The Buckle, Inc. — Form 10-Q Summary
Period: The filing covers the 13 and 39 weeks ended October 29, 2011, compared with the periods ended October 30, 2010. This conflicts with the request metadata identifying 2010 Q3; the filing itself is for fiscal 2011 Q3.
Business context and reporting period
The Buckle is a single-segment retailer of casual apparel, footwear, and accessories. It operated 429 stores in 43 states at quarter-end, versus 421 stores in 41 states a year earlier. Year to date, it opened 11 stores, substantially remodeled 23, and closed two.
Financial performance
| Metric | 13 weeks ended Oct. 29, 2011 | 13 weeks ended Oct. 30, 2010 | 39 weeks ended Oct. 29, 2011 | 39 weeks ended Oct. 30, 2010 |
|---|---|---|---|---|
| Net sales | $273.4 million | $243.3 million | $725.9 million | $646.8 million |
| Gross profit / margin | $118.7 million / 43.4% | $105.9 million / 43.5% | $308.8 million / 42.5% | $274.8 million / 42.5% |
| Operating income / margin | $60.4 million / 22.1% | $54.3 million / 22.3% | $148.5 million / 20.5% | $133.1 million / 20.6% |
| Net income / margin | $38.3 million / 14.0% | $34.4 million / 14.1% | $95.4 million / 13.1% | $85.2 million / 13.2% |
| Diluted EPS | $0.81 | $0.73 | $2.02 | $1.81 |
- Quarterly sales rose 12.4%; comparable-store sales increased 9.1%. Online sales grew 25.4% to $18.9 million. Year-to-date sales rose 12.2%, comparable-store sales increased 8.7%, and online sales grew 22.0% to $50.3 million.
- Quarterly gross margin edged down 0.1 percentage point. Lower merchandise margins and higher distribution costs were largely offset by occupancy-cost leverage. Year-to-date gross margin was unchanged.
- Operating cash flow was $85.8 million year to date, versus $84.1 million. Investing cash outflow was $21.7 million, including $31.5 million of property and equipment purchases. Financing cash outflow was $132.6 million, primarily reflecting $135.1 million of dividends.
- Cash and cash equivalents were $48.0 million; short-term investments were $30.4 million. Total cash and investments were $127.5 million, and working capital was $139.8 million. Current assets were $243.3 million and current liabilities $103.5 million.
- The company reported no bank borrowings. It had a $17.5 million unsecured credit line, including a $10.0 million limit for letters of credit; outstanding letters of credit were $1.6 million. Total liabilities were $156.0 million.
Material changes and capital allocation
- Quarterly net income increased 11.6%; year-to-date net income increased 11.9%. Sales growth was stronger than growth in operating income, and operating and net margins were slightly lower year over year.
- Cash declined $68.5 million from the start of the fiscal year. The company paid $135.1 million in dividends, including a $2.25-per-share special dividend, compared with $28.0 million in dividends in the prior-year 39-week period. Inventory was $140.8 million at October 29, compared with $88.6 million at January 29, 2011; inventory growth used $52.2 million of operating cash year to date.
- Capital expenditures were $31.5 million year to date, down from $47.4 million in the prior-year period. The company repurchased 8,600 shares for $0.3 million, with 543,900 shares remaining under its authorization.
Outlook, risks, and unusual items
- Management estimated fiscal 2011 capital expenditures of approximately $33 million to $35 million and expected about four additional store projects during the remainder of the year, including approximately two new stores. It stated existing cash, investments, and operating cash flow should fund anticipated needs for several years. The filing provides no earnings or sales guidance.
- Management identified fashion trends, product mix, competition, general economic conditions, demand, markdowns, and execution of store expansion as factors that could affect results. The business is seasonal, with holiday and back-to-school periods historically generating the greatest sales volume.
- Investments included $16.3 million of auction-rate and preferred securities at estimated fair value, against $19.9 million par value. These securities had $0.9 million of temporary impairment and $2.7 million of other-than-temporary impairment. Failed auctions and valuation estimates— including significant Level 3 inputs—create liquidity and valuation risk. Management believed further auction failures would not materially impair its ability to fund operations.
- Operating lease obligations totaled $374.5 million, including $54.2 million due within one year. The filing reported no legal proceedings and no material changes to previously disclosed risk factors. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Most important facts to verify
- Confirm the requested period: the source filing is for the quarter ended October 29, 2011, not 2010 Q3.
- Assess whether sales growth and comparable-store momentum can continue while merchandise margins and operating margins face pressure.
- Review inventory growth, seasonal sell-through, and markdown or obsolescence exposure.
- Evaluate the special dividend’s impact on cash and the company’s capacity to fund planned capital expenditures and store projects.
- Monitor auction-rate securities’ liquidity, credit quality, fair-value assumptions, and potential further impairment.