The Buckle, Inc. — Form 10-Q Summary
Reporting period: The filing covers the 13 weeks ended May 1, 2021 (fiscal 2021 first quarter), with comparison to the 13 weeks ended May 2, 2020. The request metadata says “2020 Q1,” which does not match the filing period.
Business context and financial performance
Buckle is a single-segment retailer of casual apparel, footwear, and accessories, operating stores and an e-commerce platform. It had 442 stores in 42 states at May 1, 2021. The prior-year quarter was severely affected by COVID-19 store closures; 37 stores had reopened by May 2, 2020. Management cautions that interim results are seasonal and are not necessarily indicative of full-year results.
| Metric | 13 weeks ended May 1, 2021 | 13 weeks ended May 2, 2020 |
|---|---|---|
| Net sales | $299.1 million | $115.4 million |
| Gross profit / gross margin | $147.6 million / 49.3% | $26.8 million / 23.2% |
| Operating income (loss) / margin | $75.8 million / 25.3% | $(16.2) million / (14.0%) |
| Net income (loss) | $57.3 million | $(11.8) million |
| Diluted EPS | $1.16 | $(0.24) |
| Operating cash flow | $93.5 million | $(28.3) million |
Compared with fiscal 2019’s same quarter, sales increased 48.6%, gross margin rose from 38.1% to 49.3%, and operating margin rose from 9.3% to 25.3%. Management attributed the gross-margin improvement versus 2019 to higher merchandise margins and better leverage of occupancy, buying, and distribution costs. Sales growth versus 2019 reflected 43.4% more transactions and a 4.3% increase in average unit retail, partly offset by 0.5% fewer units per transaction.
Online sales were $53.7 million, up 67.3% from the prior-year quarter and 120.0% from fiscal 2019’s comparable quarter. Online sales represented 18.0% of net sales, versus 27.8% in the pandemic-affected prior-year quarter. Selling, general, and administrative expenses totaled 24.0% of sales, compared with 37.2% in 2020 and 28.8% in 2019.
Liquidity, cash flow, and obligations
- Cash and cash equivalents were $393.2 million; short-term investments were $0.7 million and long-term investments were $19.1 million. Management reported total cash and investments of $412.9 million and working capital of $271.1 million.
- Cash increased $74.4 million during the quarter. Investing activities used $2.7 million, including $4.6 million in property and equipment purchases; financing activities used $16.4 million for dividends.
- The company had no bank borrowings. Its unsecured $25.0 million credit line, including up to $10.0 million for letters of credit, expires July 31, 2021; outstanding letters of credit were $2.4 million.
- Operating lease liabilities were $307.6 million; undiscounted future lease payments totaled $334.4 million. Total liabilities were $476.1 million. The filing reports no material restrictive covenants in its leases.
Outlook, risks, and notable items
- Management estimated fiscal 2021 capital expenditures of approximately $10–15 million and planned seven additional store projects for the remainder of the year: one new store and six remodels and/or relocations. It believes available cash, investments, and operating cash flow can fund anticipated needs for the next several years.
- Management identified potential pressures from lower demand, product-mix changes, competition, general economic conditions, fashion trends, and retail-industry conditions. Results are also exposed to markdowns, inventory obsolescence, and the seasonal timing of back-to-school and holiday sales.
- The company recorded no long-lived asset impairment in the periods presented other than $1.0 million in the prior-year quarter, when COVID-related store closures triggered an impairment assessment. The prior-year period also included negotiated rent deferrals; the company treated concessions as existing contractual terms, with no rent-expense impact.
- Management disclosed a 0.25-percentage-point decline in interest/dividend rates would reduce net income by approximately $0.5 million, or less than $0.01 per share. No material changes to the previously disclosed risk factors were reported; no legal proceedings were reported.
Important facts for investors to verify
- Separate the strong year-over-year comparison from underlying trends: the 2020 comparison quarter was materially disrupted by COVID-19; assess performance against fiscal 2019 as well.
- Monitor whether elevated sales, merchandise margins, and transaction volumes persist, and how online growth affects shipping and fulfillment costs.
- Track inventory markdowns and obsolescence estimates, which were $9.1 million at May 1, 2021, and the effects of consumer demand and product mix.
- Review the planned capital spending, lease commitments, and the status or renewal of the credit line expiring July 31, 2021.
- Consider seasonality and the filing’s caution that quarterly results may not indicate full-year performance.