Buckle(BKE) - 2024 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements For the thirteen weeks ended April 29, 2023, The Buckle, Inc. reported a decrease in net sales to $282.8 million from $309.1 million year-over-year, with net income declining to $42.9 million from $55.3 million. Total assets grew slightly to $848.9 million, while stockholders' equity increased to $405.2 million. The company generated $33.3 million in cash from operations, ending the quarter with a cash balance of $254.4 million Condensed Consolidated Balance Sheets As of April 29, 2023, total assets were $848.9 million, a slight increase from $837.6 million at the end of the previous fiscal year. The increase was driven by higher cash and inventory levels. Total liabilities decreased to $443.7 million from $461.3 million, primarily due to a reduction in accrued employee compensation. Consequently, total stockholders' equity rose to $405.2 million from $376.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 29, 2023 | January 28, 2023 | | :--- | :--- | :--- | | Total Current Assets | $433,915 | $423,336 | | Total Assets | $848,860 | $837,579 | | Total Current Liabilities | $206,804 | $226,043 | | Total Liabilities | $443,686 | $461,265 | | Total Stockholders' Equity | $405,174 | $376,314 | Condensed Consolidated Statements of Income For the thirteen weeks ended April 29, 2023, net sales decreased by 8.5% to $282.8 million compared to $309.1 million in the prior-year period. Gross profit fell to $133.3 million from $152.2 million. Net income saw a significant decline to $42.9 million, or $0.86 per diluted share, down from $55.3 million, or $1.12 per diluted share, in the first quarter of 2022 Q1 2023 vs. Q1 2022 Income Statement (in thousands, except per share data) | Metric | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Net Sales | $282,834 | $309,064 | | Gross Profit | $133,257 | $152,160 | | Income from Operations | $53,730 | $73,059 | | Net Income | $42,936 | $55,254 | | Diluted EPS | $0.86 | $1.12 | Condensed Consolidated Statements of Stockholders' Equity During the first quarter of fiscal 2023, total stockholders' equity increased from $376.3 million to $405.2 million. The growth was primarily driven by net income of $42.9 million, which was partially offset by the payment of dividends totaling $17.7 million ($0.35 per share) - Stockholders' equity increased to $405.2 million, reflecting net income of $42.9 million less dividends of $17.7 million[19] Condensed Consolidated Statements of Cash Flows For the first quarter of 2023, the company generated $33.3 million in net cash from operating activities, a notable increase from $21.5 million in the prior-year period. Net cash used in investing activities was $13.3 million, while financing activities used $17.7 million for dividend payments. This resulted in a net increase in cash and cash equivalents of $2.4 million, bringing the quarter-end balance to $254.4 million Q1 2023 vs. Q1 2022 Cash Flow Summary (in thousands) | Activity | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $33,295 | $21,503 | | Net Cash from Investing Activities | ($13,279) | ($7,867) | | Net Cash from Financing Activities | ($17,660) | ($17,533) | | Net Increase (Decrease) in Cash | $2,356 | ($3,897) | | Cash and Cash Equivalents, End of Period | $254,433 | $250,073 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies and provide further context on financial results. Key details include the company's operation as a single reportable segment with 440 stores, online sales constituting 18.1% of net sales, and a breakdown of sales by merchandise category. The notes also cover investments, fair value measurements, lease obligations, and stock-based compensation expenses - The company operated 440 stores in 42 states as of April 29, 2023, an increase of one store from the prior year[24] - Online revenues accounted for 18.1% of net sales for the thirteen weeks ended April 29, 2023, up from 17.6% in the prior year[48] Net Sales by Merchandise Group | Merchandise Group | Q1 2023 % of Sales | Q1 2022 % of Sales | | :--- | :--- | :--- | | Denims | 41.7% | 40.0% | | Tops | 27.1% | 27.8% | | Accessories | 10.8% | 8.9% | | Footwear | 8.1% | 11.9% | | Other | 12.3% | 11.4% | - As of April 29, 2023, the company had $21.9 million of unrecognized compensation expense related to non-vested stock grants, expected to be recognized over a weighted average period of approximately 2.2 years[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 8.5% decrease in Q1 2023 net sales to a 9.2% decline in comparable store sales, driven by fewer transactions. Gross profit margin fell from 49.2% to 47.1% due to deleveraged occupancy costs and lower merchandise margins. The company maintains a strong liquidity position with $300.0 million in cash and investments and no bank borrowings. Capital expenditure for fiscal 2023 is projected to be between $24.0 and $30.0 million Results of Operations Net sales for Q1 2023 decreased 8.5% to $282.8 million, with comparable store sales down 9.2%. The sales decline resulted from a 10.0% decrease in transactions, partially offset by a 2.3% increase in units per transaction. Gross profit as a percentage of sales was 47.1%, down 210 basis points from the prior year, primarily due to 140 basis points of deleveraged costs and a 70 basis point decline in merchandise margins. Operating income fell 26.5% to $53.7 million - Net sales decreased 8.5% in Q1 2023, driven by a 9.2% decrease in comparable store net sales[71] - Online sales decreased 5.6% to $51.3 million for the quarter[71] - Gross profit margin declined to 47.1% from 49.2% in the prior year, attributed to deleveraged buying, distribution, and occupancy expenses (140 bps) and lower merchandise margins (70 bps)[98] - Selling, general, and administrative expenses increased as a percentage of sales to 28.1% from 25.6%, mainly due to higher store labor-related expenses[72] Liquidity and Capital Resources The company ended Q1 2023 with strong liquidity, holding $254.4 million in cash and cash equivalents and $23.1 million in short-term investments. Working capital stood at $227.1 million. Cash flow from operations was $33.3 million. Capital expenditures for the quarter were $9.3 million. For the remainder of fiscal 2023, the company plans to open 7 new stores and complete 13 remodels, with total capital expenditures estimated between $24.0 to $30.0 million - The company ended the quarter with working capital of $227.1 million, including $254.4 million in cash and cash equivalents[128] - Total capital expenditures for fiscal 2023 are estimated to be approximately $24.0 to $30.0 million, covering new stores, remodels, and technology investments[129] - The company has a $25.0 million unsecured line of credit available, with no borrowings outstanding during the quarter[130] Critical Accounting Policies and Estimates Management confirms that the critical accounting policies and estimates used in preparing the Q1 2023 financial statements have not materially changed from those disclosed in the 2022 Annual Report on Form 10-K. Key policies highlighted include revenue recognition, inventory valuation (lower of cost or net realizable value), income taxes, leases, and investments - Revenue from retail stores is recognized at the point of sale, net of expected returns. Online sales are recognized when merchandise is tendered for delivery[103] - Inventory is valued at the lower of cost (average cost method) or net realizable value, with adjustments made for obsolescence and markdowns. The markdown adjustment was $7.0 million as of April 29, 2023[106] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is related to interest rate fluctuations on its cash and investment portfolio. Management estimates that a 0.25% decline in the interest/dividend rate would decrease net income by approximately $0.5 million, or less than $0.01 per share - The company is exposed to interest rate risk on its cash and investments. A one-quarter percent decline in interest rates would reduce net income by about $0.5 million[143] Item 4. Controls and Procedures Based on an evaluation as of April 29, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective. There were no material changes in the company's internal control over financial reporting during the first fiscal quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[115] - No changes occurred in the Company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[116] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings for the period - Item 1. Legal Proceedings: None[1] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 28, 2023 - No material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2023[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its common stock during the fiscal quarter ended April 29, 2023. As of the quarter-end, 410,655 shares remained available for repurchase under the publicly announced plan Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plans | Maximum Shares Remaining for Purchase Under Plans | | :--- | :--- | :--- | :--- | :--- | | Jan. 29 - Feb. 25, 2023 | - | - | - | 410,655 | | Feb. 26 - Apr. 1, 2023 | - | - | - | 410,655 | | Apr. 2 - Apr. 29, 2023 | - | - | - | 410,655 | - The company has 410,655 shares remaining to complete its 1,000,000 share repurchase plan authorized on November 20, 2008[153] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - Item 3. Defaults Upon Senior Securities: None[148] Item 4. Mine Safety Disclosures This item is not applicable to the company - Item 4. Mine Safety Disclosures: None[1] Item 5. Other Information The company reported no other information for the period - Item 5. Other Information: None[120] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002, and the financial statements formatted in XBRL - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and financial data in XBRL format[2][123]