Buckle Inc (BKE) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Buckle fourth-quarter earnings release conference call. At this time all participant lines are in a listen-only mode. Later there will be an opportunity for your questions. Instructions will be given at that time. As a reminder today's conference call is being recorded.

To start today's conference call off, we have members of the Buckle management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Vice President of Finance and CFO; Bob Carlberg, Vice President of Men's Merchandising; Kyle Hanson, Corporate Secretary and General Counsel; and Tom Heacock, Corporate Controller.

As they review the operating results for the fourth quarter which ended January 29, 2011, 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 statement. 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 unauthorized reproduction or recording of the call should be relied upon as the information may be inaccurate -- should not be relied upon as the information may be inaccurate, sorry about that.

With that being said, I would now like to turn the conference over to Karen Rhoads. Please go ahead.

Thank you and good morning, everyone. We are glad you could join us for the call today. Our March 10, 2011 press release reported that net income for the fourth quarter ended January 29, 2011, was $49.5 million or $1.05 per share on a diluted basis which is up 17.4% from net income of $42.1 million or $0.90 per share on a diluted basis for the prior year fourth quarter that ended January 30, 2010.

Net income for the 52-week fiscal year ended January 29, 2011 was $134.7 million or $2.86 per share on a diluted basis which is up 5.8% from net income of $127.3 million or $2.73 per share on a diluted basis for the 52-week fiscal year that ended January 30, 2010.

Net sales for the 13-week fourth quarter increased 10.4% to $303.1 million compared to net sales of $274.4 million for the prior year fourth quarter. Comparable store sales for the quarter increased 6.3% and online sales which are not included in comparable store sales increased 17.3% to $21.1 million.

Net sales for the 52-week fiscal year ended January 29, 2011, increased 5.7% to $949.8 million compared to net sales of $898.3 million for the prior-year 52-week fiscal year that ended January 30, 2010.

Comparable store sales for the year increased 1.2% and our online sales which again are not included in comparable store sales, increased 19.3% to $62.4 million. Gross margin for the quarter improved approximately 40 basis points to 47.6%. The improvement was driven by an increase in merchandise margins which had a 70 basis point impact and was partially offset by a 30 basis point increase in distribution expenses which were the result of additional depreciation expense related to our new distribution center and increased shipping cost.

For the fiscal year, gross margin declined approximately 50 basis points to 44.1%. The decline was driven by an increase in distribution and occupancy cost which had a 90 basis point impact and it was partially offset by a 40 basis point improvement in merchandise margins. The improvement in merchandise margins for both the quarter and the year was primarily a reflection of reduced markdowns as a result of strong sellthroughs on new products and an increase in our private label business which were partially offset by an increase in redemptions from our primo loyalty card program.

The increase in occupancy costs for the full year was primarily the result of increases in rent and common area maintenance costs related to new and remodeled stores as well as depreciation expense related to new fixture rollouts. To a lesser extent, it was also attributable to additional depreciation expense related to our new distribution center that went live during the third quarter and also to increased shipping costs.

Selling expense for the quarter was 18.8% of net sales which was an increase of approximately 40 basis points from the fourth quarter of fiscal 2009. The increase was driven by increases in expense related to health insurance claims, incentive bonus accrual and store marketing. These increases were partially offset by reductions as a percentage of net sales in store supplies and certain other selling expenses.

For the fiscal year, selling expense was 18.7% of net sales which was a reduction of approximately 10 basis points from fiscal 2009. The reduction was driven by a decrease in expense related to the incentive bonus accrual which was partially offset by increase in expense related to health insurance claims, Internet related fulfillment and marketing expenses and certain other selling expenses.

General and administrative expenses for the quarter were 3.2% of net sales which was a reduction of approximately 80 basis points from the fourth quarter fiscal of 2009. This reduction was driven primarily by reductions in expense related to incentive bonus, vacation accruals, and equity compensation expense which were partially offset by increases and certain other general and administrative expenses.

For the fiscal year, general and administrative expenses were also 3.2% of net sales which was a reduction of approximately 40 basis points from fiscal 2009. This reduction was driven primarily by reductions in expense related to the incentive bonus accrual, vacation accruals and equity compensation expense which again were partially offset by increases in certain other general and administrative expenses.

Our operating margin for the quarter was 25.6% compared to 24.8% for the fourth quarter of fiscal 2009. For the full year, our operating margin was 22.2% in both fiscal 2010 and fiscal 2009.

Other income for the quarter was $1 million which compares to $1.4 million for the fourth quarter of fiscal 2009 and other income for the full year was $3.9 million compared to $3.7 million last year.

Income tax expense as a percentage of pretax net income was 37.2% for the fourth quarter of fiscal 2010 compared to 38.9% in the fourth quarter of fiscal 2009 bringing fourth-quarter net income to $49.5 million for fiscal 2010 versus $42.1 million for fiscal 2009, an increase of 17.4%.

For the full fiscal year, income tax expense was 37.3% of pretax net income in fiscal 2010 compared to 37.6% in fiscal 2009 bringing year-to-date net income to $134.7 million for fiscal 2010 compared to $127.3 million for fiscal 2009, an increase of 5.8%.

Our press release also included a balance sheet as of January 29, 2011 which included the following. Inventory of $88.6 million, which was up just slightly from inventory of $88.2 million at the end of fiscal 2009 and total cash and investments of $205.5 million which compares to $230.8 million at the end of fiscal 2009.

As of the end of the year, inventory on a comparable store basis was down approximately 3% and total markdown inventory was down compared to the same time a year ago. The reductions in markdown inventory was the result of decreases in the 20% off and half off categories partially offset by an increase in the one-third off category.

We also ended the year with $169.2 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $7.6 million and depreciation expense was $8.8 million. For the full year, capital expenditures were $54.9 million and depreciation expense was $29.8 million.

Capital spending for the year is broken down as follows; $36.2 million for new store construction, store remodels and store technology upgrades, and $18.7 million of capital spending for the corporate headquarters and distribution center which includes payments made during the year as work progressed on our new distribution center in Kearny, Nebraska. As previously mentioned, we transitioned into the new $25 million facility in the latter part of September.

We currently expect our fiscal 2011 capital expenditures to be in the range of $30 million to $35 million which includes primarily our new store construction and store remodeling projects.

For the quarter, units per transaction increased approximately 3% and average transaction value increased approximately 2% with the average unit retail decreasing approximately 1.5%. For the full fiscal year, UPTs increased approximately 3% and the average transaction value increased approximately 4.5% and the average unit retail increased approximately 2%.

Additionally during our fiscal year, our average sales per square foot remained flat at $428 and our average sales per store remained approximately $2.1 million. Buckle ended the fiscal year with 420 retail stores in 41 states and that is compared to 401 stores in 41 states at the end of fiscal 2009.

And now at this point since Mr. Nelson is traveling and calling in remotely, I would like to turn the call over to Tom Heacock, our Corporate Controller.

Good morning and thanks for joining us. I would like to start by highlighting the performance from our various merchandise categories that led to our net sales increases of 10.4% for the fourth quarter and 5.7% for the full fiscal year.

Men's merchandise sales for the quarter were up approximately 14.5% with strong categories including denim, woven shirts, sweaters, outerwear, accessories and footwear. Our average denim price points decreased from $88.50 in the fourth quarter fiscal of 2009 to $87.30 in the fourth quarter of fiscal 2010.

For the quarter, our men's business was approximately 42.5% of net sales compared to approximately 41% last year and the average men's price points decreased approximately 2% from $55.35 to $56.35. For the full fiscal year, men's merchandise sales were up approximately 7%. Average denim price points for the year increased from $86.70 in fiscal 2009 to $86.90 in fiscal 2010.

For the year, our men's business was approximately 40% of sales compared to approximately 39.5% last year and the average men's price points increased approximately 1% from $50.70 to $51.25.

Women's merchandise sales for the quarter were up approximately 7% with strong categories including denim, knit tops and accessories. Average denim price points decreased from $93.10 in the fourth quarter of fiscal 2009 to $91.85 in the fourth quarter fiscal of 2010. For the quarter, our women's business was approximately 57.5% of net sales compared to approximately 59% last year and average women's price points decreased approximately 1.5% from $46.75 to $46.00.

For the full fiscal year, women's merchandise sales were up approximately 4.5%. Average denim price points for the year increased from $90.35 in fiscal 2009 to $91.40 in fiscal 2010 and for the year, our women's business was approximately 60% of sales compared to approximately 60.5% last year and average women's price points increased approximately 3.5% from $42.85 to $44.25.

For the quarter, combined accessory sales were up approximately 25.5% and combined footwear sales were up approximately 7%. These two categories accounted for approximately 9.5% and 4%, respectively of fourth-quarter net sales which compares to approximately 8.5% and 4% for each in the fourth quarter of fiscal 2009.

Average accessory price points were up approximately 8% and average footwear price points were down approximately [5%]. For the full fiscal year, combined accessory sales were up approximately 14% and combined footwear sales were up approximately 5%. These two categories for the full year accounted for approximately 8.5% and 4.5% respectively of sales which compares to approximately 7.5% and 4.5% for each in fiscal 2009.

Average accessory price points for the year were up approximately 9.5% and average footwear price points were up approximately 2.5%.

For the quarter, denim accounted for approximately 47.5% of sales and tops accounted for approximately 34% which compares to approximately 46% and 36.5% for the fourth quarter of last year. For the full year, denim was approximately 45.5% of sales and tops were about 34% which compares to approximately 43% and 36.5% for each in fiscal 2009.

Our private label business was up as a percentage of net sales for both the quarter and the year and represent approximately 32.5% of sales for the year.

During the quarter, we opened one new store and completed three substantial remodels bringing our count for the full year to 21 new stores and 25 substantial remodels. We also closed two stores during the quarter and we ended the year with 420 stores as Karen said, with 266 of those stores in our newest format.

We anticipate opening 12 new stores during fiscal 2011 including four for spring, six for back-to-school and two for holiday. We also anticipate completing 22 substantial remodels during the year. By season, we anticipate 11 of the remodeled stores will be completed for spring, 10 for back-to-school and one for holiday.

Planned new store openings for spring include stores in Troy, Michigan; Deer Park, Illinois; Tacoma, Washington; and Joliet, Illinois, and plans for the remainder of the year include stores in Providence, Rhode Island; and Natick, Massachusetts, our first in each of those states.

And with that, we welcome your questions.

(Operator Instructions). Nicole Shevins, Goldman Sachs.

Good morning. Thanks for taking my question. My first one was just on your merchandise margin. Can you get a little bit more specific on how much of the merchandise margin came from fewer markdowns versus the increase to private label?

I am not sure, Nicole, if I can be real specific on that. The private label, I would say it is a combination of both. We reduced the markdowns nicely and the private label was up maybe 10% or so over the fourth quarter a year ago. So I think it is a good combination of both.

Okay. Then your private label has been growing a lot over the past few quarters at about 32% of the mix. How does that compare to the normal Company level and what percent of the business do you see coming from private label in 2011?

I think in the past, we had been running the high 20%, sometimes 30%. We would expect it to probably be in the 32%, maybe slightly higher going into 2011.

Okay. Then just a question on denim. Price points were down a little bit for men and for women. So can you talk a little bit more about what is driving that, whether it is the mix shift to lower priced styles, shift to private label, any more color on that?

I would guess that in the men's, our BKE sales continued to grow maybe over a little bit in the brands but also our reclaim label which was our price point in the $40 range, we had more inventory and that was successful. So that probably brought the price down.

And then on the ladies side, we did have some brands in that we did have some markdowns on and so I think that probably had the biggest effect on bringing the average retail price down.

Okay. And then AUR for denim for 2011, how should we think about that?

I would estimate that it would be close to the fourth-quarter numbers on both men's and women's.

Okay. Thanks for taking my questions.

You are welcome.

Margaret Whitfield, Sterne, Agee.

Good morning. Congratulations on the results, Dennis and Karen. I wondered about the supply chain issues. I think you started to increase prices in stores on shorts I believe. But I'm wondering how you are going to navigate through this. That is question number one. I guess I am surprised there is only 12 new store openings, Dennis. Is there just a lack of good opportunities for you?

And finally, if you could comment on how the later Easter will affect your business in terms of March comps?

On the new store question, we have had a couple others that we were planning to do that due to the malls or the landlords that we had to move them back based on different space issues. But we are continuing to be very selective and making sure we not only have good locations for the malls but also within the mall and the economics are right.

On the supply side, for fall we are seeing probably some sweater and outerwear price increases in the double digits and I guess the good news on those categories was in the past year or so, I think we were buying those at very good prices. So the value in the fashion we think that we will be able to have close to the same markup on those categories. Most of our major denim brands have held price and we have not seen price increases on those except for maybe one in a small way.

A lot of our gal's fashion tops we are not seeing a big difference there. And where we have had to increase some price I think people see us more as fashion boutique looks and our selection and prices when you compare it to the competitors in that standpoint, we still look very good at those price points.

So there will be some challenges and we will have to work through some things. But I think overall our team will manage that pretty well. Tom, do you want to comment on the Easter?

I think when we went back and looked at last year if that would have shifted our best guess for March would be probably about a 2% impact and then with a slightly bigger impact in April just because it is a lower volume month.

Thank you.

Tom Filandro, SIG.

Thanks and congratulations to you all as well. A couple of quick ones. Dennis, I think you mentioned that there were some women's denim brands that maybe didn't work as well. Can you talk about what exactly, which brands didn't work and maybe address is that something we should be concerned about going forward?

Secondly, I am just a little bit curious on what you think the opportunities are from a merchandising standpoint in the spring season? And then I have one follow-up. Thanks.

As far as the women's brands, it wasn't necessarily a specific brand as much as we had a few different ones where maybe the quality of the fit or the finish was not correct and so we worked out situations at price points that made sense for both. And we cleared them through the store that way and that brought that price down a little bit more than that. I am sorry, what was your other merchandise question?

Where do you think, Dennis, you see the greatest opportunities when you built the spring season out as compared to last year?

I think on the ladies side, we saw some opportunities with the denim capris and crops as being a plus maybe a little more fashion in some of the gal's tops and such. We treat ladies dresses more as a top in our business than a category. But we have a little more success there than we had a year ago so there will be a couple of points there. The accessories and some of the footwear has been good.

Bob, do you want to comment on some of the men's spring?

Yes. Our initial reaction to shorts has been very strong. Flips as well we got in a little bit earlier than when he did last year and there has been a nice response to that. The T-shirt business looks to have some opportunities there as we work into some new bodies. And we have had some new brands that have done very well. And then our woven business just continues to trend up with the kind of plaid trend that is going on in both long sleeve and short sleeve.

Thank you.

One follow-up if I may, Dennis, is there any -- we have heard from some competitors that there is a significant potential trend emerging in the bottoms business in denim. I wonder if you guys had any comment as it relates to that? I guess the comment is really a function of is there a move away from skinny to something new and different out there?

In the ladies' business?

Yes, I don't think there is many guys wearing skinny.

I didn't think so but I heard you say men so that is why I wanted to confirm. We are seeing a variety of bottom openings and some in more of the straight, some in the boot. So we are seeing a selection of openings in the ladies and last year we had a variety of bottom openings and fits and that will continue to be our success to try to have the right amount of each opening and fit for our guest going forward.

Is skinny trending down though, Dennis?

It has never been a huge part of our business and we actually had some stores asking for a few more this spring. So we are just depending on the brand and the look, we are playing with it some.

Thank you very much and congratulations on the Natick store.

Thank you.

Edward Yruma, KeyBanc Capital Markets.

Thanks so much for taking my question. Can you talk a little bit about these stores that you intend to remodel during the year? What type of performance lift have you gotten historically when you do these remodels?

Depending on the maturity of the store and what is going on or if we add space, but I would say most of the stores would get at least a mid to high single-digit pop. A lot of them get closer to 20 but some of it just depends if we move the location to a better spot and the maturity of the store. But it is definitely positive and very competitive and we find it to be more attractive especially for ladies. It is more inviting to come in and shop and easier to shop so we feel in the long run it is a plus.

Got you. Can you talk a little bit about private label and the impact of rising costs on that front? I know you have addressed it for some of your other product lines but have you seen pressure on your private label front?

I mean, there's certain categories. Our $40 jeans for guys, we had to raise the price on that to keep the same quality. As I mentioned earlier, some of the guys shorts or some of the product coming out of Asia that we developed in wovens, whether it is top or bottoms, we had some price increase and so we are managing that through working through longer lead times, different sourcing, different countries, maybe taking a view details out that is not necessary in the garment.

So there is some challenges there but I think the team is working it and will continue to keep at it.

Great. One final question, a number of your competitors have recently augmented their footwear offerings. Have you seen an impact competitively? Thank you.

I mean I think a lot of what our teams do is special make ups on the footwear and I don't know what is going on around there. I mean our footwear business has been good. Bob, do you have any comments?

Well, the Nike 6.0, the reef business and I think like Dennis comments on, we try to make sure that those are exclusive to us like from the Reef product, I would say probably 80% of that is exclusive to us. But we are seeing a nice reaction to the flips and to the slip-on product that is like that [vans] type look that we are doing under our own label.

Great, thank you.

Anna Andreeva, JPMorgan.

Good morning, guys. Thanks so much. Just a question on gross margins. Looked like you didn't get leverage on buying and occupancy on 6% comps in the fourth quarter. Can you just remind us what kind of comp do you need to get occupancy leverage in the next few quarters until you lap the new DC I guess in the third quarter?

Karen, do you want to take that?

Yes. Definitely in the fourth quarter we had an impact in there from the added depreciation costs from the new distribution center. I think on our actual -- the store occupancy costs, that number for the fourth quarter remains relatively flat as a percentage of sales compared to a year ago. And then I will let Tom talk about 2011.

I think just with the new stores and the remodels and some of the additional fixtures that we have added over the last couple of years, I think it would continue to be somewhere in that mid single-digit range to where we would have to be higher than that to get leverage going forward.

Got it. And probably a little higher than that in the first half just given the seasonality of the business?

Correct.

Okay, got it. And on the inventory front, just continuing to be very well managed and it has been kind of a few years since we have seen declines. How should we expect inventories to play out for the first quarter and do you guys think you can comp positively in 2011 on slowed down inventories?

We are going to take the same approach as we have the last several years is trying to flow the product and manage it the best we can and it will probably be similar to the past where we could be slightly down in inventory at the end of some quarters and up a little at other quarters. Just depends on the flow and how we see the product and we don't really give guidance on where we think the comps are going to be.

Best of luck for the spring season. Thanks so much.

Adrienne Tennant, Janney Capital Markets.

Good morning and let me add my congratulations on the quarter and the year.

Thank you.

Dennis, can you talk about when you go into new markets, what does the four wall look like when you open in the more competitive markets with the higher rent versus sort of the chain average or your smaller market?

Secondly, you had commented a little bit on double digits in sweaters, I guess the average unit cost there. Can you talk a little bit about on average the total AUC? We have heard numbers as high as 18%, maybe 20%. Are you seeing those types of cost increases? And if you can give us any color quantitatively that would be very helpful. Thank you.

I would say on a couple of the categories there are some cost increase in the high teens. And the four walls question, I mean each situation we kind of look at from a standpoint of if we feel like we can cover the downside and our upside potential is very good, that in a brand-new market we understand we might be investing to develop that business if the guest doesn't know us.

But we kind of look at it where we try to cover our risk and feel good about it and approach each center whether it is in a small market or large market from that standpoint.

Do the new stores open at -- what percentage of the core business do they open at? Do they open at a 70%, 75% discount such that they can comp for years -- for several years nicely?

I would say in the new markets that number could be close. Each one can be different on how fast they open but if it is a market where they don't know us well, that would probably be in the range.

Okay, great. Karen, do you happen to have the ending square footage number?

Not with me in here, I did not bring that.

Okay. Great. Thanks a lot and best of luck.

Thank you.

Linda Tsai, MKM.

Can you give us some color on the level of customer acceptance you are seeing for higher price points?

I can just respond from the store is when I visit with them about any price increases or comments from our guests on our price and selection, at least it has been sometime since I have had someone comment that our prices were too high or not reasonable. Only if we have a higher price brand of $150 or $170 you might hear it once in a while. But then it is priced comparably for that brand in any other market so that would be the comment.

So you are saying that they don't really seem to notice?

No, if they like the garment and they see the quality and the fit in it, they seem to be very happy with it.

Then just one follow-up. What percentage of their merchandise mix for the first half have you implemented price increases? And then what level might this increase to for the second half?

The first half, I would see the price increases in total to be pretty small. I don't know if I have a specific number I can give you and it will increase in the second half. But as I mentioned at this point, a lot of our denim has not changed. There will be some increases in that in a couple of the categories, the sweaters and outerwear that I mentioned are smaller categories as a company for us. So I would just be guessing if I gave you a percent on that.

Great, thank you.

Dana Telsey, Telsey Advisory Group.

Good morning, everyone. Can you talk a little bit about sales per square foot? I think it was flat this year. How are you thinking about sales per foot and the drivers and potentially what goals you get to?

And as you think about the real estate environment, fewer new stores this year than last year, function of location, function of higher ends, how are you seeing the environment? Thank you.

You are welcome. We are still a very desirable tenant for the different malls and such and we have been pleased with our East Coast openings and we know there is more markets there that we want to get to at some point. But where we promote our managers from within, we can't be overly aggressive in certain markets until we build up our personnel so we can feel confident because the manager certainly makes a difference in our stores.

I am sorry, Dana, did I forget some part of the question?

About sales per square foot and where you think it can go?

Oh. I think we can certainly move that needle higher but we just focus on the product at what is right and what makes sense for the season and each quarter and want to deliver the looks and styles that our guests are excited and want to purchase and enjoy. So we really focus on the product selection and such and if we do a good job there, we figure the sales per square foot will take care of itself.

Could you get to a $550, $600 over time?

Well, I think we can certainly improve it over time. I would just be making a wild guess if I commented on a number.

Thank you.

You are welcome.

Laura Champine, Cowen & Co.

Good morning, guys. Dennis, maybe you could talk about since you have been in the business so long, your experience with price elasticity as your price points move around and how that is impacting your unit orders for the back half of this year?

We look at all of the garments on individual basis of what it offers and the cost and where it needs to retail. And I think when our store -- we are not just selling basic tees or hoodies or something with a logo on it. Most of our product is fashion or unique or special. So when they compare it to I think when the guest sees our styles in our store, they are comparing it to more of a boutique or other fashion stores. And when you do that, our price points are very good and so I think that is part of it.

Naturally some of the maybe fashion basics we compete with but for the fit and quality that we are offering in a lot of our product, our guests have been very happy with our selection and from the feedback I have seen, very fair about where we are priced at.

Thank you.

Liz Pearce, Roth Capital Partners.

Let me add my congratulations. Actually at this point a couple of housekeeping questions. Karen, what should we think about the tax rate for next year? Is 37-ish kind of where we -- a good rate?

It has been running around about 37.3%, just a little bit over the 37% and so I think that is probably a good range to think about that for next year.

Okay. Dennis, on the private label, I think Tom had said it was up maybe 10%. Was that quarter-over-quarter or year-over-year? I don't know -- I had to drop off for a second but I don't know if you explained is that coming from denim, is that the primary driver that's lifting it?

I think denim and knits is what is driving the increase there. And Tom, was that for the year or the quarter, I have forgotten?

I think for the year it was about 32.5%, and a little bit higher than that for the fourth quarter and I think compared to last year that was about 29% was private label for the whole year.

Okay and so it would be the reclaim, is that really what is driving it?

It would be the reclaim and more BKE and both in some denim and tops.

Okay, great. That is all I have. Thanks and best of luck.

Thank you.

Bill Dezellem, Tieton Capital Management.

Thank you. And the private label, I actually would like to follow up on that. Given that you are seeing the growth in that category, is that driven by Buckle and you folks, what you are doing to encourage customers to buy the private label product? Or is it really the inverse where it is really being driven by the consumer coming in and wanting that product?

I think we are creating demand for that, Bill, with the styling, the details and the quality and the fit of the denims. We are just getting more people exposed to those selections and having a good response. Our people in the stores are positive on it and they are also presenting it well.

Thank you. And then one additional question relative to the remodels, I believe Dennis, in a comment in response to a prior question you said that the remodels make it easier for gals to shop. And I am not sure if you were implying this or not but is there a reason that it is specifically gals and not guys?

I think the setup is probably makes it better for the guys to shop as well because there is more tables and we don't have the displays as high and the lights are very inviting. But it seems like we have some ladies that will shop us now with the store because it just seems more inviting or they are more comfortable in it being drawn into it and maybe it is a little bit of word of mouth from friends and such that are encouraging them to go in and discover that they can find product that they love and they enjoy shopping there. Where maybe they use to think of us as more of a teen shop and that they would not come in because they didn't think they would find something.

Thank you.

Rob Wilson, Tiburon Research.

Thank you. Is the $8.8 million of depreciation, should that -- we think of that as a run rate for 2011? Also given the stellar operating margins north of 20% over the last three years, why would you not be more aggressive at growing your store base this year and next year? Thanks.

I will take the last question, Rob, and then give Karen the depreciation one. As I mentioned earlier, we promote our managers from within and that helps us maximize our store. We treat it as a real specialty store with a lot of service and the way we set it up and present goods is a big factor. And so if we are too aggressive and have more stores than we have quality people for them, then we would not get the results that we would be happy with.

Karen, do you want to take the other question?

I think with the fourth quarter we did have a full quarter of the distribution center so it is definitely a more representative quarter as far as our depreciation going forward. I don't know, Tom, if you have anything to add to that?

Mr. Wilson, you have no further questions?

No, they have been answered. Thank you.

David Berman, Berman Capital.

Hi, guys. Not much left to ask but congratulations. You guys have one of I think the highest operating margins continually in all of retail. So well done.

Thank you.

Another great quarter. Inventory control is really good as well. And on that subject I'm looking at your payables and while your inventories are up over flat year-over-year which is outstanding, your payables actually up 37% and the number of days payables have gone from 15 to 19 which is a good thing you are taking advantage of credit from your vendors. But I am just curious what is happening, why the big change there?

Some of that would also be kind of just a timing from the arrivals of some of the merchandise on the payables.

Yes, there is no other real changes, Rick.

Correct, Dennis.

Okay, so it was a big number. It goes up at -- so everything is -- you started a new policy to try and get cash that way through -- because they are still pretty low. Your payable days are 19 days.

I think as Karen mentioned, it is just the timing of the receipts on some of that and we tried to bring in a little bit more product earlier than maybe a year ago.

Okay. Congratulations, guys. Outstanding. Look forward to some more one-time dividends.

Okay. Take care, David.

(Operator Instructions). There are no further questions. You may continue.

We would like to thank everyone for joining the call today. I don't think we have anything further from the Buckle end of it. But again, appreciate everyone's questions.

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