The Buckle, Inc. — Form 10-Q Summary
Business context and reporting period
The filing is for the 13 and 39 weeks ended October 30, 2010, and is unaudited. The request metadata says “2009 Q3,” but the filing itself reports fiscal 2010 Q3, compared with the periods ended October 31, 2009. The Buckle operates as one reportable segment, selling casual apparel, footwear, and accessories. It had 421 stores in 41 states at quarter-end, versus 404 a year earlier.
Financial performance and position
| Metric | 13 weeks ended Oct. 30, 2010 | 39 weeks ended Oct. 30, 2010 |
|---|---|---|
| Net sales | $243.3 million; up 5.2% | $646.8 million; up 3.7% |
| Gross profit / margin | $105.9 million / 43.5%; margin down from 44.2% | $274.8 million / 42.5%; margin down from 43.4% |
| Operating income / margin | $54.3 million / 22.3%; margin down from 22.4% | $133.1 million / 20.6%; margin down from 21.1% |
| Net income / diluted EPS | $34.4 million / $0.73; up 3.2% and 2 cents, respectively | $85.2 million / $1.81; approximately flat and down 2 cents, respectively |
| Operating cash flow | Not separately reported for the quarter | $84.1 million, versus $70.3 million |
Quarterly comparable-store sales rose 0.5%; year-to-date comparable-store sales fell 1.0%. Online sales grew 20.8% in the quarter to $15.1 million and 20.4% year to date to $41.2 million. Cash and cash equivalents were $139.2 million and short-term investments $25.3 million. Working capital was $208.1 million. Total cash and investments were $235.7 million. The company had no bank borrowings; its $17.5 million unsecured credit line was available, subject to a $10.0 million letter-of-credit limit.
At October 30, total assets were $543.6 million, total liabilities $131.4 million, and stockholders’ equity $412.2 million. These balance-sheet figures are compared with January 30, 2010, not the prior-year quarter. Inventory was $111.2 million, up from $88.2 million at January 30. Capital expenditures were $47.4 million year to date. The company reported $347.6 million of future operating lease obligations.
Material changes and management commentary
- Quarterly sales growth reflected new stores, online growth, and a 0.5% comparable-store increase. Comparable-store traffic transactions declined 3.2%, partly offset by a 2.3% increase in average price per piece and a 1.4% increase in units per transaction.
- Year-to-date sales growth was offset by weaker comparable-store sales, with transactions down 6.6%. New stores and online sales contributed to overall growth.
- Gross margin contracted in both periods, primarily as buying, distribution, and occupancy costs rose; management cited higher rent and common-area costs, new-store and remodel costs, fixture depreciation, and the new distribution center. Reduced markdowns and more private-label sales partly offset these pressures.
- Other income declined, mainly because lower interest rates reduced returns on cash and investments. Management also included a $1.1 million state sales-tax refund in other income during Q1.
- Operating cash flow improved year to date despite higher inventory investment. Investing cash outflow was $49.5 million, including $47.4 million of property and equipment purchases; financing cash outflow was $30.8 million, including $28.0 million in dividends and $6.0 million in share repurchases.
Outlook, risks, and unusual items
Management estimated fiscal 2010 capital expenditures of $56–$60 million and expected approximately four more store projects during the remainder of the year, including one new store. It believed cash, investments, and operating cash flow would be sufficient for anticipated needs for the next several years. No earnings or sales guidance was provided.
After quarter-end, the board authorized a one-time $2.50-per-share cash dividend, payable December 21, 2010 to shareholders of record December 3. The company also paid regular quarterly dividends during the reported period and repurchased 246,800 shares for $6.0 million.
Auction-rate securities and preferred securities had $23.8 million par value and $20.0 million reported fair value; the filing describes failed auctions, limited liquidity, and potential issuer and valuation risks. The reported values include $1.1 million of temporary impairment and $2.7 million of other-than-temporary impairment. Management said it intended and was able to hold the investments until recovery, and did not expect further auction failures to materially affect business funding. The company cautioned that consumer spending, economic conditions, fashion trends, product mix, competition, markdowns, and expansion spending could adversely affect results. The business is seasonal, and interim results may not indicate full-year performance.
Important facts for investors to verify
- Confirm the intended reporting year: the supplied metadata says 2009 Q3, while the filing covers fiscal 2010 Q3.
- Track comparable-store sales and transactions alongside online sales growth and new-store contributions.
- Assess whether occupancy, distribution, and depreciation costs continue to pressure gross margins.
- Review auction-rate security liquidity, valuation assumptions, and any further impairment, as well as the effect of the special dividend on cash.
- Compare actual fiscal 2010 capital spending with management’s $56–$60 million estimate and monitor inventory levels and seasonal selling.