BUCKLE INC Q3 FY2024 earnings call

• Financial results: Net income for the 13 week third quarter ended November 2, 2024 was $44.2 million vs $51.8 million prior year; year-to-date net income $118.3 million vs $140.3 million prior year. Net sales for Q3 decreased 3.2% to $293.6 million; year-to-date down 4.6% to $838.5 million. Comparable store sales Q3 down 0.7%, YTD down 5.4%; online sales Q3 up 1.1%, YTD down 9.2%. Gross margin Q3 47.7% vs 48.5% prior year; YTD 46.9% vs 47.7% prior year. SG&A for Q3 29.1% of net sales vs 27.4% prior year; YTD 29.6% vs 27.8% prior year. Operating margin Q3 18.6% vs 21.1% prior year; YTD 17.3% vs 19.9% prior year.
• Store operations: Opened 5 new stores and completed 1 full remodel in Q3; YTD 7 new stores, 13 full remodels, 6 store closures. Plans for remainder of year: 1 new store, 7 additional full remodels (6 relocations).
• Digital investments: Investments in digital channels impacting guest experience and e-commerce growth, with e-commerce returning to growth in Q3.

For the third quarter, women's merchandise sales were down about 0.5% compared to the prior year fiscal quarter, representing approximately 47% of sales. On a 13 week comparable basis, women's merchandise sales increased approximately 3%, with denim up 9%. Men's merchandise sales were down about 5.5% against the prior year fiscal quarter, representing approximately 53% of total sales, with 13 week comparable down approximately 2.5% due to warmer temperatures. Accessory sales for the 13 week quarter were up approximately 3% against the prior year 13 week comparable period, while footwear sales were down about 17%, accounting for approximately 10% and 5% of third quarter net sales respectively. Youth business had a strong back-to-school selling season, with total youth sales increasing approximately 2.5%. Private label represented 48.5% of sales versus 47% in the third quarter of 2023.

Management states they do not give future sales or earnings guidance. However, they estimate 7 or 8 new stores next year, with net 2 or 3 added over 2025, and plan to relocate and remodel another dozen stores next year, along with smaller updates/remodels in 12 to 15 stores.

The company mentions that forward-looking statements involve material risks and uncertainties subject to change factors beyond control, as described in filings with the Securities and Exchange Commission. No specific operational failures discussed in detail.

Q: Great. Good morning. It's Mauricio Serna from UBS Research. Thanks for taking my question. Sorry, I think I missed this part when you were talking about the gross margin drivers. I think, I heard that you mentioned the merchandise margins were up 55 basis points year-over-year. And I think that's a bit of a deceleration compared to what you had seen in the second quarter. So maybe first, I wanted to make sure that was the number, and maybe you could elaborate a little bit more on what drove that slowdown in terms of the merchandise margin? And also, I guess, that thing, it implies the buying occupancy and distribution costs, deleverage was a little bit higher than the prior quarter. So yeah, a little bit of detail behind that will be very helpful. Thank you.

A: Thank you, Mauricio. Good morning. Just walking through the numbers for gross margin for the quarter, it was 100 basis points of increase in occupancy costs, 35 basis points of increase in distribution and buying, and then that was offset by 55 basis points of improvement in merchandise margins. And on the merchandise margin side, I mean, really, that number is consistent both quarter and year-to-date. So similar to the trend that we've seen through the first part of the year. Comparisons are a little bit different for each of the quarters last year. So I think that's a big driver if it did decelerate from Q2. And really, the drivers of the growth there are similar to what it's been year-to-date as well that growth in private label, I mean really strong trends with our private label denim brands, given that private label up to 48.5% has been a big driver of margin improvements and then also a mix shift. Footwear's a little bit lower margin categories. So as we've -- and that's a smaller part of our business that's been accretive to margins. I know Dennis has more to add, but those are the primary drivers.

Q: Yes. Thank you. I just had a follow-up question on the store count. I think you -- just want to make sure I got this right. At the end the quarter with 445 stores, and you plan to open one. So I think that's from a net store opening for the year, that will take you to two openings? I just was wondering like how are you thinking about expansion in terms of like net store additions over the next couple of years just given where the retail landscape is right now? Thank you.

A: Good morning. We are estimating seven or eight new stores next year. And we have some situations where there will be some store closings, so best guess at the moment would be net two or three added over 2025. And we plan to relocate and remodel probably another dozen stores this next year, and also we’ll continue to have smaller updates and remodels in probably another 12 to 15 stores next year as well.

Q: Good morning. Quick question on the remodels. What kind of lift are you seeing or what kind of benefit are you seeing that you can discuss post remodel and sort of, how that -- the pace at which you're seeing, any kind of change in sales?

A: Thank you, Nancy. It's a little difficult just to give a set number. We have several stores that are performing very well and just need an update to continue their performance on the what we call open store remodels to change out counter and fresh in the store. So kind of based on previous experience, it could be low double-digits, give or take. When we move from an existing mall to an outdoor power center, we could see anywhere from low double-digits or better. And here again, it kind of depends. We have a lot of these stores that we're putting in better positions for the future, although, they are performing well presently. So there's no real set number that I could give you across the board.