Buckle(US:BKE)2024-04-03 19:59Part I Business The Buckle, Inc. is a U.S.-based retailer of casual apparel, footwear, and accessories, operating 444 stores across 42 states - The company operates 444 retail stores in 42 states under the names "Buckle" and "Buckle Youth" as of February 3, 202460 Fiscal 2023 Net Sales by Merchandise Group | Merchandise Group | Percentage of Net Sales (FY 2023) | | :--- | :--- | | Denims | 40.9% | | Tops (including sweaters) | 29.3% | | Accessories | 10.8% | | Footwear | 6.7% | | Other Categories | 12.3% | - Brand name merchandise accounted for approximately 54% of net sales in fiscal 2023, with the remaining 46% from private label brands94124 - For fiscal 2024, the company anticipates opening 8 new stores, completing 15-19 full remodels, and projects capital spending of approximately $32.0 M to $38.0 M135 Merchandising The merchandising strategy focuses on offering a wide selection of brand name and private label goods, with denim as a key sales driver - Denim is a significant contributor to total sales, representing 40.9% of fiscal 2023 net sales, followed by tops at 29.3%6566 - Key private label brands include BKE, Buckle Black, and Daytrip, while featured external brands include Miss Me, Rock Revival, and Hurley94 Store Locations and Expansion Strategies The company operated 444 stores as of February 3, 2024, with plans to open 8 new stores and remodel 15-19 in fiscal 2024 Store Count Activity (FY 2014-2023) | Fiscal Year | Open at start | Opened | Closed | Open at end | | :--- | :--- | :--- | :--- | :--- | | 2022 | 440 | 4 | 3 | 441 | | 2023 | 441 | 9 | 6 | 444 | - The projected cost of opening a new store is approximately $1.5 M, which includes $1.3 M for construction and $0.2 M for inventory80 - The company plans to open 8 new stores and complete 15-19 full remodels during fiscal 2024135 Employees and Human Capital The company employed approximately 8,000 teammates as of February 3, 2024, emphasizing an entrepreneurial culture with performance-based compensation - The company had approximately 8,000 teammates as of February 3, 2024, with about 2,800 full-time employees113 - Compensation for most store teammates is a base plus commission structure, aligning with an entrepreneurial culture and motivating service improvements141 Executive Officers of the Company The report lists the company's executive officers, including Daniel J. Hirschfeld, Dennis H. Nelson, and Thomas B. Heacock, who possess extensive industry experience - Daniel J. Hirschfeld, age 82, serves as Chairman of the Board and has been in this role since 1991120 - Dennis H. Nelson, age 74, is the President and Chief Executive Officer, having started with the company in 1970150 - Thomas B. Heacock, age 46, is the Senior Vice President of Finance, Treasurer, and Chief Financial Officer121 Risk Factors The company faces material business, operational, and general risks, including dependence on fashion trends, system vulnerabilities, and global economic disruptions - Business and Industry Risks: The company's success is highly dependent on its ability to anticipate fashion trends, manage its private label merchandise mix (46% of FY2023 sales), and compete in a crowded retail environment154124157 - Operational Risks: The company relies on complex IT systems for all major operations and a single distribution facility in Kearney, Nebraska, making it vulnerable to system failures, cyber-attacks, or physical disruptions130126 - Cybersecurity Risks: Unauthorized access to customer or employee data could result in significant expenses, litigation, and reputational damage186 - General Risks: The business is susceptible to declines in consumer spending, changes in tax laws, and disruptions from global events such as pandemics that could impact facilities, stores, and the supply chain157129162 Cybersecurity The company's cybersecurity strategy, managed by a Senior Director and overseen by the Audit Committee, follows the NIST Framework and includes incident response planning - Cybersecurity risk management is led by the Senior Director of Information Security, with oversight from the Audit Committee, which receives at least quarterly updates164165 - The company's incident response plan is based on the NIST Framework and is executed by the Buckle Incident Response Team (BIRT)164166 - While the company has faced cybersecurity threats, they have not materially affected its operations, business strategy, results of operations, or financial condition167 Properties All 444 retail stores are leased, while the corporate headquarters, distribution center, and online fulfillment center are company-owned in Kearney, Nebraska - All 444 store locations are leased facilities, and the company owns its corporate headquarters and distribution center in Kearney, Nebraska195196 Lease Expiration Schedule | Year | Number of Expiring Leases | | :--- | :--- | | 2025 | 140 | | 2026 | 77 | | 2027 | 78 | | 2028 | 41 | | 2029 and later | 108 | Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, with regular and special cash dividends paid in fiscal 2023 and no share repurchases during the year Dividend Payments Per Share | Fiscal Year | Quarterly Dividend | Special Dividend | | :--- | :--- | :--- | | 2021 | $0.33-$0.35 | $5.65 | | 2022 | $0.35 | $2.65 | | 2023 | $0.35 | $2.50 | - The company did not repurchase any of its common stock during the fourth quarter of fiscal 2023, with 410,655 shares remaining available for repurchase under the existing plan as of February 3, 2024171231 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2023, net sales decreased by 6.3% to $1.261 billion, with comparable store sales down 8.0%, resulting in a 13.6% net income decline to $219.9 million Key Financial Results (Fiscal Year 2023 vs. 2022) | Metric | FY 2023 (53 weeks) | FY 2022 (52 weeks) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.261 B | $1.345 B | (6.3)% | | Gross Profit | $619.1 M | $676.0 M | (8.4)% | | Income from Operations | $271.1 M | $328.1 M | (17.4)% | | Net Income | $219.9 M | $254.6 M | (13.6)% | - Comparable store net sales for the 53-week fiscal year decreased 8.0% compared to the prior year 53-week period209 - Online sales decreased 10.3% to $206.5 M for fiscal 2023209 Liquidity and Capital Resources The company ended fiscal 2023 with strong liquidity, holding $268.2 million in cash and no debt, with projected capital expenditures of $32.0-$38.0 million for fiscal 2024 - As of February 3, 2024, the company had working capital of $222.8 M, including $268.2 M in cash and cash equivalents245 Cash Flow from Operations | Fiscal Year | Net Cash Flow from Operations | | :--- | :--- | | 2023 | $254.6 M | | 2022 | $242.4 M | | 2021 | $311.8 M | - The company has a $25.0 M unsecured line of credit with Wells Fargo, with no borrowings outstanding as of February 3, 2024217 Critical Accounting Policies and Estimates Management identifies critical accounting policies requiring significant judgment, including revenue recognition, inventory valuation, income taxes, and lease accounting - Inventory is valued at the lower of cost or net realizable value, with an adjustment for markdowns and obsolescence of $9.1 M as of February 3, 2024253 - A liability of $10.4 M was recorded for estimated future rewards under the Buckle Rewards loyalty program as of February 3, 2024221 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal year ended February 3, 2024, which received an unqualified opinion from Deloitte & Touche LLP - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements, stating they present fairly, in all material respects, the financial position of the company230 - The auditor identified the adjustment to inventory for markdowns and obsolescence as a Critical Audit Matter due to the significant management judgments involved263291292 Consolidated Balance Sheets As of February 3, 2024, total assets were $889.8 million, total liabilities $476.6 million, and total stockholders' equity $413.2 million Balance Sheet Summary (in thousands) | Account | Feb 3, 2024 | Jan 28, 2023 | | :--- | :--- | :--- | | Total Current Assets | $444,256 | $423,336 | | Total Assets | $889,810 | $837,579 | | Total Current Liabilities | $221,456 | $226,043 | | Total Liabilities | $476,590 | $461,265 | | Total Stockholders' Equity | $413,220 | $376,314 | Consolidated Statements of Income For fiscal 2023, net sales were $1.261 billion, and net income was $219.9 million, or $4.40 per diluted share, reflecting a decline from the prior year Income Statement Highlights (in thousands, except EPS) | Metric | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net Sales | $1,261,102 | $1,345,187 | $1,294,607 | | Gross Profit | $619,065 | $676,003 | $653,009 | | Income from Operations | $271,059 | $328,132 | $335,499 | | Net Income | $219,919 | $254,626 | $254,820 | | Diluted EPS | $4.40 | $5.13 | $5.16 | Consolidated Statements of Cash Flows Net cash from operations was $254.6 million in fiscal 2023, with cash used in investing and financing activities, resulting in a $16.1 million increase in cash Cash Flow Summary (in thousands) | Activity | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating | $254,644 | $242,382 | $311,754 | | Net Cash from Investing | $(41,770) | $(41,399) | $(28,775) | | Net Cash from Financing | $(196,738) | $(202,876) | $(347,798) | | Net Change in Cash | $16,136 | $(1,893) | $(64,819) | Notes to Consolidated Financial Statements The notes provide detailed information on significant accounting policies, including revenue recognition, inventory valuation, lease accounting, and stock-based compensation - The company's lease portfolio has a weighted-average remaining lease term of 5.4 years and a weighted-average discount rate of 5.7% as of February 3, 2024324 - Stock-based compensation expense was $13.7 M in fiscal 2023, up from $11.6 M in fiscal 2022, with $11.7 M of unrecognized expense at year-end14384 - Online sales accounted for 16.4% of total net sales in fiscal 2023, compared to 17.1% in both fiscal 2022 and 2021359 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of February 3, 2024, a conclusion affirmed by the independent auditor - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year361 - Management concluded that the company's internal control over financial reporting was effective as of February 3, 2024, based on the COSO framework21 - The independent registered public accounting firm issued an unqualified opinion, stating the company maintained effective internal control over financial reporting22 Part III Directors, Executive Compensation, and Corporate Governance Information for Items 10-14, covering directors, executive compensation, and corporate governance, is incorporated by reference from the company's 2024 Proxy Statement - Information regarding Directors, Executive Officers, and Corporate Governance (Item 10) is incorporated by reference from the 2024 Proxy Statement26397 - Details on Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) are also incorporated by reference from the 2024 Proxy Statement3839406 Part IV Exhibits and Financial Statement Schedule This section lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and Schedule II detailing valuation and qualifying accounts - The report includes Schedule II - Valuation and Qualifying Accounts, which shows the reserve for sales returns was $2.55 M at the end of fiscal 2023, down from $2.98 M at the end of fiscal 202232407 - Exhibits filed include the company's Articles of Incorporation, By-Laws, credit agreements, and various stock and incentive plans34411412