The Buckle, Inc. — Form 10-K Summary
Reporting period: Fiscal 2019, the 52 weeks ended February 1, 2020. Although the request identifies “2018 Q4,” this filing is an annual report for fiscal 2019; it also includes unaudited fourth-quarter results. Financial amounts below are in U.S. dollars.
Business context
Buckle is a U.S. specialty retailer of casual apparel, footwear, and accessories, operating stores under the Buckle name and selling online. At fiscal year-end it had 448 stores in 42 states. Denim and tops represented 40.7% and 32.2% of annual sales, respectively; online revenue was 12.3% of sales.
Financial performance and liquidity
| Metric | Fiscal 2019 | Fiscal 2018 |
|---|---|---|
| Net sales | $900.3 million | $885.5 million |
| Comparable-store sales change | +2.2% | -0.9% |
| Gross profit / margin | $377.5 million / 41.9% | $366.1 million / 41.3% |
| Operating income / margin | $131.5 million / 14.6% | $120.9 million / 13.6% |
| Net income | $104.4 million | $95.6 million |
| Diluted earnings per share | $2.14 | $1.97 |
| Cash flow from operations | $130.7 million | $108.7 million |
Annual sales rose 1.7%; online sales increased 6.9% to $110.8 million. The comparable-sales gain reflected more transactions and units per transaction, partly offset by a lower average retail price per item. Gross-margin improvement reflected stronger merchandise margins and lower occupancy, buying, and distribution costs as a share of sales. Net income increased 9.2%.
Fourth quarter: Sales were $271.0 million versus $264.4 million a year earlier; net income was $47.0 million versus $41.1 million; diluted EPS was $0.96 versus $0.84.
At year-end, cash and cash equivalents were $221.0 million, short-term investments $12.5 million, and long-term investments $15.9 million. Working capital was $206.2 million. The company had no bank borrowings and reported no long-term debt, plus an unused $25 million unsecured credit line (with $1.5 million in letters of credit outstanding). After adopting lease accounting, it reported $377.6 million of operating lease liabilities; these are lease obligations, not bank debt. The company paid $112.9 million in dividends during fiscal 2019.
Changes, outlook, and material developments
- Fiscal 2019 comparable sales returned to growth after a 0.9% decline in fiscal 2018. Annual sales increased from fiscal 2018, while operating margin improved by 1.0 percentage point.
- Management’s pre-pandemic fiscal 2020 plans included three new stores, approximately four remodels or relocations, and $7–$10 million of capital expenditures. Management expected cash, investments, and operating cash flow to fund anticipated needs; the filing gives no numerical earnings or sales guidance.
- After year-end, Buckle indefinitely closed all brick-and-mortar stores effective March 18, 2020, and announced that most store and corporate employees would be furloughed effective April 5. Management said the pandemic was expected to materially adversely affect fiscal 2020 financial position, results, and cash flows, but could not estimate its duration or severity.
- On March 23, 2020, the board suspended the quarterly dividend to preserve cash and financial flexibility. This followed fiscal 2019 dividends declared of $2.30 per share, including a $1.25 special dividend.
- Fiscal 2019 marked adoption of the lease accounting standard. The company recognized operating lease right-of-use assets and liabilities; the filing says adoption did not materially affect fiscal 2019 operating results. Fiscal 2018 comparative balance-sheet amounts were not restated.
Risks and contingencies
- COVID-19 store closures, reduced consumer spending, and potential vendor disruptions pose significant near-term risks; fiscal 2020 impact was not quantifiable in the filing.
- Results depend on anticipating fashion and customer demand, maintaining merchandise margins, and competing in a highly competitive retail market amid shifting mall traffic and e-commerce shopping.
- Other identified risks include reliance on private-label merchandise and foreign sourcing, employee retention, cybersecurity and information systems, and dependence on a single distribution facility and third-party carriers.
- Management reported no litigation expected to have a material effect. The auditor gave an unqualified opinion on the financial statements and internal controls; management also concluded internal controls were effective.
Investor facts to verify
- How store closures and the suspension of dividends affected cash, sales, and operating cash flow after February 1, 2020.
- Subsequent filings for actual fiscal 2020 results, liquidity actions, and any changes to store-opening or capital-spending plans.
- Comparable-sales trends, online growth, merchandise margins, and markdown/obsolescence exposure; the inventory valuation adjustment was $12.2 million versus $10.6 million a year earlier.
- Lease commitments and lease-liability movements, distinguishing operating leases from funded debt.
- Whether the filing’s pre-pandemic outlook remains relevant; it does not provide a clear quantitative forecast for fiscal 2020 earnings or sales.