The Buckle, Inc. — Form 10-Q Summary
Period clarification: The request metadata says 2022 Q2, but the supplied filing is for the 13 and 26 weeks ended July 29, 2023—fiscal 2023 Q2 and first half—compared with periods ended July 30, 2022. The financial statements are unaudited.
Business context
Buckle is a U.S. retailer of casual apparel, footwear, and accessories, operating one reportable segment through stores and e-commerce. It had 440 stores in 42 states at July 29, 2023. Online sales were 14.9% of quarterly sales and 16.5% of first-half sales. Management notes that results are seasonal and interim results may not indicate full-year performance.
Financial performance
| Metric | Q2 FY2023 | Q2 FY2022 | First half FY2023 | First half FY2022 |
|---|---|---|---|---|
| Net sales | $292.4 million | $302.0 million | $575.3 million | $611.0 million |
| Gross profit / margin | $138.4 million / 47.3% | $145.4 million / 48.2% | $271.7 million / 47.2% | $297.5 million / 48.7% |
| Operating income / margin | $56.8 million / 19.4% | $65.7 million / 21.8% | $110.5 million / 19.2% | $138.8 million / 22.7% |
| Net income | $45.6 million | $50.1 million | $88.6 million | $105.4 million |
| Diluted EPS | $0.92 | $1.01 | $1.78 | $2.13 |
Quarterly sales fell 3.2%; comparable sales declined 3.3%. Transactions decreased 3.5% and units per transaction fell 1.8%, partly offset by a 2.2% increase in average unit retail. Online sales declined 5.6% to $43.6 million. First-half sales decreased 5.9%, comparable sales declined 6.3%, and online sales fell 5.6% to $94.9 million.
Quarterly gross margin decreased 0.9 percentage points, reflecting 60 basis points of deleveraged buying, distribution, and occupancy costs and a 30-basis-point reduction in merchandise margin. First-half gross margin fell 1.5 percentage points, reflecting 100 basis points of deleveraged costs and a 50-basis-point merchandise-margin reduction. SG&A was 27.9% of sales for the quarter versus 26.4% a year earlier, and 28.0% for the first half versus 26.0%.
Cash, liquidity, and obligations
- Cash and cash equivalents were $275.6 million; short-term investments were $23.7 million and long-term investments were $23.6 million. Management reported total cash and investments of $322.9 million and working capital of $258.5 million at July 29, 2023.
- First-half operating cash flow was $81.5 million, compared with $69.5 million in the prior-year period. Investing cash outflow was $22.7 million, including $17.9 million of property and equipment purchases; dividends paid were $35.3 million. Cash increased $23.5 million to $275.6 million.
- No bank borrowings were outstanding. The company had a $25.0 million unsecured credit line, expiring July 31, 2025, and $5.2 million of outstanding letters of credit.
- Operating lease liabilities totaled $285.3 million; undiscounted operating lease payments were $328.1 million. These lease obligations are separate from bank borrowings.
- Quarterly dividends were $0.35 per share; first-half dividends were $0.70 per share.
Outlook, risks, and notable items
Management estimated fiscal 2023 capital expenditures of approximately $26–$32 million and anticipated completing seven new stores and eight additional full remodels during the remainder of the year. It believes cash, investments, and operating cash flow will fund anticipated capital expenditures and working capital needs for the next several years. No earnings or sales guidance was provided.
Management cited possible pressure from weaker demand, product-mix changes, competition, economic conditions, fashion trends, and retail-industry conditions. Inventory markdowns and obsolescence are estimate-sensitive; the markdown/obsolescence adjustment was $7.8 million at July 29, 2023, versus $6.3 million at fiscal year-end. A 0.25-percentage-point decline in interest/dividend rates earned on cash and investments was estimated to reduce net income by about $0.5 million, or less than $0.01 per share.
Other income increased to $3.7 million for the quarter from $0.7 million and to $6.8 million for the first half from $0.8 million; the filing does not provide a clear breakdown of the increase. The filing reported no legal proceedings and no material changes to previously disclosed risk factors. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether comparable-sales and transaction trends improve, particularly given lower traffic and online sales.
- Whether merchandise margins and occupancy-cost leverage stabilize, and how markdowns affect inventory and profitability.
- The composition and sustainability of higher other income, alongside returns on cash and investments.
- Progress against the stated store, remodeling, and capital-expenditure plans, and continued cash generation after dividends.