The Buckle, Inc. — Form 10-Q Summary
Business context and reporting period
The filing covers the 13 weeks ended April 28, 2012 (fiscal Q1 2012), despite the request metadata labeling the period “2011 Q1.” The comparable period ended April 30, 2011. The Buckle operates as a single-segment retailer of casual apparel, footwear, and accessories. It had 431 stores in 43 states at quarter-end, versus 422 stores in 41 states a year earlier.
Financial performance and liquidity
| Metric | Quarter ended Apr. 28, 2012 | Prior-year quarter | Change |
|---|---|---|---|
| Net sales | $263.8 million | $240.1 million | +9.9% |
| Gross profit | $114.2 million; 43.3% margin | $102.9 million; 42.9% margin | +10.9% |
| Operating income | $58.0 million; 22.0% margin | $51.4 million; 21.4% margin | +13.0% |
| Net income | $37.8 million | $33.5 million | +13.0% |
| Diluted EPS | $0.79 | $0.71 | — |
| Operating cash flow | $37.8 million | $38.9 million | Lower by $1.2 million |
Comparable-store sales rose 7.4%; online sales increased 15.1% to $19.7 million. Cash and cash equivalents were $186.7 million, short-term investments $33.4 million, and total cash and investments approximately $259.9 million. Working capital was $245.5 million. The company reported no bank borrowings; it had an available unsecured $17.5 million credit line, including a $10.0 million letter-of-credit sublimit. Total liabilities were $152.0 million and stockholders’ equity $398.0 million at quarter-end.
Investing cash outflow was $12.0 million and financing cash outflow was $5.6 million; cash increased $20.2 million during the quarter. Capital expenditures were approximately $8.8 million. The company paid $9.6 million in dividends, or $0.20 per share.
Material changes versus the prior comparable period
Sales growth reflected comparable-store gains, a full quarter from stores opened in fiscal 2011, and online growth. Comparable-store sales benefited mainly from an 8.7% increase in average retail price per item and a 0.5% increase in transactions, partly offset by 1.8% fewer units per transaction. Merchandise margins were flat; gross margin improved primarily from lower occupancy and distribution costs as a percentage of sales. Operating and net margins also improved. Operating cash flow was modestly lower, including a significant cash use from accrued employee compensation payments.
Outlook, risks, and unusual items
Management expected approximately 24 store construction projects during the rest of fiscal 2012: about 10 new stores and 14 remodels and/or relocations. Fiscal 2012 capital expenditures were estimated at $32–$36 million. Management expected existing cash, investments, and operating cash flow to fund anticipated needs for the next several years; no merger or acquisition plans were then anticipated. Results are seasonal, with holiday and back-to-school periods historically accounting for about 35% of annual sales.
The company held $14.1 million of auction-rate and preferred securities at estimated fair value, including $11.2 million of Level 3 auction-rate securities. These investments were affected by failed auctions and limited liquidity; management disclosed $1.1 million of temporary impairment and $2.7 million of other-than-temporary impairment and believed it could hold the securities until recovery. Further impairment remains a risk. Other risks cited include fashion and product-mix changes, competition, economic conditions, markdowns, and consumer demand. Operating lease obligations totaled $352.9 million. The filing reported no legal proceedings and no material change to previously disclosed risk factors.
Management said disclosure controls were effective and reported no material change in internal control over financial reporting. The filing also states that interim results may not indicate full-year performance.
Important facts for investors to verify
- Whether sales growth and margin improvement persist, particularly given higher average selling prices and flat merchandise margins.
- The sustainability of comparable-store and online sales growth, and the effects of unit volume and transaction trends.
- The valuation, liquidity, and potential further impairment of auction-rate securities, including the Level 3 assumptions.
- Execution of the planned store projects and $32–$36 million capital-expenditure estimate, alongside lease commitments and seasonal working-capital needs.