Buckle, Inc. (The)

Ladies and gentlemen, thank you for standing by, and welcome to the 2021 Second Quarter Earnings Release Call. At this time, all participants are in a listen-only mode, and later you will have an opportunity to ask questions. Instructions will be given at that time. If you should require assistance during the call, you may press star and then zero. As a reminder, the conference is being recorded. Members of Buckles Management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance, Treasurer, and CFO, Kelly Mulsik, Vice President of Women's Merchandising, Bob Karlberg, Senior Vice President of Men's Merchandising, and Brady Fritz, Vice President, General Counsel, and Corporate Secretary. As they review the operating results for the second quarter, which ended July 31st, 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 risks and uncertainties and are subject to change based on factors 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 any 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 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 recordings of the call should not be relied upon, as the information may be inaccurate. I would now like to turn the conference over to our host, Tom Heacock. Please go ahead.

Good morning, and thanks for joining us this morning. Our August 20, 2021 press release reported that net income for the 13-week second quarter into July 31, 2021, was $51.4 million. or $4 per share on a diluted basis, which compares to net income of $34.7 million, or $0.71 per share on a diluted basis for the prior year 13-week second quarter, which ended August 1, 2020. Year-to-date net income for the 26-week period into July 31, 2021 was $108.7 million, or $2.20 per share on a diluted basis, compared to net income of $22.9 million, or $0.47 per share, on a diluted basis for the prior year 26-week period ended August 1, 2020. Net sales for the 13-week second quarter increased 36.6% to 295.1 million from net sales of 216 million for the prior year 13-week second quarter. Compared to the second quarter of fiscal 2019, net sales increased 44.8% from net sales of 203.8 million. Online sales for the quarter were 43.4 million, a decrease of 5.5% compared to 46 million in the second quarter of 2020, and an increase of 88.1% compared to 23.1 million in the second quarter of 2019. Year-to-date net sales increased 79.3% to 594.2 million from net sales of 331.4 million for the prior year 26-week fiscal period, and it's August 1, 2020. Compared to the same 26-week fiscal period in 2019, net sales increased 46.7% from net sales of $405.1 million. Online sales for the year-to-date period were $97.2 million, an increase of 24.5% compared to $78.1 million for the same 26-week fiscal period in 2020, and an increase of 104.5% compared to $47.5 million for the same 26-week fiscal period in 2019. For the quarter, UPTs decreased approximately 6.5 percent, the average unit retail increased approximately 2.5 percent, and the average transaction value decreased about 4 percent. Gross margin for the quarter was 48.1 percent, up from 43.2 percent in the second quarter of 2020. Our year-to-date gross margin was 48.7% compared to 36.3% for the same period last year. The second quarter increase in gross margin was the result of a 50 basis point improvement in merchandise margins, coupled with 440 basis points of leverage occupancy buying and distribution costs as a result of the strong sales performance for the quarter. Selling general administrative expenses for the quarter were 25.1% of sales compared to 22.1% for the second quarter of 2020. In our year to date, SG&A was 24.5% of net sales, down from 27.4% for the same period last year. The second quarter increase was due to a 250 basis point increase in incentive compensation accruals and 130 basis point increase in store labor-related expenses, which were partially offset by a 70 basis point decrease in shipping costs and 10 basis points of leverage across several other SG&A categories. Our operating margin for the quarter was 23%, compared to 21.1% for the second quarter of fiscal 2020. And for the year-to-date period, our operating margin was 24.2%, compared to 8.9% for the same period last year. Income tax expense as a percentage of pre-tax net income for both the current and prior year fiscal quarter was 24.5%, bringing second quarter net income to $51.4 million for 2021 compared to $34.7 million for 2020. Our income tax expense as a percentage of pre-tax net income for both the current and prior year-to-year to date periods was also 24.5%, bringing year-to-date net income to $108.7 million for 2021 compared to $22.9 million for fiscal 2020. Our press release also included a balance sheet as of July 31st which included the following, inventory of 95.3 million, which was down from inventory of 116.5 million as of August 1, 2020, and total cash and investments of 434.9 million. We ended the quarter with 99.7 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were 4.6 million, and depreciation expense was 4.9 million. For the year-to-date period, capital expenditures were $9.2 million, and depreciation expense was $9.7 million. Our year-to-date capital spending was broken down as follows. $8.6 million for new store construction, store remodels, and technology upgrades, and $0.6 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened one new used store, completed two full remodels, both of which were relocations into new outdoor shopping centers. and closed one store. This brings our year-to-date totals to one new store, seven full remodels, and two store closures. For the remainder of the year, we anticipate completing six additional full remodeling projects. Based on current store plans, we now expect our capital expenditures to be in the range of $12 to $15 million, which includes both planned store projects and IT investments. Buckle ended the quarter with 442 retail stores in 42 states, compared with 446 stores in 42 states at the end of the second quarter of fiscal 2020. Now we'll turn it over to Kelly Molzik, 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. Women's merchandise sales for the fiscal quarter were up approximately 31.5% against the prior year fiscal quarter. For the quarter, our women's business was approximately 45% of sales compared to 46.5% in the prior year. Average denim price points increased from $74.60 in the second quarter of fiscal 2020 to $74.65 in the second quarter of fiscal 2021. And overall, average women's price points increased about 3.5% from $38.65 to to $40. What an exciting quarter as we saw continued strong responses to new products in every category. Our denim across all fits, brands, and classifications drove our growth. We worked hard to balance our core fits and stretch fabrics with new fashion fits and rigid fabrics, which has significantly expanded the variety in our denim selection. Our private label denim continues to represent a larger share of our mix and was a key contributor in driving our denim sales for the quarter. Outside of denim, our offering in shorts and a variety of fabrics, including denim, twills, and knits, were also strong as guests continued their buy now, wear now purchasing patterns. The second quarter also brought fashion shifts as guests reemerged from their homes and returned to normal activities. They moved away from the simple and casual items and into fashion tops, dresses, and two-piece sets, graphic tees, fashion footwear, and accessories. With the expanded number of brands and lifestyles we now offer in our stores, we are excited about the opportunities we've created to continue both capturing new guests and engaging our loyal guests. Our youth business also saw a nice lift in sales throughout the quarter as kids started back to school. Our teams have done an amazing job of putting buckle youth on the map through both our four freestanding youth locations along with an expanded assortment in our regular stores. We've added youth top-to-bottom assortment to another 75 of our buckle stores, which takes us to 350 stores with a presence of youth product. Despite supply chain challenges during the quarter, the team continues to work very closely with our brand partners on creative solutions to minimize the impact to our women's business. This will be an ongoing focus for us as things continue to evolve over the coming months. I want to sincerely thank all of our vendors and brand partners that are working extremely hard for Buckle, as well as our teams here in the office, in our distribution center, and in our stores for continuing to keep Buckle at the forefront of fashion. And with that, I'll turn it over to Bob Kralberg, Senior Vice President of Men's Merchandising, to discuss the performance of men's merchandise categories.