The Buckle, Inc. — Form 10-K Summary
Business context and reporting period
The filing covers fiscal 2013, the 52 weeks ended February 1, 2014—not a standalone 2012 fourth quarter. The comparable fiscal 2012 period was 53 weeks, ended February 2, 2013. Buckle operated 450 casual-apparel stores in 43 states and also sold online.
Financial results and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Net sales | $1.128 billion | $1.124 billion |
| Gross profit / margin | $499.1 million / 44.2% | $499.3 million / 44.4% |
| Operating income / margin | $257.0 million / 22.8% | $258.2 million / 22.9% |
| Net income | $162.6 million | $164.3 million |
| Diluted EPS | $3.39 | $3.44 |
| Cash from operations | $174.0 million | $220.9 million |
Comparable-store sales were flat; online sales rose 5.3% to $89.0 million. Sales per square foot declined 2.8% to $461. Cash and cash equivalents were $164.9 million, short-term investments $20.2 million, and long-term investments $43.4 million. Working capital was $218.8 million. The company had no bank borrowings and a $25 million unsecured credit line; long-term debt was zero. Inventory increased to $124.1 million from $103.9 million.
Material changes versus prior year
Reported sales edged up 0.4%, despite one fewer week in fiscal 2013; comparable-store sales were flat. Management attributed sales growth to new stores and online sales, partly offset by the lost week. Average units per transaction rose 3.7%, while average retail price fell 1.0% and comparable-store transactions declined 2.6%. Gross margin slipped 0.2 percentage points, chiefly from deleveraged occupancy, buying, and distribution costs; improved merchandise margins partly offset this. Selling expenses rose 2.4%, while general and administrative expenses fell 10.0%, including lower equity-compensation and incentive-bonus expense. Operating income fell 0.5% and net income fell 1.0%. Operating cash flow declined to $174.0 million, partly reflecting the $20.3 million increase in inventory and changes in working capital.
Outlook, risks, and unusual items
Management planned approximately 17 new stores and 17 remodels in fiscal 2014, with capital expenditures of $48–$53 million, including IT investments and a new office building. It expected cash, investments, and operating cash flow to fund anticipated needs for several years and planned to continue quarterly dividends. Fiscal 2013 dividends totaled $97.1 million, including a $1.20-per-share special dividend.
Key risks include fashion and merchandising misjudgments, consumer-spending weakness, intense retail competition, dependence on private-label merchandise and key vendors, store-expansion execution, staffing, foreign sourcing, and reliance on a single distribution facility and complex information systems, including cybersecurity risks. Auction-rate securities had a $10.975 million par value and $9.644 million fair value, reflecting a $1.331 million temporary impairment; failed auctions limit liquidity. Management said further auction failures were not expected to materially impair its ability to fund the business, but additional impairment remained possible. No litigation was identified as expected to have a material effect. The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions.
Important facts for investors to verify
- Whether comparable-store sales, transactions, and sales per square foot improve after a flat year.
- Whether inventory growth is supported by demand and does not require increased markdowns; the inventory markdown/obsolescence reserve was $7.4 million.
- Progress and returns on the planned store openings, remodels, and $48–$53 million capital program.
- Liquidity, fair value, and recovery assumptions for auction-rate securities, including the Level 3 valuation inputs.
- Sustainability of operating cash flow and dividends, given the lower cash generation and substantial lease commitments of $351.7 million.