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Edited Transcript of BKE earnings conference call or presentation 10-Mar-17 2:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Buckle Inc Earnings Call

KEARNEY Mar 10, 2017 (Thomson StreetEvents) -- Edited Transcript of Buckle Inc earnings conference call or presentation Friday, March 10, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Karen Rhoads

The Buckle, Inc. - SVP of Finance & CFO

* Tom Heacock

The Buckle, Inc. - VP of Finance, Treasurer, Corporate Controller

* Dennis Nelson

The Buckle, Inc. - President and CEO

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Conference Call Participants

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* Tiffany Kanaga

Deutsche Bank - Analyst

* Julie Kim

Nomura Instinet - Analyst

* Chris Gassen

Faircourt Valuation - Analyst

* Bruce Galloway

Granite Lake Capital - Analyst

* Ujjval Dave

Ujjval Investments - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the fourth-quarter earnings release conference call.

(Operator Instructions)

As a reminder, I would like to let you know that today's conference is being recorded. Members of the Buckle's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Senior Vice President of Finance and CFO; Kelli Molczyk, Vice President of Women's Merchandising; Bob Carlberg, Senior Vice President of Men's Merchandising; and Tom Heacock, Vice President of Finance, Treasurer, and Corporate Controller. As they review the operating results for the fourth quarter and fiscal year ended on January 28, 2017, 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 express written consent. Any authorized reproductions or recordings of the call should not be relied upon, as the information may be inaccurate. At this time, I'll turn the call over to your host, Ms. Karen Rhoads. Please go ahead.

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Karen Rhoads, The Buckle, Inc. - SVP of Finance & CFO [2]

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Thank you. Good morning, everyone. We appreciate you joining the call this morning. Our March 10, 2017 press release reported that net income for the 13-week fourth quarter that ended January 28, 2017, was $36 million, or $0.74 per share on a diluted basis. And that is compared to net income of $54.3 million or $1.13 per share on a diluted basis for the prior-year 13-week quarter that ended January 30, 2016.

Net income for the 52-week fiscal year that ended January 28, 2017 was $98 million or $2.03 per share on a diluted basis. And that compares to net income of $147.3 million or $3.06 per share on a diluted basis for the prior-year 52-week fiscal year that ended January 30, 2016.

Our net sales for the 13-week fourth quarter decreased 15.7% to $280 million compared to net sales of $332 million for the prior-year 13-week fourth quarter. Comparable store sales for the quarter were down 16.1% in comparison to the same 13-week period in the prior year. And our online sales decreased 8.8% to $32.2 million.

Net sales for the 52-week fiscal year decreased 12.9% to $974.9 million compared to net sales of $1.12 billion for FY15. Comparable store sales for the full year were down 13.5% in comparison to the same 52-week period in the prior year. And online sales decreased 5.4% to $99.8 million.

As noted in this morning's press release, our net sales for the 13-week and 52-week fiscal periods that ended January 28, 2017, were reported net of the impact of both reward redemptions and accruals for estimated future rewards that are related to the Company's new guest loyalty program. The guest loyalty program launched during the fiscal quarter that ended January 30, 2016.

Absent the impact of the new loyalty program, total net sales for the fourth quarter were down 14.3% and comparable store sales were down 14.6%. For the full year, total net sales were down 11.5% and comparable store sales were down 12.2%.

Gross margin for the quarter was 44.9%, down approximately 210 basis points from 47% for the fourth quarter of last year. The decrease was driven primarily by deleveraged occupancy, buying and distribution expenses relating from the comparable store sales decline, which had about a 270 point basis point impact, and was partially offset by an 85 basis point improvement in merchandise margins for the quarter and a reduction in expense related to the incentive bonus accrual. Excluding the impact of the new loyalty program, merchandise margins for the quarter would have been down approximately 40 basis points.

For the fiscal year, gross margin was 40.7%, down approximately 230 basis points from 43% for the same period last year. The decrease was driven primarily by deleveraged occupancy, buying and distribution expenses resulting from the comparable store sales decline, and that had about a 255 basis point impact. It was partially offset by a 25 basis point improvement in merchandise margin. Excluding the impact of the new loyalty program, merchandise margins for the full year would have been down approximately 40 basis points.

Selling expanse was 22% of net sales for the fourth quarter of FY16, compared to 19.5% of net sales for the fourth quarter of FY15, with increases as a percentage of net sales, in-store payroll, online marketing and fulfillment, health insurance and certain other selling expenses, partially offset by a reduction in expense related to the incentive bonus accrual. For the fiscal year, selling expense was 21.1% of net sales compared to 19% for FY15, with increases as a percentage of net sales, in-store payroll, online marketing and fulfillment, health insurance and certain other selling expenses, partially offset by a reduction in expense related to the incentive bonus accrual.

General and administrative expenses for the quarter were 3.1% of net sales, compared to 2.4% of net sales for the fourth quarter of FY15, with increases as a percentage of net sales and expense related to the incentive bonus accrual and certain other general and administrative expenses, partially offset by a reduction in equity compensation expense. For the fiscal year, general and administrative expenses were 3.9% of net sales compared to 3.5% of net sales for FY15, with increases as a percentage of net sales across several general and administrative expense categories.

Our operating margin for the quarter was 19.8% compared to 25.1% for the fourth quarter of FY15. For the full fiscal year, our operating margin was 15.7% compared to 20.5% for FY15. Other income for the quarter was $2 million compared to $3.3 million for the fourth quarter of FY15. And other income for the full fiscal year was $3.5 million compared to $5.2 million last year.

Income tax expense as a percentage of pretax net income was 37.3% for the fourth quarter of FY16 compared to 37.2% for the fourth quarter of FY15, bringing fourth-quarter net income to $36 million for FY16 versus $54.3 million for FY15. For the full fiscal year, income tax expense was 37.3% of pretax net income for both FY16 and FY15, bringing net income to $98 million for FY16 versus $147.3 million for FY15.

Our press release also included a balance sheet as of January 28, 2017, which included the following. Inventory of $125.7 million, which was down approximately 16% from inventory of $149.6 million at the end of FY15. Our total cash and investments were $264.6 million, which compares to $231.5 million at the end of FY15.

As of the end of the year, inventory on a comparable store basis was also down approximately 16% compared to the same time a year ago. And total markdown inventory was down compared to the same time a year ago. We also ended the quarter with $169 million in fixed assets net of accumulated depreciation.

Our capital expenditures for the quarter were $4.7 million and depreciation expense was $8.7 million. For the full fiscal year, capital expenditures were $31.7 million and depreciation expense was $32.8 million.

Year-to-date capital spending is broken down as follows -- $29.5 million for new store construction, store remodel and store technology upgrades; and $2.2 million for capital spending at the corporate headquarters and distribution center. We currently expect our FY16 capital expenditures to be in the range of $25 million to $30 million, which includes primarily new store construction, store remodeling projects and certain IT investments.

For the quarter, UPTs increased approximately 3.5%, the average transaction value decreased approximately 4%, and the average unit retail decreased approximately 7%. For the full fiscal year, UPTs increased approximately 1.5%, the average transaction value decreased approximately 3%, and the average unit retail decreased approximately 4%.

Additionally, our average sales per square foot for the year was $370 compared to $430 in FY15. And our average sales per store were $1.9 million compared to $2.2 million for FY15.

Buckle ended the year with 467 retail stores in 44 states, compared to 468 stores in 44 states at the end of FY15. Additionally, our total square footage was 2.392 million square feet as of the end of the year, compared to 2.378 million square feet at the same time a year ago. And I now would like to turn the call over to Tom Heacock, our Vice President of Finance, Treasurer and Corporate Controller.

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Tom Heacock, The Buckle, Inc. - VP of Finance, Treasurer, Corporate Controller [3]

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Good morning and thanks for being with us this morning. I would like to start by highlighting the performance from our various merchandise categories for both the quarter and the full fiscal year.

Men's merchandise sales for the quarter were down approximately 9%. Our average denim price points decreased from $92 in the fourth quarter of FY15 to $87.70 in the fourth quarter FY16. For the quarter, our men's business was approximately 53% of net sales, compared to 49% last year, and our average men's price points decreased approximately 5% from $58.85 to $55.80.

For the full year, men's merchandise sales were down approximately 7%, with average denim price points decreasing from $93.05 in FY15 to $90.80 in FY16. For the year, our men's business was approximately 48.5% of sales compared to 45.5% last year, and our average men's price point decreased approximately 2.5% from $55.65 to $54.40.

Women's merchandise sales for the quarter were down approximately 21%, with our average denim price points decreasing from $95.70 in the fourth quarter of FY15 to $87.35 in the fourth quarter of FY16. For the quarter, our women's business was approximately 47% of sales compared to 51% last year, and our average women's price points decreased approximately 10% from $51.15 to $46.10.

For the full year, women's merchandise sales were down approximately 16.5%, with average denim price points decreasing from $96.15 in FY15 to $88.95 in FY16. For the full year, our women's business was approximately 51.5% of sales compared to 54.5% last year, and our average women's price points decreased approximately 7% from $50.30 to $46.80.

For the quarter, combined accessory sales were down approximately 12.5% and combined footwear sales were down approximately 20.5%. These two categories accounted for approximately 10% and 5.5%, respectively, of fourth-quarter sales, which compares to 9.5% and 5.5% for each in the fourth quarter of FY15.

Average accessory price points were down approximately 7% for the quarter and average footwear price points were down approximately 20.5%. For the full year, combined accessory sales were down approximately 10% and combined footwear sales were down approximately 14%. These two categories accounted for approximately 9% and 6%, respectively, of net sales for the year, which compares to 9% and 6% for each in FY15. Average accessory price points were down approximately 1% and average footwear price points were down approximately 10.5% for the full year.

For the quarter, denim accounted for approximately 45.5% of sales and tops accounted for approximately 31%, which compares to 46% and 30.5% for each in the fourth quarter of FY15. And for the full year, denim accounted for approximately 42% of sales and tops accounted for approximately 31%, which compares to 42.5% and 31% for each in FY15.

Our private label business was up slightly as a percentage of sales for the quarter and represented approximately 39% of sales. And for the full year it was down just slightly and represented approximately 35% of sales.

During the fourth quarter, we opened 1 new store, completed 2 full remodels and closed 4 stores post holiday, bringing our count for the full year to 5 new stores, 19 full remodels and 6 store closures. As of the end of the fiscal year, 390 of our 467 stores were in the newest format. We also closed two additional stores in February, just after the end of the fiscal year.

For FY17, we anticipate opening 2 new stores, including 1 for back to school and 1 for holiday. And we also anticipate completing 7 full remodels, which include 5 for spring and 2 for back to school. With that, we welcome your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions).

And our first question comes from the line of Tiffany Kanaga with Deutsche Bank. Please go ahead.

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Tiffany Kanaga, Deutsche Bank - Analyst [2]

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Hi. Thanks for taking our questions. Good morning. Several of your peers have discussed expectations for gross margin declines in the first quarter. And as I look at your February results, I see average price points falling at an accelerated rate. So, how are you thinking about your gross margin for the first quarter? And, also, where do you think you might settle as you work through your denim strategy and try to stabilize comps?

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Dennis Nelson, The Buckle, Inc. - President and CEO [3]

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The February in the past, we've had a lot of our guests want to buy the more expensive denim at that time. And, as you noted, the tax refunds being later, we saw a definite drop off on that during February. So, I think going forward we will still see probably some denim retail prices come down a bit for us in the first quarter.

But our gross margins, we don't make forecasts on that. We think we have our inventories managed well and in good shape, and continue to focus on, as the guest is looking to buy now, wear now, have a continued flow of new product and exciting new merchandise as the season goes forward. We think we will manage the business as we have consistently this past year.

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Tiffany Kanaga, Deutsche Bank - Analyst [4]

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Thanks. You mentioned tax refund delays. As we look back on February, how much of the comp decline do you attribute to tax refund delays or weather or other macro factors? And, additionally, have you seen any pick up into March?

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Dennis Nelson, The Buckle, Inc. - President and CEO [5]

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I think we would be part of what I've heard in the general retail response is that toward the end of the month we've seen some improvement in that. I'm sorry, I forgot the first part of the question.

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Tiffany Kanaga, Deutsche Bank - Analyst [6]

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I just wanted to know how much of your February decline you attribute to tax refund delays or weather or other macro factors?

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Dennis Nelson, The Buckle, Inc. - President and CEO [7]

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We haven't broke that out.

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Tiffany Kanaga, Deutsche Bank - Analyst [8]

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If I may ask one more on SG&A, as you work to revive the top line, in the meanwhile, where do you see opportunity to rationalize your SG&A expense? And could we expect some sort of formal cost-cutting program with a target dollar amount? Or would you at least help us think through where you might focus your efforts and what magnitude of savings you could achieve?

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Dennis Nelson, The Buckle, Inc. - President and CEO [9]

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I think we've always been conservative on our expenses. And we will continue to review all of our general expenses from supplies, travel and various things like that. We also are reviewing our renewals very closely on our leases to make sure we have the appropriate economics on our locations. But we do not have a formal cost-cutting plan. We continue to want to invest in our business that makes sense, and that will provide our future opportunities going forward.

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Tiffany Kanaga, Deutsche Bank - Analyst [10]

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Thank you so much.

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Operator [11]

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And our next question comes from the line of Simeon Siegel with Nomura Instinet. Please go ahead.

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Julie Kim, Nomura Instinet - Analyst [12]

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Good morning. This is Julie Kim on for Simeon. Thank you for taking our questions. Can you just give some color on what occurred in the online channel during the quarter as sales continued to decline? And should we expect further deceleration in that channel moving forward, or any detail on what that channel should look like?

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Dennis Nelson, The Buckle, Inc. - President and CEO [13]

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I think on part of that, our markdown on our denim compared to a year ago probably had some impact on the online sales, as well as some of our clearance on tops was not as efficient as the year before. We will be continuing to audit and review our marketing and our digital to see what improvements we can do there. And we think that we will be able to make a change on that in the near future.

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Julie Kim, Nomura Instinet - Analyst [14]

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And if I could add one more, it looks like this was the first year you had net store closures. Can you give color on what we should expect the store fleet to look like, both in the next year and further out in the longer term?

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Dennis Nelson, The Buckle, Inc. - President and CEO [15]

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We've continued to, as renewals come up, we look at each one on its own merits. And sometimes we set them up on a month-to-month basis. We have some renewed on a yearly basis. So, we continue to watch that and make sure that we have the right economics on that. We would expect probably a few more closings over the year. But we don't see any large change in our store base.

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Julie Kim, Nomura Instinet - Analyst [16]

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Okay. Great. Thank you. And best of luck.

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Operator [17]

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Our next question will come from the line of Chris Gassen with Faircourt Valuation. Please go ahead.

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Chris Gassen, Faircourt Valuation - Analyst [18]

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Good morning, everybody. I just have a general question. When you sit here and you read all of this stuff about Amazon and online and all of that stuff, I'm just wondering your general strategy when you look at this.

Do you view this whole online trend as a tsunami that's going to overtake the retail industry? Or do you view it as something of a temporary phenomenon? And how are you guys, in general, putting together your strategy going forward with this? I'm just wondering your general comments on this whole thing.

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Dennis Nelson, The Buckle, Inc. - President and CEO [19]

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We understand the online e-comm is here to stay and will have certain growth. And we intend to continue to improve and do a better job there to get more of that business. But we also still feel that, for specialty stores, we offer a great shopping experience with our talent we have in the stores. And we also focus on unique, exclusive special product that cannot be found, in most cases, elsewhere.

We think that with our talent, as far as putting outfits together and doing the fits, with a lot of appointments and the relationship our stores have, that we will be able to have some excellent stores going forward to maximize that, as well. For example, we worked with one of our partners on putting together a deal with the Fast & Furious casual clothing line where we have an exclusive on that we're working with. We started testing last fall and we have that in the stores now. And when the movie comes out in mid April, we'll have two weeks of trailers at the cinema to introduce that to more guests and create some opportunities for the stores.

So we feel that we'll review our marketing going forward and take more of an aggressive approach to crank the excitement for our business. I think for several years there, being in the best locations and having the best talent and product, we didn't have to overspend on marketing. And now we're reviewing that to see where we can invest and make a better opportunity for our guests going forward.

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Chris Gassen, Faircourt Valuation - Analyst [20]

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I'm just going to ask you a little bit of a follow-up. Can you give me a sense -- and this is just a sense or a [bumper] -- when you look at our locations in these shopping malls, here in the Detroit area we've got some newer ones that are the newer outdoor ones and we've got some upscale ones and we've got some ones, like right near my house here, that are on their last leg. They are really in bad shape. I don't know how you would categorize these -- A, B, C or whatever they would talk about the desirability of the properties. When you look around the country where Buckle is, how would you categorize our real estate in terms of where we're located in terms of the desirability of the malls?

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Dennis Nelson, The Buckle, Inc. - President and CEO [21]

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I think our overall real estate we feel like we have a very good situation. As you mentioned, some of the malls that are becoming weaker, that's where you've seen some of our closings this past year where we've either been on a month-to-month or year-to-year where the economics made sense in the past to have a store there. And as they continued to deteriorate, in a lot of cases we have stores that are in reasonable shopping distance of the ones we're closing that we feel we'll be able to create a better shopping experience than putting money into old stores where the mall isn't keeping up. So, that's how we look at it.

They'll be continued involvement there. In some of those markets, there's new areas where the growth is, that will create some opportunities. And there's certainly going to be certain malls that don't make sense going forward.

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Chris Gassen, Faircourt Valuation - Analyst [22]

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I don't know how many malls we're in. Approximately what percentage would you say are in crappy malls, to use a very sophisticated real estate term?

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Dennis Nelson, The Buckle, Inc. - President and CEO [23]

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We don't necessarily look at it that way. We look at our economics. What a mall developer might see as a C mall might be a B store for us because it's the best shopping experience for that community and we have the right setup to do business.

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Chris Gassen, Faircourt Valuation - Analyst [24]

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If you're a B store in a C mall, is the outlook -- are you just living on borrowed time with something like that?

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Dennis Nelson, The Buckle, Inc. - President and CEO [25]

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Not necessarily.

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Chris Gassen, Faircourt Valuation - Analyst [26]

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Not necessarily? Okay. Very good. Thank you very much. I appreciate your comments.

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Operator [27]

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(Operator Instructions)

We will open the line of Bruce Galloway with Granite Lake Capital. Please go ahead.

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Bruce Galloway, Granite Lake Capital - Analyst [28]

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Hi, guys. Can you just talk about to strategize to improve sales, because it seems like the sales have been trending down and it doesn't seem like it's turning? What strategy do you have in place to increase traffic? And I know it's pretty tough because the mall traffic is down so much.

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Dennis Nelson, The Buckle, Inc. - President and CEO [29]

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I think we have to look in -- I want to say that I think the last year has been a situation where it's more about managing the business than trying to generate extra sales, like where the trend has become for several years we were selling the denim that was well over $100 to $150. There's still a market for there. And I think we've managed the inventory for the right level of that sales. But we're now selling probably more jeans in the $75, $80 area then we are the $120 to $150. So, that has an impact.

And then, as you see in the gal's footwear, the fourth quarter, our dollars were down 20%. And a lot of that is due to the year and two before we were selling fashion boots, leather boots, western boots that were at $250 to $300 and more. And as that trend goes away, we're selling more $70 to $80 boots. So, you have some big retail dollars to replace. But when the fashion isn't there, it would be the wrong thing to do to try to force higher dollars on guests that want to move on to something else.

Sometimes you have more opportunities than others. But I think our teams have put out a great flow of product and did well. As you've seen, the margins have held in there very well with sales down and everything else going on. I think that's a complement to our team as far as managing the business.

They've been doing that for a number of years. And I feel that they will continue to work with our sales team on getting a great presentation and putting the right product out there. And I would guess at some point the price points will turn around. That will also give us a little better opportunity.

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Bruce Galloway, Granite Lake Capital - Analyst [30]

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Okay. Great. Thank you.

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Operator [31]

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And we will open the line of Ujjval Dave with Ujjval Investments. Please go ahead.

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Ujjval Dave, Ujjval Investments - Analyst [32]

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Hi, thanks. Hi, guys. I have a bunch of questions and most of the questions target towards long-term future of the Company. But just to be fair, I will ask one question at a time and then go back to the queue.

The first question I have is about the recent comp drop. [As I have written], earlier calls, negative comp growth is not a new thing for Buckle. To put things in perspective, during 2015 you had negative 3.5% comp on average, that worsened to 12% negative in 2016. And during first two months, if we use it as an average, it's now negative 20%.

I'm sure you guys must be analyzing all of the known and some unknown forces behind that. So, could you please share your analysis on how you're planning to address each of the known forces at least? And [retell the plat] would be very helpful.

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Dennis Nelson, The Buckle, Inc. - President and CEO [33]

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As I think I mentioned in the last question with the retail prices coming down, that's had a big effect on our comp sales. So, we are continuing to look at ways to introduce product and build multiple units per sale to make up the difference at retail dollars. As well as with the traffic in the malls down, has also had an effect, and Internet. They are all combinations.

But I think that what has also compounded the problem is the economics of a great majority of the areas we're in, from the oil industry, the ag industry, what's going on in the West Virginia type areas, the Canadian dollar discouraging them to come across to shop. So, I think there's a lot of combinations there that were good for us for a number of years, have all hit at the same time, that's had an impact on our business.

By keeping our best people and working with our guests and building stronger teams and a better product selection, and reviewing our marketing to see how we can help ourselves going forward, that's how we feel we'll get back on top of business.

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Ujjval Dave, Ujjval Investments - Analyst [34]

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Okay. That's very helpful. I will go back in the queue.

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Operator [35]

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And we have a follow-up from the line of Chris Gassen. Please go ahead.

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Chris Gassen, Faircourt Valuation - Analyst [36]

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Thank you. Can you give me a sense of the store level economics? And I was actually pleasantly surprised that, given the sales figures for this year, you guys were still able to earn two bucks a share given that. And how much flexibility do you have to maintain current levels of profitability if sales were to continue to decline?

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Dennis Nelson, The Buckle, Inc. - President and CEO [37]

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Karen or Tom, do you want to take that?

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Chris Gassen, Faircourt Valuation - Analyst [38]

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In other words, we've got more problems with mall traffic, and you hear this or that or whatever, pricing in denim doesn't pick up. In other words, if comps are down, continued, maybe not 25, 30% but if it just continues, do you have enough flexibility to maintain profitability?

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Karen Rhoads, The Buckle, Inc. - SVP of Finance & CFO [39]

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I think Dennis mentioned earlier, we really try and always be very conservative and look at ways to be smart with our dollar spending. But it's a pretty fine line between, even in the stores managing payroll, we want the stores to manage payroll, but we also want the stores to have enough people on the sales floor to really service the guests when they're in the store.

We're known for -- our mission is to provide the most enjoyable shopping experience possible for our guests. And if we cut staffing too lean, we're not going to live up to our mission statement. So, it really is that fine line between making sure that we are investing in our stores, investing in our people for future growth, as well as making sure we're saving dollars where we can. So, we certainly are aware of that and look for ways that makes sense business-wise.

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Chris Gassen, Faircourt Valuation - Analyst [40]

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Given the nature of the leases that we're in, we've got sales $1.9 million per store. Is there a level of sales per store where the alarm button really goes off and says -- okay, now we've really got some trouble here because the store level economics are such that we have to have certain levels before we've got real problems?

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Dennis Nelson, The Buckle, Inc. - President and CEO [41]

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I think what we look at is each store, because we have a lot of different situations. We're in smaller communities in the Midwest. We're in the cities. So, you could have a $1 million store in a smaller community that you'd be very happy with. We just look at each situation on its own merits and go from there.

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Chris Gassen, Faircourt Valuation - Analyst [42]

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Okay. Thank you very much.

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Operator [43]

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Okay. And we'll go back to the line of Ujjval Dave. Please go ahead.

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Ujjval Dave, Ujjval Investments - Analyst [44]

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Hi. In general, the apparel industry is facing very tough patch, as other callers also mentioned. And I heard various reasons and justification behind negative growth given by many of the CEOs. But lately a lot of things are going positive in the economy, including the higher wages, employment is getting better, higher consumer confidence. But apparel industry isn't getting any break there. Potential signs are that malls, in particular, are having secular decline. And I think Dennis confirmed that, as well. People change their habits, how they shop, where they shop.

And this is even trickier among younger generation. Basically they just stop coming to the malls. Either they are shopping online or going to the discount stores. And in the case of Buckle, I think they are not getting this young generation.

So, since Buckle is making most of their revenue from big end mall stores and very limited transaction online, are you guys avoiding online or not very enthusiastic about online due to low-margin business? If you concur with what I'm understanding about your industry, and consumer habits, my question is how are you planning to connect with the younger customer base?

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Dennis Nelson, The Buckle, Inc. - President and CEO [45]

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I think with some of our newer product brands that the merchandisers are bringing in, that is going to appeal to the younger guests, and some of the newer price points will be helpful, as well. And, as I mentioned earlier, we are going to do an audit of our brand and see if there's a better way to market our brand to our guests.

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Ujjval Dave, Ujjval Investments - Analyst [46]

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That is fair. If consumers are coming to the stores and you have great customer service in the store and you can convince them or appeal them towards in-person purchase. But if they don't come to the store, how are you going to increase your sales? How are you going to sell the product on new quality stuff to them?

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Dennis Nelson, The Buckle, Inc. - President and CEO [47]

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I think that's what we just referred to as looking at our social media, our branding of the business, as well as looking to improve our digital to all those phases to help build our business.

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Ujjval Dave, Ujjval Investments - Analyst [48]

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Related to that, in the last conference call you conveyed that you are having iOS [biz] Buckle app. I found that app quite unique and helpful. But using that app consumers can [result] their item which is in the nearby store. And so far I don't see any way to buy items on Buckle.com and get it shipped to the local store for free. You mentioned that you might be considering incorporating such features in few months. So, do you have any update on these omnichannel initiatives?

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Dennis Nelson, The Buckle, Inc. - President and CEO [49]

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The site-to-store they're working on presently and hope to have that hopefully by fall. Maybe sooner.

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Ujjval Dave, Ujjval Investments - Analyst [50]

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So, [you guys will implement] I can purchase item, make the payment online and then go to the store without any charges, I can pick it up from there? Is that right?

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Dennis Nelson, The Buckle, Inc. - President and CEO [51]

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Yes.

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Ujjval Dave, Ujjval Investments - Analyst [52]

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Okay. Thank you. I'll go back in the queue.

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Operator [53]

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All right. And we will open the line of Chris Gassen. Please go ahead.

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Chris Gassen, Faircourt Valuation - Analyst [54]

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You read a lot in the paper about some of the various retailers trying to do more online because of the trends. How tough is that business in terms of getting the systems in place to be able to manage that properly?

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Dennis Nelson, The Buckle, Inc. - President and CEO [55]

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I think we have a pretty good system in place. Some of it comes down to marketing. But also part of it is to be able to do so profitably where people are not giving out big sales, huge discounts and then do free shipping back and forth. We've seen quite a bit in the press about that being a negative to a lot of retailers. So, it's probably not so hard to generate more sales if you don't care about the bottom line.

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Chris Gassen, Faircourt Valuation - Analyst [56]

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Do you need a lot of extra IT people? Do you get vendors to take care of that for you? From somebody who is not experienced with any of this, how difficult is it to get this thing up and running? Can you just call a vendor and say -- we want to do some online, put together a website, manage a warehouse for us, or is it a real slog?

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Dennis Nelson, The Buckle, Inc. - President and CEO [57]

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We already have an online e-comm business going where we fulfill from ourselves. We have an IT department. And we've been running e-comm business now since the early 2000s.

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Chris Gassen, Faircourt Valuation - Analyst [58]

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Okay. Fair enough. Thank you very much.

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Operator [59]

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There are no other questions in queue at this time.

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Karen Rhoads, The Buckle, Inc. - SVP of Finance & CFO [60]

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If there are no other questions at this time, we, again, just want to thank each one of you for joining the call today. We appreciate you listening in and appreciate the questions. Thanks and have a great weekend.

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Operator [61]

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Ladies and gentlemen, today's conference will be made available for replay after 10.00 today until March 24 at midnight. You may access the AT&T executive playback service at any time by dialing 1-800-475-6701 and entering the access code 419676. International participants may dial 1-320-365-3844. That does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.