The Buckle, Inc. — FY2018 Form 10-K
Reporting period: Fiscal 2018, the 52 weeks ended February 2, 2019. The request metadata says “2017 Q4,” but this filing covers fiscal 2018; the prior-year comparison was fiscal 2017, a 53-week year.
Business context
Buckle is a U.S. specialty retailer of casual apparel, footwear, and accessories, operating 450 stores in 42 states plus an e-commerce channel. Denim contributed 41.0% of sales and tops 32.8%. Online sales were $103.7 million, or 11.7% of net sales.
Key financial metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Net sales | $885.5 million | $913.4 million |
| Gross profit / margin | $366.1 million / 41.3% | $380.0 million / 41.6% |
| Operating income / margin | $120.9 million / 13.6% | $134.1 million / 14.7% |
| Net income | $95.6 million | $89.7 million |
| Diluted EPS | $1.97 | $1.85 |
| Operating cash flow | $108.7 million | $119.7 million |
| Capital expenditures | $10.0 million | $13.5 million |
Cash and cash equivalents were $168.5 million, short-term investments $51.5 million, and long-term investments $18.7 million. Working capital was $280.2 million. The company had no bank borrowings or long-term debt and maintained a $25 million unsecured credit line, expiring July 31, 2019.
Changes versus the prior period
- Net sales fell 3.1%; comparable-store sales declined 0.9%. The comparison is affected by FY2017’s extra week and store closures. On a 52-week comparison, online sales rose 7.5%.
- Gross margin slipped 0.3 percentage points, mainly from deleveraged occupancy, buying, and distribution costs; merchandise margins were flat.
- Operating income declined 9.8%, while net income rose 6.6%, reflecting a lower effective tax rate: 24.5% versus 35.7%, primarily following U.S. tax law changes.
- Operating cash flow decreased to $108.7 million. Inventory rose to $125.2 million from $118.0 million.
- The company closed seven stores and opened none in FY2018; its store count fell to 450.
Outlook, risks, and notable items
- Management planned one new store, approximately three full remodels, and $8–$12 million of FY2019 capital spending. It expected cash, investments, and operating cash flow to fund anticipated needs for the next several years. No revenue or earnings guidance was provided.
- Management expected to continue quarterly dividends, subject to performance and market conditions. FY2018 dividends totaled $2.00 per share, including a $1.00 special dividend.
- Key risks include fashion and merchandise-selection execution, comparable-store sales, mall traffic and e-commerce competition, consumer spending, private-label mix, foreign sourcing, and reliance on a single distribution center and complex IT systems.
- A 2017 payment-data incident affected certain guest payment information from purchases at some stores between October 28, 2016 and April 14, 2017. The company reported containment and security enhancements; it did not expect potential card-brand assessments to be material.
- Adoption of revenue standard ASC 606 produced a $389,000 cumulative retained-earnings adjustment and changed gift-card breakage presentation; management said the effect on FY2018 results was not material. The company expected lease standard ASC 842 to add right-of-use assets and lease liabilities, without a material income-statement or cash-flow effect.
- Operating lease commitments totaled $287.3 million. Management reported no litigation expected to have a material effect. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor facts to verify
- Whether sales and comparable-store trends improve, especially after adjusting comparisons for the prior year’s extra week and store closures.
- Whether online growth and merchandise pricing can support margins amid ongoing competition and fashion risk.
- Inventory quality, markdown assumptions, and the $10.6 million inventory valuation adjustment.
- Cash generation and dividend sustainability, including the distinction between recurring quarterly dividends and special dividends.
- Implementation effects of ASC 842 and any developments related to the 2017 data incident.