The Buckle, Inc. — Form 10-Q Summary
Reporting period: Second quarter and first half of fiscal 2022, ended July 30, 2022; comparisons are to periods ended July 31, 2021. The request metadata says 2021 Q2, but the supplied filing is for 2022 Q2.
Business: Apparel, footwear, and accessories retailer operating one reportable segment through stores and e-commerce. Buckle had 441 stores in 42 states at quarter-end. Online sales were 15.3% of quarterly net sales and 16.5% year to date.
Key financial results
Dollar amounts are in millions except per-share data. Margins are percentages of net sales.
| Metric | Q2 FY2022 | Q2 FY2021 | First half FY2022 | First half FY2021 |
|---|---|---|---|---|
| Net sales | $302.0 | $295.1 | $611.0 | $594.2 |
| Gross profit | $145.4 | $142.0 | $297.5 | $289.6 |
| Gross margin | 48.2% | 48.1% | 48.7% | 48.7% |
| Operating income | $65.7 | $67.9 | $138.8 | $143.7 |
| Operating margin | 21.8% | 23.0% | 22.7% | 24.2% |
| Net income | $50.1 | $51.4 | $105.4 | $108.7 |
| Diluted EPS | $1.01 | $1.04 | $2.13 | $2.20 |
| Operating cash flow | — | — | $69.5 | $136.5 |
Financial position and changes
- Quarterly sales rose 2.3%; comparable sales increased 1.6%. Higher average retail price and slightly more units per transaction were partly offset by 1.5% fewer transactions. E-commerce sales grew 6.5% to $46.2 million.
- First-half sales increased 2.8%; comparable sales rose 2.6%. Online sales grew 3.5% to $100.6 million.
- Quarterly operating income and net income declined despite sales growth. Selling, general, and administrative expenses rose to 26.4% of sales from 25.1%, primarily reflecting higher store labor and other expenses. Quarterly gross margin edged up; merchandise margins were flat. First-half gross margin was unchanged, while operating margin declined.
- Cash and cash equivalents were $266.7 million, short-term investments $17.4 million, and total cash and investments $304.8 million. Working capital was $218.8 million. There were no bank borrowings; the company had a $25 million unsecured credit line, expiring July 31, 2023.
- First-half operating cash flow fell to $69.5 million from $136.5 million, mainly due to inventory rebuilding, accounts payable timing, and payment of prior-year incentive bonuses. Cash increased $12.8 million to $266.7 million. Capital expenditures were $14.9 million; dividends paid were $35.1 million.
- Inventory was $128.5 million, up from $102.1 million at fiscal year-end. Operating lease liabilities totaled $264.5 million; these are lease obligations, not bank borrowings.
Outlook, risks, and other matters
- Management estimated fiscal 2022 capital expenditures of $22–$27 million and expected to complete two new stores and 11 additional full remodels during the remainder of the year. It stated existing cash, investments, and operating cash flow should fund anticipated needs for the next several years. No specific sales or earnings forecast was provided.
- Management cited potential pressure from weaker demand, product-mix or fashion changes, competition, and general economic conditions. Inventory markdowns or obsolescence, seasonal sales variability, and lower cash generation are also relevant risks. The business is seasonal, with holiday and back-to-school periods historically important.
- A new five-year private-label credit-card agreement took effect July 1, 2022. The bank owns the accounts and bears customer nonpayment risk; Buckle receives a percentage of card sales and may receive performance incentives, recorded in net sales.
- No legal proceedings or material changes to previously disclosed risk factors were reported. Management stated disclosure controls were effective and there were no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether sales and comparable-sales trends persist, particularly given fewer quarterly transactions and the seasonal nature of results.
- Whether elevated inventory converts to sales without increased markdowns or margin pressure.
- Whether higher store labor and other operating costs continue to weigh on operating margins.
- How operating cash flow and capital spending develop, including execution of planned store projects and technology investments.
- The contribution and performance terms of the new private-label card agreement; the filing does not quantify its expected financial impact.