The Buckle, Inc. — Form 10-Q Summary
Period: Quarter ended October 31, 2015, with year-to-date results for the 39 weeks ended that date; comparisons are to the periods ended November 1, 2014. The request metadata says “2014 Q3,” but the filing itself reports fiscal 2015 third-quarter results.
Business context
The Buckle is a single-segment retailer of casual apparel, footwear, and accessories. It operated 468 stores in 44 states at quarter-end, compared with 461 stores a year earlier. During the first 39 weeks, it opened eight stores and substantially remodeled 13.
Financial performance
| Metric | Quarter | 39 weeks |
|---|---|---|
| Net sales | $280.2 million, down 4.1% | $787.6 million, down 1.5% |
| Gross profit / margin | $117.3 million / 41.9%, versus $127.8 million / 43.7% | $325.5 million / 41.3%, versus $339.9 million / 42.5% |
| Operating income / margin | $56.3 million / 20.1%, versus $64.6 million / 22.1% | $146.3 million / 18.6%, versus $162.5 million / 20.3% |
| Net income | $35.9 million, versus $40.6 million | $92.9 million, versus $102.4 million |
| Diluted EPS | $0.74, versus $0.84 | $1.93, versus $2.13 |
| Operating cash flow | Not separately stated | $53.6 million, versus $91.6 million |
Quarterly comparable sales fell 5.2%; comparable transactions declined 5.6% and average retail price per item fell 1.0%, partly offset by more units per transaction. Online sales rose 13.6% to $25.9 million. Year-to-date comparable sales fell 3.1%, while online sales rose 14.4% to $70.2 million. Gross margin pressure reflected lower merchandise margins and deleveraged occupancy, buying, and distribution costs. The quarterly effective tax rate was 37.3%, unchanged from the prior year.
Liquidity, capital and debt
At October 31, 2015, cash and cash equivalents were $121.4 million, short-term investments $28.2 million, and long-term investments $42.4 million; total cash and investments were approximately $192.0 million. Working capital was $258.7 million. The company had no bank borrowings and no outstanding line-of-credit borrowings; it had a $25.0 million unsecured credit line, including a $10.0 million letter-of-credit sublimit. Total liabilities were $171.3 million. Operating cash flow was lower year over year, with inventory-related cash use increasing to $45.9 million.
Year-to-date capital expenditures were $30.9 million. Management estimated fiscal 2015 capital expenditures of approximately $34–$36 million and said cash, investments, and operating cash flow should fund anticipated needs for the next several years. The company paid $33.4 million in dividends during the 39-week period.
Outlook, risks and notable items
- Management expected approximately one additional new store and one substantial remodel or relocation for the remainder of fiscal 2015; no earnings or sales guidance was provided.
- Management highlighted exposure to fashion trends, product mix, competition, general economic conditions, consumer demand, markdowns, and store-expansion spending.
- The company held $7.3 million of auction-rate securities at estimated fair value, reflecting a $0.7 million temporary impairment. Failed auctions limit liquidity; management believed it could hold the securities until recovery or maturity, but further impairment remained possible.
- Seasonality is significant: holiday and back-to-school periods historically generated approximately 35% of annual sales. Management cautioned that interim results may not indicate full-year performance.
- There were no reported legal proceedings or material changes to the prior annual-report risk factors. Management reported effective disclosure controls and no material change in internal control over financial reporting.
- The filing noted future adoption of revenue-recognition and inventory accounting standards; management was evaluating the revenue standard’s effect and did not expect the inventory standard to have a material effect.
Important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is for the quarter ended October 31, 2015, despite the metadata’s “2014 Q3” label.
- Track comparable-store sales, transaction trends, online growth, and whether margin declines persist.
- Assess inventory growth and its effect on operating cash flow, markdowns, and liquidity.
- Monitor auction-rate security valuation and liquidity, as well as planned capital spending and store expansion.
- Review subsequent filings for full-year results and any updated outlook or risk disclosures.