Buckle(BKE) - 2023 Q4 - Annual Report

PART I Item 1. Business The Buckle, Inc. is a retailer of casual apparel, footwear, and accessories for young men and women, operating 441 stores in 42 states as of January 28, 2023 Company Overview - The Buckle, Inc. is a retailer of medium to better-priced casual apparel, footwear, and accessories for fashion-conscious young men and women, operating 441 retail stores in 42 states as of January 28, 2023[8] - The Company emphasizes personalized customer attention and provides services such as free hemming, free gift-packaging, easy layaways, a private label credit card, and a guest loyalty program[8] Available Information - The Company's annual reports on Form 10-K, other SEC filings, corporate governance policies, ethics code, and Board of Directors' committee charters are publicly available free of charge on the Investor Information section of www.buckle.com[359](index=359&type=chunk) Special Note Regarding Forward-Looking Statements - Forward-looking statements, including anticipated store openings and revenue growth, are based on currently available information and are subject to various risks and uncertainties, meaning actual future results may differ materially[11] - The Company is under no obligation to update or revise any forward-looking statements[375] Merchandising Strategy - The Company's merchandising strategy aims to create loyalty by offering a wide selection of key brand name and private label merchandise, appealing to fashion-conscious 15 to 30-year olds[12] Merchandise Group Sales Percentage | Merchandise Group | January 28, 2023 | Fiscal Years Ended January 29, 2022 | January 30, 2021 | | :-------------------------- | :--------------- | :---------------------------------- | :--------------- | | Denims | 39.3 % | 39.6 % | 40.1 % | | Tops (including sweaters) | 29.7 | 30.2 | 30.1 | | Accessories | 10.0 | 9.3 | 9.0 | | Footwear | 9.2 | 9.7 | 10.2 | | Sportswear/fashions | 5.5 | 5.9 | 5.8 | | Outerwear | 2.1 | 1.9 | 1.9 | | Casual bottoms | 1.1 | 0.9 | 0.9 | | Youth | 3.1 | 2.5 | 2.0 | | Total | 100.0 % | 100.0 % | 100.0 % | - Brand name merchandise accounted for approximately 56% of the Company's net sales during fiscal 2022, with the remainder comprised of private label merchandise from exclusive brands[33] Marketing and Advertising - In fiscal 2022, the Company spent $19.2 million, or 1.4% of net sales, on targeted seasonal marketing campaigns, digital marketing efforts, and in-store point-of-sale materials[34] - The Company's website, www.buckle.com, serves as an interactive platform for shopping, discovery, learning, and engagement, with continuous investment in site enhancements[35] - The Buckle Rewards program, combining loyalty and private label credit card rewards, offers tiered benefits and exclusive offers to loyal guests and cardholders[379] Store Operations - The Company provides a unique store environment with a high level of personalized service, employing highly motivated employees who offer specialized services like free hemming and gift-packaging[377] - Store design features warm wood fixtures and floors, real brick finishes, and an appealing ceiling and lighting layout, with the signature Buckle-B icon reinforcing brand identity[378] - The Company maintains a comprehensive program to prevent and control shrinkage losses, achieving a merchandise shrinkage rate of 0.4% of net sales in fiscal 2022[381] Purchasing and Distribution - The Company purchases products from manufacturers within the United States and from agents sourcing goods from foreign manufacturers, with merchandisers continually monitoring fashion trends, quality, and delivery schedules[37] - A centralized receiving and distribution center in Kearney, Nebraska, serves as the Company's only store distribution center, aiming to ship the majority of merchandise to stores within one to two business days of receipt[38][383] - The Company utilizes a transfer program to shift merchandise to locations where it is selling best, which helps maintain customer satisfaction and reduces the need for markdowns[360] Store Locations and Expansion Strategies - As of January 28, 2023, the Company operated 441 stores in 42 states, with locations in downtown, strip centers, lifestyle centers, and shopping malls[20] - The Company anticipates opening 6 new stores and completing approximately 12-17 full remodels in fiscal 2023, with estimated capital spending of $24.0 million to $30.0 million for store projects and technology investments[43] Store Count by Fiscal Year | Fiscal Year | Open at start of year | Opened in Current Year | Closed in Current Year | Open at end of year | | :---------- | :-------------------- | :--------------------- | :--------------------- | :------------------ | | 2013 | 440 | 13 | 3 | 450 | | 2014 | 450 | 16 | 6 | 460 | | 2015 | 460 | 9 | 1 | 468 | | 2016 | 468 | 5 | 6 | 467 | | 2017 | 467 | 2 | 12 | 457 | | 2018 | 457 | — | 7 | 450 | | 2019 | 450 | 2 | 4 | 448 | | 2020 | 448 | 3 | 8 | 443 | | 2021 | 443 | 1 | 4 | 440 | | 2022 | 440 | 4 | 3 | 441 | Information Technology - The Company's information technology systems include PC-based point-of-sale (POS) registers that transmit item-level sales data to a central server via a virtual private network (VPN)[24][362] - The PLU system allows central control over merchandise pricing, enabling faster and more accurate sales processing and monitoring of pricing decisions across all stores[26] - The Company's intranet site, supported by the VPN, provides stores with various tools for product search, inventory management, scheduling, performance tracking, and communication with the corporate office[352] Employees and Human Capital - As of January 28, 2023, the Company had approximately 9,100 teammates, with about 3,100 full-time, and 830 employed at corporate offices and the distribution center[48] - The Company invests heavily in the education, training, and leadership development of its teammates, offering sales training, Leadership Academy programs, and manager meetings[29] - Buckle's entrepreneurial culture is supported by competitive base pay, benefits, and incentive compensation tied to individual and overall Company performance, with a base-plus-commission structure for most store teammates[363] Competition - The men's and women's apparel industries are highly competitive, with fashion, selection, quality, price, location, store environment, and service being the principal competitive factors[30] - The Company believes it competes mainly on the basis of customer service and merchandise selection against department stores and specialty retailers[30] - Many competitors are considerably larger with substantially greater financial, marketing, and other resources, and competition for prime site locations is intense[50] Trademarks - The Company owns numerous federally registered trademarks, including "BUCKLE" and "BKE," which are considered of considerable value to its business and marketing efforts[52] Regulation - The Company and its merchandise are subject to regulation by various federal, state, local, and foreign authorities, including trade laws, customs regulations, and international trade agreements for imported goods[53] - Compliance with these laws and regulations has not had, and is not expected to have, a material effect on the Company's capital expenditures, results of operations, or competitive position[53] Seasonality - The Company's business is seasonal, with the holiday season (approximately November 15 to December 30) and the back-to-school season (approximately July 15 to September 1) historically contributing the greatest volume of net sales, accounting for about 35% of annual net sales[364] Executive Officers of the Company - Key executive officers include Dennis H. Nelson (President and Chief Executive Officer), Daniel J. Hirschfeld (Chairman of the Board), and Thomas B. Heacock (Senior Vice President of Finance, Treasurer, and Chief Financial Officer)[55][77][78] - The Company's management team, from store managers through senior management, is experienced, with most having started their careers on the sales floor[48] Item 1A. Risk Factors The Company faces