The Buckle, Inc. — Form 10-Q Summary
Reporting period: The filing covers the 13 and 26 weeks ended July 28, 2012. Although the request metadata says 2011 Q2, the filing itself reports fiscal 2012 second-quarter and first-half results; comparisons are with periods ended July 30, 2011. Amounts below are in millions unless stated otherwise.
Business context and financial results
Buckle operates a single-segment retail business selling casual apparel, footwear and accessories. It had 439 stores in 43 states at July 28, 2012. The company opened eight stores and substantially remodeled 12 during the first half.
| Metric | Q2 2012 | Q2 2011 | First half 2012 | First half 2011 |
|---|---|---|---|---|
| Net sales | $215.5 | $212.4 | $479.2 | $452.5 |
| Gross profit | $86.5 | $87.1 | $200.7 | $190.1 |
| Gross margin | 40.1% | 41.0% | 41.9% | 42.0% |
| Operating income | $36.4 | $36.8 | $94.4 | $88.1 |
| Operating margin | 16.9% | 17.3% | 19.7% | 19.5% |
| Net income | $23.2 | $23.6 | $61.0 | $57.0 |
| Diluted EPS | $0.49 | $0.50 | $1.28 | $1.21 |
Second-quarter sales increased 1.5%, while comparable-store sales declined 0.8%. First-half sales rose 5.9%, including comparable-store sales growth of 3.6%. Online sales increased 12.1% to $16.0 million in Q2 and 13.7% to $35.7 million year to date. Higher average selling prices supported sales; comparable-store transaction counts and units per transaction fell in both periods.
Cash flow, liquidity and capital
- First-half operating cash flow was $31.6 million, compared with $32.6 million a year earlier. Capital expenditures were $19.6 million; dividends paid were $19.2 million.
- Cash and cash equivalents were $166.0 million, short-term investments $31.7 million, and working capital $262.6 million at July 28, 2012. Total cash and investments were $233.4 million.
- Total liabilities were $144.8 million. No bank borrowings were outstanding; the company had a $25.0 million unsecured credit line, including a $20.0 million limit for letters of credit. Outstanding letters of credit were $2.4 million.
- Fiscal 2012 capital expenditures were estimated at $30–$34 million, with approximately 11 additional store construction, remodeling or relocation projects planned for the remainder of the year. Management said available cash, investments and operating cash flow should fund anticipated needs for several years.
- Operating lease obligations totaled $363.9 million, including $57.1 million due within one year.
Changes, commentary and risks
- Q2 net income declined 1.4% and operating income declined 1.0%, despite higher sales. Gross margin fell 0.9 percentage points, reflecting occupancy and other cost deleverage and lower merchandise margins. Lower selling expenses partly offset higher general and administrative costs.
- First-half net income rose 7.0%; operating margin improved to 19.7%, while gross margin edged down 0.1 percentage points. G&A expense grew faster than sales, partly due to vacation-pay and equity-compensation costs.
- At July 28, the company held auction-rate and preferred securities with a reported fair value of $13.3 million, against $17.1 million at par. Disclosed impairments included $1.1 million classified as temporary and $2.7 million as other-than-temporary. Auction failures and valuation assumptions create liquidity and impairment risks; the company said it did not expect further failures to materially affect its ability to fund operations.
- Management highlighted retail demand, fashion trends, competition, product mix, markdowns and general economic conditions as factors that could affect results. The business is seasonal, with holiday and back-to-school periods historically representing significant sales periods. Interim results may not indicate full-year performance.
- No material changes to previously disclosed risk factors were reported. The filing lists no legal proceedings and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the period: the filing is for the 13 and 26 weeks ended July 28, 2012, not 2011 Q2 as the request metadata suggests.
- Track comparable-store sales, transaction and unit trends, and whether higher average selling prices continue to offset lower customer traffic.
- Monitor gross-margin performance, markdowns and expense leverage as store expansion and remodeling continue.
- Review auction-rate security liquidity, credit quality and fair-value assumptions, including potential further impairment.
- Assess planned capital spending and substantial lease commitments against operating cash flow and the seasonal working-capital build.