Buckle, Inc. (The)

Ladies and gentlemen, good morning. Thank you for standing by and welcome to the Buckles 2021 first quarter earnings release. Members of the Buckles management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance, Treasurer and CFO, Kelly Mulcik, Vice President of Women's Merchandising, Bob Carlberg, Senior Vice President of Men's Merchandising, Brady Fitz, Vice President, General Counsel and Corporate Security, Secretary, excuse me, as they review the operating results for the first quarter, which ended May 1st, they would like to reiterate their policy of not giving future sales 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 risk and uncertainties and are subject to change based on factors such 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 such forward-looking statements. Such factors include but are not limited to 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 the 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 recording of the calls should not be relied upon necessarily. as the information may be inaccurate. And at this time, I'd like to turn the conference over to our host, Mr. Tom Heacock. Please go ahead.

Good morning, and thanks for joining us this morning. Our May 21, 2021 press release reported that net income for the 13-week first quarter ended May 1, 2021 was $57.3 million, or $1.16 per share on a diluted basis, which compares to a net loss of $11.8 million, or $0.24 per share, on a diluted basis for the prior year 13-week first quarter ended May 2, 2020, and net income of $15.1 million, or $0.31 per share, on a diluted basis for the first quarter of fiscal 2019. Net sales for the 13-week first quarter increased by 0.2% to $299.1 million from net sales of 115.4 million for the prior year 13-week first quarter. Compared to the first quarter of fiscal 2019, net sales increased 48.6% from sales of 201.3 million. Online sales for the quarter were 53.7 million, an increase of 67.3% compared to 32.1 million in the first quarter of 2020, and an increase of 120% compared to $24.4 million in the first quarter of 2019. Again, compared to the first quarter of fiscal 2019, UPTs decreased approximately 0.5%, the average unit retail increased approximately 4.5%, and the average transaction value increased about 3.5%. Gross margin for the quarter was 49.3%. compared to 23.2% in the first quarter of 2020 and 38.1% in the first quarter of 2019. The increase in gross margin compared to 2019 was the result of a 315 basis point improvement in merchandise margins coupled with significantly leveraged occupancy buying and distribution costs as a result of the strong sales performance for the quarter. Selling general administrative expenses for the quarter were 24% of net sales compared to 37.2% for the first quarter of 2020 and 28.8% for the first quarter of 2019. The reduction compared to 2019 is the result of a 560 basis point improvement in stored labor-related expenses and a 50 basis point reduction in travel costs, along with 190 basis points of leverage across several other SG&A expenses. These savings were partially offset by a 205 basis point increase related to incentive compensation accruals, a 75 basis point increase in shipping costs due to our continued strong e-commerce performance, a 20 basis point increase in equity compensation expense, and a 20 basis point increase in marketing related expenses. Our operating margin for the quarter was 25.3% compared to negative 14% for the first quarter of fiscal 2020, and 9.3% for the first quarter of 2019. Our effective tax rate was 24.5% for the first quarter of each of the three years, bringing first quarter net income to $57.3 million for 2021, compared to a net loss of $11.8 million for 2020 and net income of $15.1 million for 2019. Our press release also included a balance sheet as of May 1st, 2021, which included the following. Inventory of $89 million, which was down from inventory of $121.7 million as of May 2, 2020, and $120.8 million as of May 4, 2019. And total cash and investments of $412.9 million. We ended the quarter with $100 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $4.6 million, and depreciation expense was $4.8 million. Year-to-date capital spending is broken down as follows. $4.1 million for new store construction, store remodels and technology upgrades, and $0.5 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed five full remodels, all of which were relocations into new outdoor shopping centers, and we also closed one store. For the year, we plan on opening one new used store, completing six additional full remodel projects, and also have one planned store closure later this month. Based on current store plans, we still expect our capital expenditures to be in the range of $10 to $15 million, which includes both planned store projects and IT investments. Buckle ended the quarter with 442 retail stores in 42 states, compared to 446 stores in 42 states at the end of the first quarter of fiscal 2020. And now I'll turn it over to Kelly Mulzik, Vice President of Women's Merchandising.

Thanks, Tom. I would like to start by highlighting the performance of our women's merchandise categories for the quarter. Please note that due to the disruption in the prior year, all sales comparisons will be against the first quarter of 2019. Women's merchandise sales for the fiscal quarter were up approximately 46.5% against the first quarter of fiscal 2019. For the quarter, our women's business was approximately 49% of sales, Average denim price points for the quarter were $76.20 compared to $75.85 in the first quarter of 2020 and $76.70 in the first quarter of fiscal 2019. Overall price points for the quarter were $45.50 compared to $44.00 in Q1 of 2020 and $42.65 in the first quarter of 2019. In reviewing our first quarter results, we continue to be pleased with how the women's product is resonating with our guests and our teammates. Denim continues to perform nicely in a wide variety of fits, from traditional to fashion, finishes from clean to busted, fabrics from super stretch to rigid, and bottom openings from skinny to flare. Our full-length denim alternatives in crops and shorts also continue to perform well. As we all gradually transitioned to more out-of-the-home living, we saw nice upticks to our fashion top mix, our graphic tees, fashion and casual footwear, and accessories as guests looked to step out with their best fashion foot forward. Our private label footprint continues to expand in all categories, creating one-of-a-kind products fit for our guests. Our regular price business continues to drive sales, with our markdown inventory representing a smaller percentage of the total. The exclusive product mix combined with more regular price sales have had a positive impact on our merchandise margins. In addition, with the enhancements to our omni-channel experience, we saw nice gains in our online business for the quarter. With the sales performance beating our plan, the team worked extremely hard throughout the quarter to fill in any gaps in product flow by chasing in-season available goods from our valued partners as well as working through early shipments where applicable. Those at-once goods, in conjunction with the steady flow of new planned spring inventory, continue to set our stores up with fresh product for our guests. We continue to plan for a healthy flow of newness through the second quarter to prepare our stores for the back-to-school season. And with that, I'll turn it over to Bob Karlberg, Senior Vice President of Men's Merchandising, to discuss the performance of our men's merchandise category.