Buckle Inc (BKE) 2006 Q2 法說會逐字稿

This is Tom [Hicock] with The Buckle and this is a recording of the Buckle's commentary related to the Company's quarterly earnings press release for the 13-week period ended July 29, 2006.

Our August 17, 2006 press release reported that net income for the 13-week period ended July 29, 2006 was $6.6 million or $0.33 per share on a diluted basis compared with $7.6 million or $0.38 per share on a diluted basis for the corresponding 13-week period ended July 30, 2005. This was a decrease in net income of 12.1% on a 1.7% net sales decrease during the period. For the quarter net sales decreased 1.7% to $102.4 million from net sales of $104.1 million for the second quarter of fiscal 2005.

Comparable store sales for the second quarter for stores open at least one full year decreased 5.7%. Gross margin dollars decreased 6% compared to the prior year's second quarter. This resulted in a gross margin percentage of approximately 33.3% which was a decline of approximately 150 basis points as a percentage of net sales from the second quarter of fiscal 2005.

Looking at the components of cost of goods sold, actual merchandise margins declined approximately 40 basis points. The Company also had increased in second-quarter expense as a percentage of net sales related to deleveraged occupancy and buying costs and to stock option compensation expense. These increases were, however, partially offset by a reduction in incentive bonus accrual.

Selling expense for the second quarter was 21.6% as a percentage of net sales which was an increase of approximately 70 basis points from the second quarter of fiscal 2005. This increase was primarily attributable to increases as a percentage of net sales in Internet fulfillment and marketing expenses, store salaries, store fixture expense, stock option compensation expense, bankcard fees and certain other selling expenses. These increases were, however, partially offset by reductions in the incentive bonus accrual, payroll taxes and certain other selling expenses.

General and administrative expenses for the second quarter were 3.6% as a percentage of net sales which was a decrease of approximately 10 basis points compared to the second quarter of fiscal 2005. This decrease was attributable to reductions in the incentive bonus accrual and compensation expense related to restricted stock grants and unrealized gains in the Company's nonqualified deferred compensation plan. These reductions were, however, partially offset by increases as a percentage of net sales in stock option compensation expense, home office payroll expense and certain other general and administrative expenses. Prior year general and administrative expenses were also positively impacted by a onetime gain on the disposal of assets.

Income from the operations was 8.1% as a percentage of net sales for the second quarter ended July 29, 2006 versus 10.3% for the quarter ended July 30, 2005. Other income during the second quarter of fiscal 2006 was up compared to the second quarter of fiscal 2005 due to an increase in income earned on the Company's cash and investments during the period resulting from higher interest rates and the proceeds received related to the settlement of a Hurricane Katrina insurance claim and the settlement of a lawsuit related to Visa MasterCard interchange fees.

The aforementioned changes resulted in an overall decrease of approximately 11.4% in our second-quarter pretax net income compared to the second quarter of fiscal 2005. Income tax expense for the period decreased approximately 10.2% compared to the same period a year ago bringing second-quarter net income to $6.6 million or approximately 6.5% as a percentage of net sales.

Our press release also included a balance sheet as of July 29, 2006 which includes the following -- inventory of $90.9 million which was down approximately 10% from inventory of $100.9 million at the end of the second quarter of fiscal 2005 and total cash and investments of $184.9 million compared to $199.8 million at the end of fiscal 2005 and $149.6 million at the same time a year ago. The buckle ended the quarter with 346 retail stores in 38 states compared with 333 stores in 38 states at the end of the second quarter of fiscal 2005.

It's our company policy not to provide any guidance on current sales or to project results for the next quarter. Additionally, any forward-looking statements made during this commentary involve material risks and uncertainties and are subject to change based on factors that 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 SEC. I hope this brief commentary has answered your questions. If you have any further questions please call Karen Rhoads at 308-236-4440 or myself at 308-238-2443. Thanks.