Buckle Inc (BKE) 2007 Q1 法說會逐字稿

Ladies and Gentlemen, thank you for standing by. Welcome to the first quarter earnings release conference call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session with instructions given at that time. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded.

I would now like to review the 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 that 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 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.

I'd now like to turn the conference over to Ms. Karen Rhoads. Please go ahead.

Thank you. Good morning. We appreciate you being on the call today. To start out with, our May 24, 2007 press release reported net income for the 13 week quarter that ended May 5, 2007, was $12.2 million or $0.40 per share on a diluted basis, and that compares with $9.4 million, or $0.31 per share on a diluted basis for the corresponding 13 week quarter that ended April 29 of 2006. Please note that the prior year's earnings per share had been adjusted to reflect the impact of our three for two stock split, which was on January 12, 2007.

Our net sales for the quarter increased 10.5% to $121.1 million, compared to net sales of $109.6 million for the prior year first quarter. Our comparable store sales for the quarter increased 6.4%, compared to the same 13 week period in the prior year. Our gross margin for the quarter improved approximately 200 basis points to 37.6%. This improvement was driven primarily by an increase in merchandise margin which had about 150 basis point impact and also by leveraged occupancy and buying costs, which had about a 60 basis point impact. These improvements were partially offset by an increase in expense related to our incentive bonus accruals.

The selling expense for the quarter was 19.3% of net sales, which was a reduction of approximately 70 basis points from the first quarter of fiscal 2006. The decrease was driven primarily by reductions as a percentage of net sales in store payroll expense, stock option compensation expense, advertising expense, and certain other selling expenses. These improvements were partially offset by an increase in expense that was related to the incentive bonus accrual for the quarter.

General and administrative expenses for the quarter were 4.1% of net sales, which was an increase of about 60 basis points from the first quarter of fiscal 2006. This increase was primarily attributable to increases in equity compensation related to grants of non-vested stock shares, also expense related to the incentive bonus accrual as mentioned before and to compensation expense related to unrealized gains on the Company's non-qualified deferred compensation plans. These were partially offset by reductions as a percentage of net sales in certain other general and administrative expenses. Our operating margin for the quarter was 14.1% compared to 12.1% for the first quarter of fiscal 2006.

Other income, I think I'm going to let Tom take over for right now as I have a little tickle in my throat there. So excuse me.

Other income during the quarter increased approximately 34% to $2.1 million, driven primarily by an increase in income earned on the Company's cash and investments, an increase in income earned related to unrealized gains in the Company's non-qualified deferred compensation plan, and additional insurance proceeds received during the quarter related to Hurricane Katrina and Hurricane Rita losses. Income tax expense as a percentage of pre-tax net income for the quarter was 36.6%, compared to 37% for the first quarter of fiscal 2006, bringing first quarter net income to $12.2 million for fiscal 2007 versus $9.4 million for fiscal 2006, an increase of 30.3%. For the quarter, UPT's increased approximately 1%. The average transaction value increased approximately 3.5%, and the average unit retail increased approximately 2%.

Our press release also included a balance sheet as of May 5, 2007, which includes the following: Inventory of $70.3 million, which was up approximately 4.3%, from inventory of $67.4 million at the end of the first quarter of fiscal 2006, and total cash and investments of $192.7 million compared to $183.4 million at the end of fiscal 2006 and $201.1 million at the same time a year ago. We ended the quarter with $95.8 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $6.9 million net of payables and depreciation expense was $4.7 million. We still expect full year capital expenditures to be in the range of 27 to $30 million.

The Buckle ended the quarter with 353 retail stores in 38 states compared with 341 stores in 38 states at the end of the first quarter of fiscal 2006. With the opening of two new stores during fiscal May, we currently operate 355 retail stores in 38 states, and with that, I'll turn the call over to Dennis Nelson, our President and CEO.

Good morning. Thank you for calling in. We're very pleased with our first quarter results, a good response to our inventory and our sales management team did a nice job with our stores. I will open up for questions now.

(OPERATOR INSTRUCTIONS). We'll go to the line of Shaun Smolarz with Sidoti & Company. Please go ahead.

Hi, good morning.

Good morning, Shawn.

My first question relates to the SG&A expense. It seems like in the quarter based on my calculation on a dollar basis it was up about 10% for the quarter and based on your older comments it seems like that was based on some of the bonus accrual and other equity compensation and my question is do you anticipate that level of an increase going forward?

Well, I think, Shaun, part of it on the bonus accrual, that's dependent upon growth in three categories, so that accrual comes from growth in comparable store sales, gross margin, and net income, so that will vary each quarter depending upon the results in each of those three areas, and the accrual is on growth in those areas, so each of those areas has to grow over the comparable stores year-over-year and the other two on gross margin and pre-bonus and pre-tax net income is growth over a three year rolling average, so that will be dependent upon performance.

On the non-vested shares compensation, we have three years of those out there now. We have granted shares in '05, '06 and '07 for each of those three fiscal years, and part of that last year, early on in the year, where it kind of depends too whether we are vesting or accruing to assume that we'll vest all of those shares at the end of the year because there are some performance targets we have to meet. In this year, first quarter, we did vest at this point the accrual is based on all of the shares vesting. So I don't know if that answers your question but that's kind of how the first quarter accrual was made.

Okay. And next question is what are your views to the extent to which the macroeconomy environment could affect sales volume later in the year, like some retailers are being more cautious on the consumer like with rising gas prices and other economical factors, so what are your opinions on the economy?

Well, I guess we know the gas factor could have an effect on our business slightly, but basically, our history has been if the product is right and we're doing a good job, that that will not have a huge impact on our business but would have some effect.

And this quarter, it seems like you guys did very well in a rather difficult retail environment overall. Outside of the easy year-over-year comparison, what else would you attribute on the strong performance to?

Well, I think our merchandisers did a nice job of putting a good selection of tops and shorts in our stores and we capitalized especially in March on that business. I think we had cleaned up some of our sale inventory we had in the stores a year ago so we were selling more regular priced product than a year ago, and just a nice response from our guess, on our merchandise selection.

Did your marketing efforts come into play at all?

We were, we did have a small promotion with Schwinn Motorbikes during the quarter but we actually did not do magazine advertising. We did more in house things with our internet marketing to small degrees, but basically feel having the best locations in the malls and also having very good store managers creating a good environment for shopping is our best advertising.

All right and my last question, is could you discuss any possible plans for the total cash balance which is is very strong to end the first quarter?

Well, we review that at each Board meeting and we have our Annual Meeting next week, but have no other comments on that.

Okay, all right, thank you very much. Thanks, Shaun.

(OPERATOR INSTRUCTIONS). And we have no questions.

Okay.

All right

Thanks, Julie. Thanks, Karen, and everybody.

Yes.

Thanks for calling in.

Thanks for those who called in today to listen to the call.

Goodbye.

Thank you. Ladies and Gentlemen, this conference will be available for replay after 2:00 p.m. Central Time today through midnight, June 7th 2007. You may access the AT&T teleconference replay system at any time by dialing 1-800-475-6701 and entering the access code 873545. International participants dial 320-365-3844. Those numbers, again, are 1-800-475-6701 and 320-365-3844, and enter the access code 873545. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

Thank you.