Business context and reporting period
The Buckle, Inc. is a U.S. retailer of casual apparel, footwear, and accessories, operating stores and an e-commerce platform as one reportable segment. This 10-Q covers the 13 weeks ended May 4, 2024; the comparable period ended April 29, 2023 (comparable-store sales are measured against the period ended May 6, 2023). The request metadata labels the period “2023 Q1,” but the filing is for fiscal 2024 Q1.
Buckle operated 440 stores in 42 states at quarter-end. Online revenue was 16.9% of sales, down from 18.1% a year earlier.
Financial performance and condition
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Net sales | $262.5 million | $282.8 million | Down 7.2% |
| Gross profit / margin | $120.7 million / 46.0% | $133.3 million / 47.1% | Margin down 1.1 percentage points |
| Operating income / margin | $42.4 million / 16.2% | $53.7 million / 19.0% | Income down 21.1% |
| Net income | $34.8 million | $42.9 million | Down 18.8% |
| Diluted EPS | $0.69 | $0.86 | Down $0.17 |
| Operating cash flow | $29.9 million | $33.3 million | Down $3.4 million |
Cost of sales was 54.0% of revenue versus 52.9%; SG&A was 29.8% versus 28.1%. The gross-margin decline reflected 1.60 percentage points of deleveraged buying, distribution, and occupancy costs, partly offset by a 0.50-point improvement in merchandise margins. Net income margin was 13.3%, compared with 15.2%.
Cash and cash equivalents were $267.4 million and short-term investments were $23.1 million at May 4, 2024. Total cash and investments, including $26.8 million of long-term investments, were $317.2 million. Working capital was $241.5 million. The company had no bank borrowings; its $25 million unsecured credit line expires July 31, 2025, with $2.8 million of outstanding letters of credit. Operating lease liabilities totaled $323.9 million; these are lease obligations, not bank borrowings.
Investing cash outflow was $12.9 million, including $10.8 million of property and equipment purchases; dividends paid were $17.8 million. Cash decreased $0.8 million during the quarter to $267.4 million.
Material changes versus prior comparable period
- Comparable-store sales fell 9.0%. Management attributed lower sales to an 8.0% decline in transactions and a 5.5% decline in units per transaction, partly offset by a 6.0% increase in average unit retail.
- Online sales declined 13.4% to $44.4 million from $51.3 million.
- Average retail price per item rose 6.0%, primarily reflecting merchandise mix and price-point changes.
- SG&A dollars decreased modestly, but rose as a share of sales because of lower revenue and higher store labor, paid-time-off accrual, G&A salaries, and marketing costs. Lower incentive compensation accruals and e-commerce shipping expense partly offset those increases.
- Inventory was $130.7 million versus $126.3 million at February 3, 2024. The inventory markdown and obsolescence adjustment was $10.4 million, up from $9.1 million at fiscal year-end.
Outlook, risks, and other notable items
Management expects fiscal 2024 capital expenditures of approximately $32–$38 million, primarily for store projects and technology. It anticipates completing seven new stores and 14 additional full remodels during the remainder of the fiscal year. Management believes cash, investments, and operating cash flow will fund anticipated capital expenditures and working capital needs for the next several years. No sales or earnings guidance was provided.
Management cautions that demand, product mix, fashion trends, competition, general economic conditions, and retail-industry conditions could adversely affect sales, profitability, and cash flow. The business is seasonal, with holiday and back-to-school periods historically contributing about 35% of annual sales. Interest-rate sensitivity disclosure estimates that a 0.25-percentage-point decline in rates earned on cash and investments would reduce net income by approximately $0.5 million, or less than $0.01 per share.
The filing reports no legal proceedings and no material changes to previously disclosed risk factors. Management reported effective disclosure controls and no material change in internal control over financial reporting. CEO Dennis H. Nelson adopted a Rule 10b5-1 plan providing for sale of up to 450,000 shares, with sales expected to begin in July 2024. The company paid a $0.35-per-share dividend during the quarter and made no share repurchases.
Important facts for investors to verify
- Whether the sharp comparable-store and online sales declines continue, and whether transactions and units per transaction stabilize.
- Whether merchandise-margin improvement can offset occupancy and other fixed-cost deleverage as sales change.
- Inventory quality, markdown exposure, and the adequacy of the $10.4 million inventory adjustment.
- Execution and returns from planned store openings, remodels, and $32–$38 million of capital expenditures.
- Cash generation and dividend sustainability in light of seasonal working-capital needs and substantial lease commitments.
- The filing period: this report is for Q1 fiscal 2024 ended May 4, 2024, notwithstanding the “2023 Q1” request metadata.