The Buckle, Inc. (NYSE:BKE) Q4 2023 Earnings Call Transcript
The Buckle, Inc. (NYSE:BKE) Q4 2023 Earnings Call Transcript March 15, 2024
The Buckle, Inc. beats earnings expectations. Reported EPS is $1.59, expectations were $1.44. BKE isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. Thank you for standing by and welcome to Buckle's Fourth Quarter and Fiscal 2023 Earnings release webcast. As a reminder, all participants are currently in a listen-only mode. A question-and-answer session will be conducted following the company’s prepared remarks with instructions given at that time. Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Senior Vice President of Finance, Treasurer and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel and Corporate Secretary. As a review of operating results, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement.
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995, all forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors which may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to those described in the company's filings with the Securities and Exchange Commission. The company does not undertake to publicly update or revise any forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its expressed written consent. Any unauthorized reproductions or recordings of the call should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. And now I'd like to turn the conference over to your host, Tom Heacock.
Tom Heacock: Good morning, and thanks for joining us this morning. Our March 15, 2024 press release reported a net income for the 14-week fourth quarter ended February 3, 2024 was $79.6 million, or $1.59 per share on a diluted basis, compared to net income of $87.8 million, or $1.76 per share on a diluted basis for the prior year 13-week fourth quarter ended January 28, 2023. Net income for the 53-week fiscal year ended February 3, 2024, was $219.9 million, or $4.40 per share on a diluted basis, compared to net income of $254.6 million, or $5.13 per share on a diluted basis for the prior year 52-week fiscal year and to January 28, 2023. Net sales for the 14-week fourth quarter decreased 4.8% to $382.4 million compared to net sales of $401.8 million for the prior year 13-week fourth quarter.
Comparable store sales for the 14-week fiscal quarter decreased 9.6% in comparison to the same 14-week period in the prior year, and online sales decreased 12.4% to $65.5 million for the 14-week fiscal period, which compares to $74.8 million for the prior year 13-week fiscal period. Compared to the same 14-week period a year ago, online sales were down 16.6%. Net sales for the 53-week fiscal year decreased 6.3% to $1.261 billion compared to net sales of $1.345 billion for the prior year 52-week fiscal year. Comparable store sales for the 53-week fiscal year ended February 3, 2024 decreased 8% from the prior year 53-week period ended February 4, 2023. Our online sales were down 10.3% to $206.5 million for the 53-week fiscal year, compared to $230.4 million for the prior year 52-week fiscal year and compared to the same 53-week period a year ago, online sales were down 11.8%.
For the quarter UPTs increased approximately 0.5%. The average unit retail increased approximately 1.5% and the average transaction value increased about 2%. For the full year, UPTs were flat. The average unit retail increased approximately 1% and the average transaction value increased approximately 1%. Gross margin for the quarter was 52.3%, down 70 basis points from 53% in the fourth quarter of 2022. The current quarter decline is the result of deleveraged buying, distribution and occupancy expenses partially offset by a 20 basis point improvement in merchandise margins. For the full year gross margin was 49.1%, which was down 120 basis points from 50.3% in the prior year, with the current quarter decline being due to deleverage buying, distribution and occupancy expense along with a 20 basis point reduction in merchandise margins.
Selling general administrative expenses for the quarter were 27.1% of net sales compared to 25.6% for the fourth quarter of 2022. The fourth quarter increase was due to 150 basis point increase in store labor related expenses, a 35 basis point increase in marketing spend, a 30 basis point increase in G&A salaries, a ten basis point increase in equity compensation expense and a 25 basis point increase in other SGNA expense categories, and these increases were partially offset by a 60 basis point reduction in incentive compensation accruals and a 40 basis point decrease in ecommerce shipping expenses. For the full year SG&A was 27.6% of sales compared to 25.9% for the same period last year. The full year increase was due to 135 basis point increase in store labor related expenses, a 30 basis point increase in G&A salaries, a 25 basis point increase in marketing spend, a 20 basis point increase in equity compensation expense, and a 20 basis point increase in other SG&A expense categories and these increases were again partially offset by a 60 basis point reduction in incentive compensation accruals.
Our operating margin for the quarter was 25.2% compared to 27.4% for the fourth quarter of fiscal 2022, and for the full year our operating margin was 21.5% compared to 24.4% for the same period last year. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 23%, bringing fourth quarter net income to $79.6 million for fiscal 2023 compared to $87.8 million for fiscal 2022. Income tax expense as a percentage of pretax net income for both the current and prior year full year periods was 24%, bringing net income to $219.9 million for fiscal 2023 compared to $254.6 million for fiscal 2022. Our press release also included our balance sheet as of February 3, 2024, which included the following.
Inventory of $126.3 million, which was up about 1% from the same time a year ago, and total cash and investments of $315.4 million, which was after payment of $196.7 million in dividends during the year. We ended the quarter with $128.8 million in fixed assets of accumulated depreciation. Our capital expenditures for the quarter were $9.3 million and depreciation expense was $5.9 million. For the full year, capital expenditures were $37.3 million and depreciation expense was $20.8 million. Fiscal 2023, capital spending was broken down as follows, $35.9 million for new store construction, store remodels and technology upgrades, and $1.4 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened four new stores and completed four full store remodels, two of which were relocations into new outdoor shopping centers.
We also closed three stores, bringing our full year counts to nine new stores, 18 full remodels and six store closures. Of our 18 full remodels during the year, 11 were relocations to new outdoor shopping centers, reflecting our ongoing strategy of ensuring that we are located in the best shopping environment in each of our markets. Cumulatively, over the last three years, 42 of our 56 full remodels have been relocations to new outdoor centers. Besides making better locations, these remodels also frequently enable us to take on more space with our new stores. For two of our recent projects, the extra square footage allowed us to close our standalone new store and move everything back under one roof. Current plans for fiscal 2024 include opening eight new stores and completing 15 to 19 full remodel projects with at least half of the planned being relocations to new outdoor centers.
We also have closed two stores year-to-date with two additional planned store closures in early April. Buckle ended the year with 444 retail stores in 42 states, compared with 441 stores in 42 states at the end of fiscal 2022. And now I'll turn it over to Adam Akerson, Vice President of Finance.
Adam Akerson: Thanks, Tom. Women's merchandise sales for the quarter were down about 8% against the prior year fiscal quarter and represented approximately 41% of sales compared to 42.5% in the prior year. On a 14-week comparable basis, women's merchandise sales were down approximately 12.5%. Average denim price points increased from $79.75 in the fourth quarter of fiscal 2022 to $81.25 in the fourth quarter of fiscal 2023, while the overall average women's price point increased about 1.5% from $50.30 to $51. On the men's side, merchandise sales for the quarter were down about 2% against the prior year fiscal quarter, representing approximately 59% of total sales compared to 57.5% in the prior year. On a 14-week comparable basis, men's merchandise sales were down approximately 5.5%.
Average denim price points increased from $86.25 in the fourth quarter of fiscal 2022 to $87.15 in the fourth quarter of fiscal 2023. For the quarter, overall average men's price points increased approximately 3% from $54.50 to $56.05. On a combined basis, accessory sales for the 14-week quarter were down approximately 7.5% against the prior year 14-week comparable period, while footwear sales were down about 41%. These two categories accounted for approximately 11% and 6% respectively, of fourth quarter net sales, which compares to 10.5% and 9% for each in the fourth quarter of fiscal 2022. For the quarter, average accessory price points were up approximately 1.5% and average footwear price points were up 10.5%. Denim accounted for approximately 44% of sales and tops accounted for approximately 29.5%, which compares to 41.5% and 30% for each in the fourth quarter of fiscal 2022.
Our women's denim business for the quarter was down about 6.5% compared to the same 14-week period a year ago. While the overall women's denim business was down, we were excited about the continued growth in the performance of our premium fits and fabrics in our Buckle Black label, which grew about 18.5% during the quarter. Our core BKE line also performed better than the average. For tops, our fashion tops continued to be challenging, with many of our women's guests focusing on essential styles and easy to wear pieces. Also, compared to the same 14-week period ago, our men's denim business was down about 1%, which was primarily the result of reducing our inventory of street fashion brands. In our core denim brands, we saw positive trends for the quarter with the business in BKE and Buckle Black both improving year-over-year.
The men's business had a nice performance in short sleeve tees, soft shells and vests in several of our accessory categories. We also saw strong sell-throughs in our private branded wovens, knits and sweaters for the quarter. Our Q4 comparisons also continued to be challenged with declines in our Hey Dude volume, particularly on the men's side. Fourth quarter net sales for our men's business without Hey Dude compared to the same 14-week period a year ago were down about 1.5%. During the quarter we continued to see nice growth in our youth business, with combined youth business growing approximately 4% over the prior year 14-week period. Our overall private brand penetration continued to grow as our buying teams continued to develop and deliver a strong assortment across all categories.
Private label represented approximately 50% of Q4 sales compared with 48% a year ago and 46% for fiscal 2023, compared with 44.5% in fiscal 2022. And with that, we welcome your questions. Thank you.
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