The Buckle, Inc. — Form 10-K Summary
Period clarification: The filing is for fiscal 2014, the 52 weeks ended January 31, 2015, not 2013 Q4. Fiscal 2013 was the 52 weeks ended February 1, 2014. The filing separately reports fourth-quarter results.
Business context
Buckle operates specialty apparel stores for fashion-conscious young men and women. At fiscal year-end it operated 460 stores in 44 states, selling branded and private-label apparel, footwear, and accessories. Denim represented 43.7% of fiscal 2014 sales; tops represented 30.8%. Online sales were $94.3 million, up 6.0% year over year.
Financial performance and liquidity
| Metric | Fiscal 2014 | Fiscal 2013 |
|---|---|---|
| Net sales | $1,153.1 million | $1,128.0 million |
| Gross profit / margin | $507.3 million / 44.0% | $499.1 million / 44.2% |
| Operating income / margin | $257.0 million / 22.3% | $257.0 million / 22.8% |
| Net income | $162.6 million | $162.6 million |
| Diluted EPS | $3.38 | $3.39 |
| Operating cash flow | $195.8 million | $174.0 million |
Comparable-store sales were flat. At comparable stores, transactions fell 4.8%, while units per transaction rose 3.5% and average retail price increased 1.3%. Cash and cash equivalents were $133.7 million; working capital was $202.3 million and total cash and investments were $203.3 million. There was no bank debt outstanding; the company had a $25.0 million unsecured credit line. Property and equipment purchases were $45.5 million, and cash dividends paid totaled $176.6 million, including a $2.77-per-share special dividend.
Fiscal 2014 fourth-quarter sales were $353.5 million and net income was $60.1 million, compared with $339.0 million and $59.3 million, respectively, in the prior-year quarter.
Material changes versus prior period
- Sales increased 2.2%, driven by new-store contributions and online growth; comparable-store sales were flat.
- Gross margin declined 0.2 percentage points, reflecting slightly lower merchandise margins and deleveraged occupancy, buying, and distribution costs.
- Operating income was essentially unchanged, while operating margin declined 0.5 percentage points. Higher selling and general and administrative expenses offset sales growth.
- Operating cash flow increased to $195.8 million from $174.0 million. Cash and equivalents fell by $31.2 million, primarily amid investing spending and dividend payments.
- The company opened 16 stores, remodeled 18, and closed 6; year-end store count rose from 450 to 460.
Outlook, risks, and unusual items
- Management expected approximately 9 new stores, 11 remodels or relocations, and $35–$39 million in fiscal 2015 capital expenditures. It expected cash, investments, and operating cash flow to fund anticipated needs for several years and planned to continue quarterly dividends.
- Key risks include fashion and merchandise-mix misjudgments, comparable-sales volatility, intense competition, consumer-spending weakness, expansion execution, staffing, foreign sourcing, and reliance on a single distribution center and complex IT systems, including cybersecurity risks.
- $7.4 million of auction-rate securities remained illiquid due to failed auctions; the company recorded a $0.7 million temporary impairment and said it did not expect further auction failures to materially impair its ability to fund operations.
- Future minimum operating lease commitments totaled $366.3 million. No material litigation was reported. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
- A new revenue-recognition standard was issued; the company was evaluating its effect. The credit line was amended after year-end, extending maturity to July 31, 2017 and reducing the letter-of-credit sublimit from $20 million to $10 million.
Most important facts for investors to verify
- Confirm the requested period: this is fiscal 2014, not 2013 Q4; review the reported fourth-quarter figures separately if that is the intended comparison.
- Track comparable-store sales and transaction trends, particularly the decline in store transactions, alongside online sales growth.
- Assess whether margin pressure and rising selling and administrative costs continue, and whether store expansion earns adequate returns.
- Review dividend sustainability against operating cash flow, capital spending, and the company’s substantial lease commitments.
- Monitor auction-rate securities for liquidity or impairment changes and verify the terms and availability of the amended credit facility.