The Buckle, Inc. — Form 10-Q Summary
Business context and reporting period
The Buckle is a U.S. retailer of casual apparel, footwear, and accessories, operating stores and an e-commerce platform as one reportable segment. This filing covers the 13 weeks ended April 29, 2023 (fiscal 2023 first quarter), compared with the 13 weeks ended April 30, 2022. The filing period is fiscal 2023 Q1, notwithstanding the request metadata’s “2022 Q1” label.
Financial and operating results
| Metric | Quarter ended Apr. 29, 2023 | Prior-year quarter |
|---|---|---|
| Net sales | $282.8 million | $309.1 million |
| Gross profit / margin | $133.3 million / 47.1% | $152.2 million / 49.2% |
| Operating income / margin | $53.7 million / 19.0% | $73.1 million / 23.6% |
| Net income | $42.9 million | $55.3 million |
| Diluted EPS | $0.86 | $1.12 |
| Operating cash flow | $33.3 million | $21.5 million |
- Comparable sales fell 9.2%; total sales declined 8.5%. Transactions decreased 10.0%, partly offset by 2.3% more units per transaction; average unit retail declined 0.6%.
- E-commerce sales decreased 5.6% to $51.3 million and represented 18.1% of net sales, versus $54.3 million and 17.6% a year earlier.
- Gross margin contracted 210 basis points: management attributed 140 basis points to deleveraged buying, distribution, and occupancy costs and 70 basis points to lower merchandise margins. SG&A rose to 28.1% of sales from 25.6%, including higher store labor-related and other expenses.
- Cash and cash equivalents were $254.4 million; short- and long-term investments totaled $45.6 million. Working capital was $227.1 million. The company reported no bank borrowings. Operating lease liabilities totaled approximately $299.0 million.
- Investing cash outflow was $13.3 million, including $9.3 million of property and equipment purchases; dividends paid were $17.7 million. Cash increased $2.4 million during the quarter.
Material changes, outlook, and risks
- Sales, gross profit, operating income, net income, and diluted EPS all declined year over year. Other income increased to $3.1 million from $0.1 million; the filing does not provide a clear explanation of the increase in the supplied text.
- Management estimated fiscal 2023 capital expenditures of $24–$30 million and expected to complete 7 new stores and 13 additional full remodels during the rest of the fiscal year. It stated cash, investments, and operating cash flow should fund anticipated requirements for the next several years.
- The company had 440 stores in 42 states at quarter-end. During the quarter it opened 2 stores, substantially remodeled 4, and closed 3.
- Management identifies demand, product mix, fashion trends, competition, and general economic conditions as factors that could pressure sales, profitability, and cash flows. Results are seasonal, with holiday and back-to-school periods historically contributing approximately 35% of annual sales.
- The unsecured $25 million credit line expired July 31, 2023; no borrowings were outstanding at quarter-end. Management reported compliance with its terms. Legal proceedings were reported as none, and the company disclosed no material change to its previously reported risk factors.
Important facts for investors to verify
- Whether subsequent results confirm a recovery in comparable sales, transactions, and merchandise margins.
- The drivers and sustainability of the quarter’s elevated other income.
- Actual fiscal 2023 capital spending, store openings and remodels, and the company’s liquidity after the credit-line expiration.
- Inventory quality and markdown exposure: inventory rose to $137.7 million from $125.1 million, while the markdown and obsolescence adjustment increased to $7.0 million from $6.3 million at fiscal year-end.
- How seasonal trading and operating lease commitments affect cash generation and profitability.