The Buckle, Inc. — Form 10-Q Summary
Reporting period: Thirteen weeks ended April 30, 2022 (first quarter of fiscal 2022), compared with the thirteen weeks ended May 1, 2021. The request metadata says “2021 Q1,” but the filing itself covers 2022 Q1. Buckle operates one reportable segment, selling casual apparel, footwear, and accessories through stores and e-commerce.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Net sales | $309.1 million | $299.1 million | +3.3% |
| Comparable sales | +3.7% | Not stated here | |
| Gross profit / margin | $152.2 million / 49.2% | $147.6 million / 49.3% | Profit +3.1%; margin down 0.1 percentage point |
| Operating income / margin | $73.1 million / 23.6% | $75.8 million / 25.3% | Income down 3.6% |
| Net income | $55.3 million | $57.3 million | Down 3.5% |
| Diluted EPS | $1.12 | $1.16 | Down 3.4% |
| Operating cash flow | $21.5 million | $93.5 million | Down $72.0 million |
Sales growth reflected 3.6% more transactions and 1.5% higher average unit retail, partly offset by 1.8% fewer units per transaction. Online sales rose 1.1% to $54.3 million and represented 17.6% of sales, versus 18.0% a year earlier.
Financial position and liquidity
- At April 30, 2022, cash and cash equivalents were $250.1 million; short-term investments were $12.9 million and long-term investments were $20.1 million. Management reported total cash and investments of $283.1 million and working capital of $184.5 million.
- Total assets were $789.0 million and total liabilities were $435.4 million. There were no bank borrowings; the company had a $25.0 million unsecured credit line, expiring July 31, 2023, with $4.0 million of letters of credit outstanding.
- Operating lease liabilities totaled $276.2 million, including current and non-current portions. These lease obligations are distinct from bank borrowings.
- Operating cash flow was reduced mainly by inventory rebuilding and payment of prior-year incentive bonuses. Inventory increased to $121.2 million from $102.1 million at fiscal year-end.
- Capital expenditures were approximately $7.1 million in the quarter. Dividends paid were $17.5 million, or $0.35 per share.
Material changes and management commentary
- Gross margin was nearly flat: lower merchandise margins and higher store-distribution freight costs each reduced margin by about 0.2 percentage point, partly offset by 0.3 percentage point of occupancy-cost leverage.
- Selling expense increased 12.1% to $67.2 million; selling, general, and administrative expenses rose to 25.6% of sales from 24.0%. Management cited higher store labor, e-commerce freight, marketing, and certain other costs, partly offset by lower incentive compensation accruals.
- Management expects fiscal 2022 capital expenditures of approximately $22 million to $27 million, plans to complete five new stores and 10 to 15 full remodels during the remainder of the year, and believes available cash, investments, and operating cash flow will fund anticipated needs for several years.
- The company had 439 stores in 42 states at quarter-end, versus 442 stores a year earlier. It opened no stores, remodeled six, and closed one during the quarter.
Outlook, risks, and unusual items
- No sales or earnings guidance was provided. Management cautioned that demand, product mix, competition, economic conditions, and other retail-industry risks could reduce sales, profitability, and cash flow. Results are seasonal and interim performance may not indicate full-year results.
- Management estimates that a one-quarter-percentage-point decline in rates earned on cash and investments would reduce net income by approximately $0.5 million, or less than $0.01 per share.
- Inventory valuation depends on estimates of markdowns, obsolescence, demand, and market conditions; actual outcomes could differ. The reported inventory markdown/obsolescence adjustment was $5.3 million at April 30, 2022.
- The filing reports no material changes to previously disclosed risk factors, no legal proceedings, and no material impairment losses. Management said there were no known contractual-obligation trends expected to materially affect financial condition or results.
Important facts for investors to verify
- Whether sales and comparable-sales momentum continued, and how transaction growth, pricing, and units per transaction evolved.
- Whether merchandise margins, freight costs, and elevated selling expenses improved or further pressured operating margins.
- Whether inventory growth converted to sales without increased markdowns or obsolescence.
- How operating cash flow developed after the quarter’s inventory build and bonus payments, alongside planned capital spending and dividends.
- Store expansion and remodel execution, and the company’s capacity to meet lease and other contractual obligations under weaker demand scenarios.