.5%.

Speaker Change: During the quarter. So both of those were contributing factors to the 60 basis point increase and then on the leverage that we saw which was about 10 basis points for Q1 looking at total occupancy cost for for Q1 were up about 3.5%. So with total sales better than that we did get a little bit of leverage.

Unknown Executive: So with total sales better than that, we did get a little bit of leverage. And then, sorry, can you hear me? I don't know if I'm still like, I'm on mute or not. We can hear you. Oh, perfect.

Speaker Change: Got it and then sorry.

Speaker Change: Sorry can you hear me I don't know if im still like an immune or not we can hear you perfect.

Tom Heacock: So I guess just the other one on SG&A, what, you know, seems like was elevated, anything there that's like, you know, like you called out, you know, you do a very good job. like breaking down the components, but like, anything on how should we, how should we thinking about maybe like the ability opportunity to actually see some leverage on SG&A if we continue to see actually like the good progress in the comp sale. They're kind of walking through the drivers, and we call them out in the script, but the total SG&A dollars were up just a little bit over $5 million.

Speaker Change: I guess just the other one on SG&A, what it seems like with elevated anything the area that flight.

Tom Heacock: You you called out you know you do a very good jobs.

Speaker Change: So like breakdown on the component I'd like.

Tom Heacock: Anything on how should we how should we be thinking about maybe like.

Tom Heacock: The.

Speaker Change: Ability opportunity to actually see some leverage on SG&A, if we continue to see actually like the good progress in our comp sale.

Speaker Change: They kind of walked through the drivers when we called them out in the script, but total SG&A dollars were up just a little bit over $5 million and so you know for the quarter looking at store payroll was was flat as a percentage of sales, which was the first quarter. That's been the case for several quarters, but even with that total payroll dollars work during the quarter were up just over.

Tom Heacock: And so, you know, for the quarter, looking at store payroll was flat as the percentage of sales, which was the first quarter, that's been the case for several quarters. But even with that, total payroll dollars during the quarter were up just over $2 million, so that was the biggest driver of SG&A expense. And a lot of that is, again, store labor, sales labor that's variable based on top-line results. The other components that we called out were incentive comp, and again, the strong performance during the quarter with pre-bonus net income being up year over year. And then, you know, again, looking for our expectation for the rest of the year for that, and the accrual was up year over year.

Speaker Change: $2 million. So that was the biggest biggest driver of SG&A expense and a lot of that is again store labor sales labor that's variable based on topline results.

Tom Heacock: The other component of it called out where incentive comp and again the strong performance during the quarter with pre bonus net income being up year over year, and then again looking for our expectation for the rest of the year for that and the accrual was up year over year, and then equity comp and health insurance, which health insurance. We're self funded so a little bit I was just reactive to claims that come in.

Tom Heacock: And then equity comp and health insurance, which health insurance were self-funded, so a little bit, I just reacted to claims that come in. We had better performance a year ago during Q1, and then equity comp is largely a function of stock price on the date of grant for new shares.

Speaker Change: And we had better better performance a year ago. During Q1, and then equity comp is largely a function of stock price on the date of grant for new shares.

Tom Heacock: Understood. Thank you so much.

Unknown Executive: Thank you so much.

Speaker Change: There are no further questions in queue. As a reminder, if you would like to ask the question <unk> raise your hand, and the zoom app.

Unknown Executive: 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.

Speaker Change: Okay lets say Theres no further questions I will now turn the call back over to Butler for any closing remarks.

Unknown Executive: Okay, looks like there's no further questions.

Unknown Executive: I will now turn the call back over to Buckle for any closing remarks. Thank you everybody for participating in the call and we hope you enjoy the rest of the day and have a wonderful holiday weekend. Goodbye.

Butler: And thank you everybody for participating in the call and we hope you enjoy the rest of the day and have a wonderful holiday weekend.

Speaker Change: Goodbye.