The Buckle, Inc. — FY2020 Form 10-K
Reporting period: The filing covers the 52 weeks ended January 30, 2021, with comparisons to the 52 weeks ended February 1, 2020 (FY2019). Although the request metadata says “2019 Q4,” this is an annual FY2020 report; fourth-quarter figures are separately noted below.
Business context
Buckle is a U.S. specialty retailer of casual apparel, footwear, and accessories, operating 443 stores in 42 states at fiscal year-end and an e-commerce platform. Denim and tops represented 40.1% and 30.1% of FY2020 sales, respectively. Online sales were 21.1% of sales, up from 12.3% in FY2019.
Financial performance and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net sales | $901.3 million | $900.3 million | +0.1% |
| Comparable sales | +0.4% | +2.2% | — |
| Gross profit | $400.7 million | $377.5 million | +6.1% |
| Gross margin | 44.5% | 41.9% | +2.6 percentage points |
| Operating income | $168.0 million | $131.5 million | +27.8% |
| Operating margin | 18.7% | 14.6% | +4.1 percentage points |
| Net income | $130.1 million | $104.4 million | +24.6% |
| Diluted EPS | $2.66 | $2.14 | +24.3% |
| Operating cash flow | $227.4 million | $130.7 million | +$96.8 million |
Online sales grew 72.0% to $190.6 million. Comparable-sales growth reflected a 2.7% rise in average unit retail, partly offset by fewer transactions and a lower average number of units per transaction. Gross-margin improvement reflected higher merchandise margins and lower occupancy and buying/distribution costs. Selling expenses fell to $191.2 million from $204.5 million; G&A was approximately $41.5 million in both years.
At year-end, cash and cash equivalents were $318.8 million, short-term investments $3.4 million, and long-term investments $18.3 million; working capital was $230.9 million. The company reported no bank borrowings and no long-term debt. Operating lease liabilities totaled $306.3 million, including $81.8 million current. Operating cash flow was supported in part by inventory and accounts-payable movements as the company adjusted to pandemic conditions.
FY2020 fourth quarter: Net sales were $318.8 million and net income was $65.6 million, versus $271.0 million and $47.0 million, respectively, in FY2019’s fourth quarter.
Material changes, outlook, and risks
- All brick-and-mortar stores temporarily closed beginning March 18, 2020; reopening began the week of April 26. Revenue for the first 26 weeks fell 18.2% year over year, while online sales rose 64.3% in that period. Full-year online growth was 72.0%.
- Fiscal 2020 included three store openings and eight closures; the year-end store count was 443, down from 448. Management expected one new store, approximately 8–12 remodels or relocations, and $10–$15 million of capital expenditures in FY2021. One FY2021 store closure had occurred by March 29, 2021.
- The board suspended quarterly dividends in the first two fiscal quarters during the pandemic, then paid $0.30 per share in each of the last two quarters plus a $2.00 special dividend. Total FY2020 dividends were $128.5 million. Future dividend policy is not specified as guidance.
- Management said cash, investments, and operating cash flow should be sufficient for anticipated capital expenditures and working capital needs for several years. Results remain exposed to fashion and merchandise-mix decisions, consumer spending, competition and e-commerce shifts, COVID-19 disruptions, foreign sourcing and tariffs, and dependence on a single distribution center and third-party carriers.
- An impairment assessment following pandemic-related sales reductions resulted in $1.0 million of store asset impairment charges. The inventory markdown/obsolescence valuation adjustment was $10.8 million at year-end, down from $12.2 million. Deloitte issued unqualified opinions on the financial statements and internal control; inventory valuation was identified as a critical audit matter.
- The company reported no litigation expected to have a material effect. Contractual obligations included $334.0 million of undiscounted operating lease payments and $14.6 million of purchase obligations.
Important facts for investors to verify
- How much FY2020 profitability and cash generation depended on temporary cost reductions, inventory/payables timing, and other pandemic-related effects.
- Whether the sharp online-sales growth can be sustained profitably, including the effect of higher shipping costs.
- The durability of merchandise-margin gains, inventory valuation assumptions, and the impact of changing fashion or private-label mix.
- Store lease commitments, upcoming expirations, and the renewal or closure decisions affecting the 443-store base.
- Cash and investment balances, lease liabilities, and dividend decisions after the reporting date; the filing does not provide a specific earnings or sales forecast.