Business Context and Reporting Period
Company: The Buckle, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Thirteen and thirty-nine weeks ended November 2, 1996.
Business Overview: Retailer of medium to better-priced casual apparel for fashion-conscious young men and women. As of November 2, 1996, the company operated 178 stores in 22 states.
Key Financial Metrics
| Metric (in thousands) | 13 Weeks Ended Nov 2, 1996 | 39 Weeks Ended Nov 2, 1996 |
|---|---|---|
| Net Sales | $61,073 | $144,321 |
| Gross Profit | $20,867 | $44,609 |
| Gross Margin % | 34.2% | 30.9% |
| Operating Income | $7,532 | $12,436 |
| Net Income | $4,807 | $8,131 |
| Diluted EPS | $0.65 | $1.12 |
| Cash from Operations (39 weeks) | $10,850 | |
| Cash & Equivalents (Nov 2, 1996) | $31,051 | |
| Working Capital (Nov 2, 1996) | $48,038 |
Material Changes vs. Prior Period
- Sales Growth: Net sales increased 21.4% for the quarter and 24.7% for the year-to-date (YTD) compared to the prior year. Comparable store sales rose 14.4% (quarter) and 13.7% (YTD), driven by higher average prices per piece and new store openings.
- Profitability: Operating income surged 35.2% for the quarter and 54.8% YTD. Net income increased 35.6% for the quarter and 49.1% YTD.
- Margins: Gross profit margin improved to 34.2% (quarter) and 30.9% (YTD) due to better merchandise margins and occupancy cost leverage, partially offset by higher redemptions from the PRIMO frequent shopper program.
- Expenses: Selling expenses rose 22.4% (quarter) and 23.7% (YTD), while General and Administrative (G&A) expenses increased 32.7% (quarter) and 20.9% (YTD). Increases were largely due to higher bonus accruals and stock option expenses.
- Cash Flow: Net cash provided by operating activities for the 39-week period jumped to $10.85 million from $2.37 million in the prior year, driven by higher net income and reduced inventory buildup.
Guidance, Outlook, and Risks
- Capital Expenditures: Management estimates total capital expenditures for fiscal 1996 will be approximately $6.0 million (before landlord allowances). Construction for fiscal 1996 stores was complete as of November 15, 1996, with two new stores planned for early fiscal 1997.
- Liquidity: The company maintains $31.1 million in cash and cash equivalents and has two $5.0 million unsecured lines of credit. No significant borrowings occurred during the first nine months of fiscal 1996.
- Seasonality: The business is highly seasonal, with the Christmas and back-to-school seasons historically accounting for approximately 40% of annual net sales.
- Risks: Results are subject to general economic conditions. The company is subject to restrictive covenants on its credit lines, including a requirement to maintain $5.0 million in working capital (currently at $48.0 million).
Investor Verification Checklist
- Verify the sustainability of the 14.4% comparable store sales increase and the impact of the PRIMO card redemption rates on future margins.
- Confirm the accuracy of the $6.0 million capital expenditure estimate for the remainder of fiscal 1996.
- Monitor the impact of bonus accruals and stock option expenses on future G&A and selling expense ratios.
- Review the status of lease negotiations for the two planned new stores in fiscal 1997.
- Assess the company's ability to maintain the $5.0 million working capital covenant during peak inventory build-up periods.