The Buckle, Inc. — Form 10-Q Summary
Business context and reporting period
This filing covers the 13 and 26 weeks ended July 31, 2021, compared with the periods ended August 1, 2020. Although the request metadata says 2020 Q2, the filing itself is for fiscal 2021 Q2. Buckle operates as a single-segment retailer of casual apparel, footwear, and accessories through stores and e-commerce. It had 442 stores in 42 states at quarter-end.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Net sales | $295.1 million | $216.0 million | $594.2 million | $331.4 million |
| Gross profit / margin | $142.0 million / 48.1% | $93.4 million / 43.2% | $289.6 million / 48.7% | $120.2 million / 36.3% |
| Operating income / margin | $67.9 million / 23.0% | $45.5 million / 21.1% | $143.7 million / 24.2% | $29.4 million / 8.9% |
| Net income | $51.4 million | $34.7 million | $108.7 million | $22.9 million |
| Diluted EPS | $1.04 | $0.71 | $2.20 | $0.47 |
- Sales rose 36.6% in Q2 and 79.3% year to date. Growth reflected higher transactions and average retail prices, partly offset by fewer units per transaction. Online sales declined 5.5% in Q2 to $43.4 million, but increased 24.5% year to date to $97.2 million.
- Gross-margin improvement reflected expense leverage, including occupancy, buying, and distribution costs, and stronger merchandise margins. Q2 selling, general, and administrative expenses rose to 25.1% of sales from 22.1%, partly due to incentive compensation and store labor.
- First-half operating cash flow was $136.5 million, versus $49.2 million. Investing cash outflow was $15.7 million, including $9.2 million of property and equipment purchases; financing cash outflow was $32.9 million, primarily dividends.
- At July 31, cash and cash equivalents were $406.7 million, short-term investments $8.6 million, and working capital $311.4 million. Cash and investments totaled $434.9 million including $19.6 million of long-term investments. The company reported no bank borrowings and had a $25 million unsecured credit line, with $4.4 million of letters of credit outstanding.
- Operating lease liabilities totaled $291.7 million, including $82.3 million current and $209.5 million non-current. These are lease obligations, not bank debt.
Material changes, outlook, and risks
- Comparisons are materially affected by COVID-19: Buckle closed all stores beginning March 18, 2020 and reopened stores starting the week of April 26, 2020. Accordingly, prior-year first-half sales and margins are a disrupted comparison; management did not separately report comparable-store sales.
- Management estimated fiscal 2021 capital expenditures of $12–15 million and expected to complete six additional store construction projects, all remodels or relocations. It stated existing cash, investments, and operating cash flow should fund anticipated needs for the next several years; no earnings or sales guidance was provided.
- Management cited risks including weaker product demand, changing product mix and fashion trends, competition, general economic conditions, and other retail-industry uncertainties. Results are seasonal, with back-to-school and holiday periods historically important.
- The company recorded no long-lived-asset impairment in the periods presented; it recorded $1.0 million of store-related impairment in the quarter ended May 2, 2020. Management reported no material changes to the previously disclosed risk factors, no legal proceedings, and no material changes in internal controls.
Important facts for investors to verify
- Assess the sustainability of sales and margin gains against the unusually weak, COVID-affected 2020 comparison period.
- Track transaction trends, average selling prices, units per transaction, and online sales, which declined year over year in Q2.
- Monitor inventory markdown exposure, incentive compensation and labor costs, and cash flow changes from working capital and tax payments.
- Review lease commitments, planned capital spending, and the company’s seasonal sales pattern when evaluating liquidity and future results.