The Buckle, Inc. — FY2022 Form 10-K
Period clarification: The supplied filing is an annual report for the 52 weeks ended January 28, 2023 (fiscal 2022), not a 2021 Q4 filing as indicated in the request metadata. Comparisons below are to fiscal 2021, ended January 29, 2022.
Business context
Buckle is a U.S. specialty retailer of casual apparel, footwear, and accessories, operating 441 stores in 42 states and an e-commerce business. It reports one operating segment. Stores and online sales serve fashion-conscious young men and women; denim represented 39.3% of fiscal 2022 sales. Online sales were 17.1% of total sales.
Financial performance and liquidity
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Net sales | $1,345.2 million | $1,294.6 million |
| Comparable sales growth | 3.3% | Not stated in the supplied text |
| Gross profit / margin | $676.0 million / 50.3% | $653.0 million / 50.4% |
| Operating income / margin | $328.1 million / 24.4% | $335.5 million / 25.9% |
| Net income / net margin | $254.6 million / 18.9% | $254.8 million / 19.7% |
| Diluted earnings per share | $5.13 | $5.16 |
| Cash from operations | $242.4 million | $311.8 million |
Sales rose 3.9%, while online sales increased 4.3% to $230.4 million. Growth reflected a 4.6% increase in average unit retail and a 0.1% increase in transactions, partly offset by a 0.8% decline in units per transaction. Merchandise margin declined 0.45 percentage points; lower relative occupancy, buying, and distribution costs offset 0.35 points of that decline. Selling and general and administrative expenses together increased to 25.9% of sales from 24.5%.
At year-end, cash and cash equivalents were $252.1 million, short-term investments $21.0 million, and long-term investments $20.6 million; working capital was $197.3 million. The company reported no bank borrowings and had a $25 million unsecured credit line, expiring July 31, 2023. Operating lease liabilities totaled $303.8 million. Operating cash flow fell from the prior year, principally as inventory was rebuilt and incentive bonuses were paid. Capital expenditures were $30.4 million. Fiscal 2022 dividends totaled $202.9 million, including a $2.65-per-share special dividend; there were no share repurchases.
Material changes, outlook, and risks
- Despite higher sales, operating income declined 2.2% and net income was essentially flat year over year, reflecting expense growth and slightly lower gross margin.
- Inventory increased to $125.1 million from $102.1 million. Management’s markdown and obsolescence adjustment was $6.3 million, compared with $5.6 million a year earlier; inventory valuation was the auditor’s critical audit matter.
- Management expects six new stores and approximately 12–17 full remodels or relocations in fiscal 2023, with capital spending of $24–$30 million. Through March 28, 2023, three stores had closed. The company said cash, investments, and operating cash flow should fund anticipated needs for the next several years. No earnings or sales-growth guidance is provided in the supplied filing text.
- Key risks include fashion and merchandise-selection sensitivity, competition and changing shopping patterns, consumer-spending and economic conditions, foreign sourcing and vendor concentration, labor costs, cybersecurity and systems disruptions, and dependence on a single distribution center. Axis Denim represented 15.2% of sales and Rock Revival/Miss Me 10.7%.
- There were no legal proceedings expected to have a material effect. Deloitte issued unqualified opinions on the financial statements and internal controls. The filing identifies inventory markdown and obsolescence estimates as a significant area of audit judgment.
Important facts for investors to verify
- Whether sales and comparable-store momentum can persist, and whether average selling prices can offset softer unit volume.
- Whether merchandise margins recover and operating expenses moderate after the fiscal 2022 margin and operating-income declines.
- How inventory growth, aging, and markdown assumptions affect future gross profit and cash flow.
- Execution and returns on planned store openings and remodels, alongside $303.8 million of recorded lease liabilities and $343.8 million of undiscounted operating lease payments.
- Exposure to vendor concentration, store-lease renewals, and the single Kearney distribution facility; 145 store leases were scheduled to expire in 2024.
- The sustainability of dividends, particularly special dividends, given operating cash flow, investment needs, and changing retail conditions.