The Buckle, Inc. (NYSE:BKE) is a leading retailer of casual apparel, footwear, and accessories, catering to fashion-conscious men, women, and kids. With a strong presence across 42 states and a growing e-commerce platform, the company has solidified its position as a go-to destination for quality merchandise and exceptional customer service.

Financials

In the fiscal year ended January 28, 2023, The Buckle reported annual net income of $219,919,000 and annual revenue of $1,261,102,000. The company's annual operating cash flow stood at $254,644,000, while its annual free cash flow reached $217,344,000, showcasing its robust financial performance and ability to generate substantial cash flows.

During the first quarter of fiscal 2024, which ended on April 29, 2023, the company reported net income of $34,843,000, or $0.69 per diluted share, compared to net income of $42,936,000, or $0.86 per diluted share, in the prior-year period. Net sales for the quarter decreased 7.2% to $262,480,000, with comparable store sales declining 9.0% compared to the same 13-week period in the prior year. Online sales for the quarter decreased 13.4% to $44,400,000.

The decline in sales was primarily attributable to an 8.0% decrease in the number of transactions and a 5.5% decrease in the average number of units sold per transaction, partially offset by a 6.0% increase in the average unit retail. The company's management team attributed the sales performance to a challenging retail environment and evolving consumer preferences.

Despite the top-line challenges, The Buckle's management team remained focused on maintaining a strong merchandise margin. Gross profit margin for the quarter was 46.0%, down 110 basis points from the prior-year period, as the company experienced deleverage in buying, distribution, and occupancy expenses, partially offset by a 50 basis point improvement in merchandise margins.

The company's selling, general, and administrative (SG&A) expenses increased to 29.8% of net sales, up from 28.1% in the prior-year quarter. This increase was primarily driven by higher store labor-related expenses, increased expense related to accrued paid-time-off, and higher general and administrative salaries, marketing spend, and other SG&A expense categories. These increases were partially offset by a reduction in incentive compensation accruals and lower e-commerce shipping expenses.

As a result of these factors, the company's operating margin for the quarter was 16.2%, compared to 19.0% in the first quarter of fiscal 2023. The company's effective tax rate remained consistent at 24.5% for both the current and prior-year quarters.

Recent Developments

Looking ahead, The Buckle's management team remains focused on executing its strategic initiatives, which include continued investment in its store network, e-commerce platform, and private label brands. During the first quarter, the company completed 5 full store remodels, 4 of which were relocations into new outdoor shopping centers, and closed 4 stores, one of which was a Youth store that was combined back with the full-line store upon remodel.

For the remainder of fiscal 2024, the company anticipates opening 7 new stores and completing an additional 14 full remodeling projects. These initiatives are aimed at enhancing the customer experience, improving operational efficiency, and positioning the company for long-term growth.

Merchandise Mix

The Buckle's merchandise mix during the first quarter of fiscal 2024 reflected the ongoing shifts in consumer preferences. Women's merchandise sales, which accounted for approximately 47% of total sales, were down 8.5% compared to the prior-year period, with a 9.5% decline on a 13-week comparable basis. Men's merchandise sales, representing 53% of total sales, were down 5.5%, with a 7.5% decline on a 13-week comparable basis.

Within the merchandise categories, the company's denim business continued to be a relative standout, with the combined denim categories outperforming the total business and declining only 3.5% compared to the same 13-week period a year ago. The company's private label brands, including Buckle Black and Salvage, performed well within the denim category. However, the shorts category was challenged during the quarter due to a lack of newness in the market, though the company was able to effectively manage inventory levels.

The Buckle's accessory sales were down approximately 8.5% on a 13-week comparable basis, while footwear sales declined by around 34%. These two categories accounted for approximately 11% and 6%, respectively, of first-quarter net sales, compared to 11% and 8% in the prior-year period.

The company's focus on developing its private label brands continued to pay dividends, as private label merchandise represented 46% of sales during the first quarter, up from 44% in the prior-year period. This strategic emphasis on private brands has allowed The Buckle to differentiate its product offerings and maintain strong merchandise margins.

Liquidity

The Buckle's balance sheet remains robust, with $317,200,000 in total cash and investments as of April 29, 2023. The company's current ratio stood at 2.18, and its quick ratio was 1.54, indicating a strong liquidity position. Capital expenditures for the first quarter totaled $10,829,000, primarily for new store construction, store remodels, and technology upgrades.

Outlook

Looking ahead, The Buckle's management team remains cautiously optimistic about the company's long-term prospects, despite the near-term challenges faced in the retail environment. The company's focus on delivering a compelling merchandise assortment, enhancing the customer experience, and prudently managing its operations should position it well to navigate the evolving consumer landscape and capitalize on future growth opportunities.