Buckle Inc (BKE) 2013 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Buckle first quarter earnings release conference call. At this time all participants are in a listen-only mode. Later there will be an opportunity for questions and answers with instructions given at that time.

(Operator Instructions)

As a reminder today's conference call is being recorded. Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Vice President of Finance and CFO; Pat Whisler, Vice President of Women's Merchandising; Bob Carlberg, Vice President of Men's Merchandising; Kyle Hanson, Corporate Secretary and General Counsel and Tom Heacock, Treasurer and Corporate Controller. As they review the operating results of the first quarter, which ended May 4, 2013, they would like to reiterate their policy of not giving future sales results 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 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 reproductions or recordings of the call should not be relied upon as the information may be inaccurate. I would now like to turn the conference call over to Karen Rhoads. Please go ahead.

Good morning. Thank you everyone for joining the call this morning. Our May 23, 2013 press release reported that net income for the 13-week first quarter that ended May 4, 2013 was $37.6 million, or $0.78 per share on a diluted basis. And that's compared to net income of $37.8 million, or $0.79 per share on a diluted basis, for the prior year 13-week first quarter that ended April 28, 2012. Our net sales for the 13-week first quarter increased 2.3% to $269.7 million, compared to net sales of $263.8 million for the prior year 13-week first quarter. Comparable store sales for the quarter were up 1.2% in comparison to the same 13-week period in the prior year. And our online sales, which are not included in comparable store sales, increased 6% to $20.9 million.

Gross margin dollars for the quarter increased 2.5%, or $2.8 million, to $117.0 million. Gross margin for the quarter was 43.4%, an improvement of approximately 10 basis points from 43.3% for the first quarter last year. The improvement was driven by a 35 basis point improvement in merchandise margins which was partially offset by an increase in occupancy, buying, and distribution costs. Selling expense was 17.5% of net sails in the first quarter of both fiscal 2013 and fiscal 2012. Increases in store payroll expense and health insurance claims expense were offset by reductions as a percentage of net sales in store supplies expense and expense related to our incentive bonus accrual as well as certain other selling expenses. General and administrative expenses for the quarter were 3.9% of net sales, up approximately 10 basis points from the first quarter of fiscal 2012. Increases in equity compensation expense and expense related to our accrued vacation pay were partially offset by reduction in certain other general and administrative expenses.

Operating income for the quarter increased 2.1%, or $1.2 million, to $59.3 million. Our operating margin was 22.0% for the first quarter of both fiscal 2013 and fiscal 2012. Other income for the quarter was $0.4 million, compared to $1.8 million for the first quarter of Fiscal 2012, with the reduction related to certain state economic development incentives that were received during the first quarter of fiscal 2012. Income tax expense as a percentage of pre-tax net income was 37.0% for the first quarter of fiscal 2013, compared to 36.8% for the first quarter of fiscal 2012 bringing first quarter net income to $37.6 million for fiscal 2013 versus $37.8 million for fiscal 2012. Our press release also included a balance sheet as of May 4, 2013.

The balance sheet includes the following. Inventory of $105.9 million, which was up approximately 9% from inventory of $97.0 million at the end of the first quarter of fiscal 2012. And total cash and investments of $180.3 million, which compares to $179.8 million at the end of fiscal 2012 and also compares to $259.9 million at this same time a year ago. As of the end of the quarter, inventory on a comparable store basis was up approximately 7% and total markdown inventory was up compared to the end of the first quarter last year. We also ended the quarter with $166.5 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $11.2 million and depreciation expense was $7.9 million.

Capital spending for the quarter is broken down as follows. $4.7 million for new store construction, store remodels, and store technology upgrades and $6.5 million for capital spending at the corporate headquarters and distribution center. This includes $5 million for the purchase of a new airplane that replaces the airplane that we sold at the end of the last fiscal year. We still expect our fiscal 2013 capital expenditures to be in the range of $34 million to $38 million. For the quarter, UPTs increased approximately 3.5%.

The average transaction value increased approximately 4% and the average unit retail increased approximately 0.5%. Buckle ended the quarter with 443 retail stores in 43 states and that is compared to 431 stores in 43 states at the end of the first quarter of fiscal 2012. Additionally, our total square footage was 2.224 million square feet as of the end of the quarter, compared to 2.156 million square feet at this same time a year ago. At this time, I'd like to turn the call over to Tom Heacock, our Corporate Controller and Treasurer.

Good morning and thanks for joining us. I'd like to start by highlighting the performance from our merchandise categories that led to our net sales increase of 2.3% for the quarter. Men's merchandise sales for the quarter were up approximately 3.5% with strong categories including denim and accessories. Average denim price points decreased for the quarter from $91.45 in the first quarter of fiscal 2012 to $90.30 in the first quarter of fiscal 2013. For the quarter our men's business was approximately 40% of net sales compared to approximately 39.5% last year and average men's price points increased slightly from $53.75 to $53.95. Women's merchandise sales for the quarter were up approximately 2%. Strong categories included woven tops, active apparel, accessories and footwear.

Average denim price points for the quarter increased from $96.15 in the first quarter of fiscal 2012 to $98.90 in the first quarter of fiscal 2013. For the quarter, our women's business was approximately 60% of net sales compared to approximately 60.5% last year. And average women's price points increased approximately 1.5% from $47.75 to $48.60. For the quarter combined accessory sales were up approximately 10.5% and combined footwear sales were up approximately 15%. These two categories accounted for approximately 7.5% and 6.5% respectively of first quarter net sales, which compares to approximately 7% and 5.5% for each in the first quarter of fiscal 2012.

[Abto] accessory price points were up approximately 2% and average footwear price points were up approximately 14% for the quarter. For the quarter denim accounted for approximately 44.5% of sales and tops accounted for approximately 28.5%, which compares to approximately 44.5% and 30% for each in the first quarter last year. Our private label business was up slightly as a percentage of sales for the quarter and represent approximately 31% of sales. During the quarter we opened three new stores and completed one substantial remodel, and as of the end of the quarter 328 of our 443 stores were in our newest format. For the full fiscal year we still anticipate opening 13 new stores, including one store that is already open during fiscal May, eight for back-to-school and one for holiday. And we also still anticipate completing a total of seven substantial remodels during the year. With that we'll open it up to your questions.

(Operator Instructions)

Paul Alexander.

Hi, guys, thanks for the question. Could you comment a little bit more on inventory up here? Do you feel comfortable about it? Is it merely a calendar shift thing? And how related is the inventory up 6% or 7% on a comparable store basis to the markdown inventory being up? Thank you.

Thank you, Paul. Dennis is calling in remotely. So Dennis, if you're okay I'll direct that one to start out with to you.

Okay, thank you. Thanks, Paul. Yes, we feel very comfortable with our inventory and our markdown situation. We actually feel that we might have missed some sales in the denim category with our inventory level where it's at so we're looking forward to the second quarter.

What category was the increase in markdowns in then? Or is it increase in inventory as well if denim was a little light?

Karen, do you have that?

I do not. I'll see if Tom -- I'll turn that over to Tom if he has that.

I don't think we ever talk about the specific categories on the buckets. I think we kind of break it down by which of the buckets the 20% off the third and the half and I think it was in each of those buckets where we saw increases. But I don't know that we'd say by merchandise category.

Okay. And then on e-comm, continues to be a little bit slower than peers. Why do you think it might be slower -- the e-comm growth might be slower than peers and how do you view the competitive sphere online?

Karen, do you have what we are doing on the internet marketing?

Well, I think on the internet marketing we've continued to provide ways to enhance the search features and the shopability of our site. We are probably going up from some pretty strong growth in some of the earlier years and I don't know how that would compare to some of the competitors for the quarter.

I think last year online sales were up 15% on top of some strong growth so we're not real promotional on that and been consistent with our approach on that so we think we can continue to grow that nicely but we don't have any real specifics on that.

Okay thank you guys.

Thank you.

Adrienne Tennant, Janney Capital Markets.

Hi, this is actually Gabriella Carbone calling in for Adrienne. I just had a quick question regarding the calendar shift. What sort of impact do you expect on Q2, given that week one of August is moving into that quarter? On a sales and EPS basis, any color on that would be very helpful.

Yes, great question. And definitely the shift with the second quarter ending August 3 this year compared to ending July 28 a year ago will shift a strong week into that second quarter. So we anticipate a positive impact from that shift for the second quarter.

Could you quantify that at all or just --

We'll get into last year's. I mean, it's probably about $6 million in sales and I don't know that we would say the EPS impact of that, but that kind of gives an idea of directionally where it is.

Okay, perfect, thank you. I appreciate it.

Lee Giordano, Imperial Capital.

Thanks good morning.

Good morning.

My question's on the merchandise and I'm just wondering if there's any new notable brands or fashion trends that have emerged that you're looking to capitalize on for either back-to-school or for holiday?

We have no new labels or brands that we're introducing that would have any major impact. We are on the ladies side building up our two labels of our own jeans, the Daytrip and the BKE, increasing and rebuilding inventories there which we think will be good and add to our brand selection, which has been doing well. And we've also expanded the little girl's denim for this back-to-school to include almost all stores on that which we think will be -- and which has been received nicely and we think will be a nice back-to-school plus. And then on the men's side also, expanding our private label denim as well as our top selection to keep it new and fresh and we think it will be a nice presentation there.

Thank you.

You're welcome.

John Kernan, Cowen and Company.

Hi, this is Jerry on for John. You guys have a lot of moving pieces in the SG&A line. It seems like your equity comp and vacation pay have been trending up. I was wondering if you could help me understand how we should model that line going forward, how I should think about that?

Well, the equity compensation is an accrual based upon the fair market value on the data grant of the restricted stock and although there are, you know, multiple buckets within that accrual for each of the years that are continuing to vest, the grants of restricted stock for fiscal 2013 would have had a higher fair market value than the shares that were granted for the prior three fiscal years that are still a part of that bucket. So that was the increase in the restricted stock. It was really pretty comparable as far as the number of shares, but it was a function of the fair market value on that data grant. And on the vacation pay, you know, we did make some changes in fiscal 2012 that impacted along the way. But one of the changes that we made a year ago that impacted first quarter this year was the change in the timing of our store manager vacation pay. But I think for the remaining quarters that should be apples-to-apples now, correct, Tom?

I think we would not see the same -- expect to see the same increase, I think, for the rest of the year that we saw in the first quarter in the vacation fees.

Great, thanks guys.

(Operator Instructions)

Liz Pierce, Ascendiant Capital Markets.

Good morning. Just a couple of quick questions. Dennis, you said on the denim that you feel like you missed it. Can you just perhaps provide -- or not totally missed it but maybe provide a little bit of color on what you think that the miss was or what you're adding or is that what you said about expanding the private label?

Yes, it was more that we changed some makers on our private label jeans on the gal's side and it took us a little longer to get everything right and working than we planned. So we missed having some of our styles in during the spring season, which we believe now that we've got that taken care of and should be close to normal before too long.

Okay, and when you mentioned on the men's side you were expanding your private label and your tops, are you expanding private label tops or just tops in general?

I think -- seems like the private label is taking a little bigger market share in our men's tops and has been working well. And that can change from season to season or we're always buying it. It kind of depends on what the brands are offering and showing, but our team has been doing a nice job with our own brands and so that's been good business for us.

Okay. And then Karen, can you remind us just what you need on a comp for occupancy leverage?

On the occupancy leverage we would need a low- to mid-single digit comp for the year. But obviously quarter-by-quarter -- the first two quarters because the absolute dollars of sales are smaller than in the back half of the year, it takes a little bit stronger comp in the first half of the year than it does in the back half of the year. But looking for the year as a whole, it would be low- to mid-single digits.

Okay, that's what I thought. Okay great, thank you so much.

Thank you.

You're welcome, Liz.

We have no further questions in queue at this time. Please proceed.

Well thank you everyone for joining the call and I believe that there's no further questions so we can go ahead and conclude the call.

Thanks everyone.

Thank you. And ladies and gentlemen this conference will be available for replay beginning at 12.30 today, May 23, 2013, until June 6, 2013 at 11.59 PM. To access the AT&T executive playback service during that time please call 1-800-475-6701, international participants may dial area code 320-365-3844 and enter the access code of 293207. That will conclude your conference call for today. Thank you for your participation and for using AT&T's executive teleconference service. You may now disconnect.