Business context and reporting period
The Buckle, Inc. is a U.S. retailer of casual apparel, footwear and accessories, operating as one reportable segment. This filing covers the 13 and 26 weeks ended August 1, 2015, compared with the periods ended August 2, 2014. The request metadata says “2014 Q2,” but the filing itself is for fiscal 2015 Q2. At quarter-end, Buckle operated 464 stores in 44 states; it opened four stores in the first half of fiscal 2015.
Financial performance
| Metric | 13 weeks ended Aug. 1, 2015 | 13 weeks ended Aug. 2, 2014 | 26 weeks ended Aug. 1, 2015 | 26 weeks ended Aug. 2, 2014 |
|---|---|---|---|---|
| Net sales | $236.1 million | $235.7 million | $507.4 million | $507.4 million |
| Gross profit / margin | $94.6 million / 40.1% | $94.9 million / 40.3% | $208.2 million / 41.0% | $212.1 million / 41.8% |
| Operating income / margin | $37.2 million / 15.7% | $38.8 million / 16.4% | $90.0 million / 17.7% | $98.0 million / 19.3% |
| Net income | $23.5 million | $24.5 million | $57.1 million | $61.8 million |
| Diluted EPS | $0.49 | $0.51 | $1.18 | $1.29 |
For the quarter, comparable-store sales declined 1.7%; online sales rose 17.4% to $20.1 million. For the first half, comparable-store sales declined 2.0%, online sales increased 14.9% to $44.3 million, and sales per square foot fell 3.4% to $197.73. Higher average selling prices partly offset fewer transactions and lower units per transaction.
First-half operating cash flow was $30.8 million, down from $45.7 million. Capital expenditures were $21.0 million, versus $22.7 million. Cash and cash equivalents were $122.5 million at August 1; short-term investments were $19.8 million, and total cash and investments were $190.8 million. Working capital was $230.6 million. The company had no bank borrowings; its unsecured $25 million credit line was extended to July 31, 2017. Dividends paid in the first half totaled $22.3 million, or $0.46 per share.
Material changes versus prior comparable periods
- Quarterly sales were nearly flat, while first-half sales were unchanged; comparable-store sales declined in both periods.
- First-half gross margin contracted 0.8 percentage points and operating margin contracted 1.6 points. Management attributed pressure primarily to occupancy, buying and distribution cost deleverage associated with lower comparable sales; improved merchandise margins partly offset the pressure.
- First-half general and administrative expense increased 13.3% to $22.7 million, and selling expense increased 1.5% to $95.5 million. First-half net income declined 7.7%.
- First-half operating cash flow declined, with inventory use of cash increasing to $20.9 million from $4.0 million; accounts payable provided $23.4 million of cash.
Outlook, risks and unusual items
Management estimated fiscal 2015 capital expenditures of approximately $35 million to $39 million, including store projects, IT investments and completion of a new office building. It expected about eight additional store construction projects during the remainder of the year, including approximately five new stores and three remodels and/or relocations. Management stated that available cash, investments and operating cash flow should fund anticipated requirements for the next several years; no earnings or sales guidance was provided.
Key risks cited include retail demand, fashion and product-mix shifts, competition, general economic conditions, markdowns and inventory obsolescence, and the seasonal nature of sales. The company held $7.3 million of auction-rate securities at fair value, against $8.0 million par value, with a $0.7 million temporary impairment. Failed auctions limit liquidity; management said it intended and was able to hold the securities pending recovery, but further impairment remains possible. The filing reported no material change in risk factors and no legal proceedings. A new revenue-recognition standard was expected to become effective for the company in fiscal 2018; the impact was still under evaluation.
Important facts for investors to verify
- Confirm the period: this is the fiscal 2015 second-quarter filing, not a 2014 Q2 filing.
- Monitor comparable-store sales, transaction counts and units per transaction, alongside continued online-sales growth.
- Assess whether margin pressure and higher G&A costs persist, and whether operating cash flow recovers as inventory and working-capital needs change.
- Review planned capital spending and store expansion against cash generation and dividend commitments.
- Track auction-rate-security liquidity, valuation assumptions and potential impairment exposure.