The Buckle, Inc. — Fiscal 2011 Form 10-K
Reporting period: The filing covers the 52 weeks ended January 28, 2012, not a fiscal 2010 fourth quarter. Fiscal 2011 Q4 data are included below for reference. Buckle operated 431 casual-apparel stores in 43 states and reported as a single business segment.
Financial performance
| Metric | Fiscal 2011 | Fiscal 2010 | Change |
|---|---|---|---|
| Net sales | $1,062.9 million | $949.8 million | +11.9% |
| Comparable-store sales | +8.4% | +1.2% | Improved |
| Gross profit / margin | $468.7 million / 44.1% | $419.1 million / 44.1% | Profit +11.8%; margin flat |
| Operating income / margin | $236.3 million / 22.2% | $210.8 million / 22.2% | +12.1%; margin flat |
| Net income / margin | $151.5 million / 14.2% | $134.7 million / 14.2% | +12.5%; margin flat |
| Diluted EPS | $3.20 | $2.86 | +11.9% |
| Cash from operations | $209.3 million | $179.9 million | +16.3% |
Online sales rose 25.0% to $78.0 million. Sales growth also reflected higher comparable-store traffic and average prices, new stores, and a full year of results from fiscal 2010 openings. Denim represented 46.6% of sales, up from 45.3%; tops declined to 32.1% from 34.0%.
Fiscal 2011 Q4: Sales were $337.1 million versus $303.1 million; net income was $56.1 million versus $49.5 million; diluted EPS was $1.18 versus $1.05.
Liquidity, debt, and capital returns
- Year-end cash and cash equivalents were $166.5 million; short-term investments were $30.0 million, long-term investments $40.0 million, and working capital $210.3 million.
- No bank borrowings were outstanding. The company had a $17.5 million unsecured credit line, including up to $10.0 million for letters of credit; outstanding letters of credit were $2.3 million.
- Investing cash outflow was $17.6 million, including $36.6 million of property and equipment purchases. Financing cash outflow was $141.7 million, including $144.6 million of dividends.
- Fiscal 2011 dividends were $0.20 per quarter plus a $2.25 special dividend per share. Management planned to continue quarterly dividends in fiscal 2012.
- Future minimum operating lease commitments totaled $342.6 million; $55.5 million was due in less than one year.
Material changes and management commentary
- Comparable-store sales growth accelerated to 8.4% from 1.2%; online sales growth also strengthened to 25.0% from 19.3%.
- Gross and operating margins remained at 44.1% and 22.2%. Merchandise-margin pressure and higher distribution and shipping costs were offset by better occupancy-cost leverage.
- General and administrative expense increased 20.4% to $37.0 million, chiefly reflecting higher incentive-bonus accruals and equity compensation. Selling expense rose 10.0%, slower than sales growth.
- Cash from operations increased to $209.3 million from $179.9 million. Year-end cash and cash equivalents rose by $50.0 million.
- Management said cash, investments, and operating cash flow should fund anticipated working capital and capital needs for the next several years.
Outlook, risks, and unusual items
- Fiscal 2012 plans called for approximately 10 new stores, 20 full remodels, and capital spending of $32–$36 million. Management cautioned that plans depend on economic conditions, suitable sites, lease terms, and hiring and training staff.
- Key business risks include fashion and merchandise-mix misjudgments, consumer-spending weakness, competition, comparable-sales volatility, reliance on private-label merchandise for higher margins, and dependence on a single distribution center and complex information systems.
- Auction-rate securities and preferred securities had a reported fair value of about $14.2 million, including a $1.1 million temporary impairment and $2.7 million other-than-temporary impairment. Failed auctions constrain liquidity; management believed the investments could be held until recovery and did not expect them to impair the company’s ability to fund operations.
- Two vendors accounted for 19.4% and 19.5% of fiscal 2011 net sales, respectively, increasing sourcing and vendor-concentration exposure. No other vendor exceeded 10%.
- The company reported no material pending litigation. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification priorities
- Confirm that the filing’s 52-week period ended January 28, 2012 matches the intended period; the supplied filing is not a fiscal 2010 Q4 report.
- Review the sustainability of comparable-store and online sales growth, and whether price increases or unit and transaction trends are driving results.
- Assess private-label mix, merchandise margins, markdowns, and the effect of loyalty-program redemptions on profitability.
- Examine the valuation, credit quality, and realizability of auction-rate securities, including the Level 3 assumptions and impairments.
- Consider the company’s substantial lease commitments, vendor concentration, and single-distribution-center and technology risks alongside its store-expansion plans.