Buckle, Inc. (The)

Reporting in progress. Welcome to Buckles' third quarter earnings release webcast. As a reminder, all participants are currently in a listen-only mode. A question-and-answer session will be conducted following the company's prepared remarks with instructions given at that time. Members of Buckles Management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance, Treasurer and CFO, Adam Ackerson, Vice President of Finance and Corporate Controller, and Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary. As they review operating results for the third quarter, which ended October 29, 2022, 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 states, 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 calls should not be relied upon, as the information may be inaccurate. And as a reminder, today's webcast is being recorded. And now I'd like to turn the conference over to your host, Tom Heacock. Tom, over to you.

Good morning, and thanks for joining us today.

Our November 18, 2022 press release reported that net income for the 13-week third quarter ended October 29, 2022 was $61.4 million for $1.24 per share on a diluted basis compared to net income of $62.2 million for $1.26 per share on a diluted basis for the prior year 13-week third quarter, which ended October 30, 2021. Year-to-date net income for the 39-week period ended October 29, 2022. was $166.8 million, or $3.37 per share on a diluted basis, which compares to net income of $170.9 million, or $3.46 per share on a diluted basis for the prior year 39-week period ended October 30, 2021. Net sales for the 13-week third quarter increased 4%, to $332.3 million, compared to net sales of $319.4 million for the prior year 13-week third quarter. Comparable source sales for the quarter increased 3% in comparison to the same 13-week period in the prior year, and our online sales increased 8.8% to $55 million. Year-to-date net sales increased 3.3%, to $943.4 million for the 39-week fiscal period ended October 29, 2022, compared to net sales of $913.7 million for the prior year 39-week period ended October 30, 2021. Comparable source sales for the year-to-date period were up 2.8% in comparison to the same 39-week period in the prior year, and our online sales increased 5.3% to $155.6 million. For the quarter, UPTs decreased approximately 0.5%, the average unit retail increased approximately 6%, and the average transaction value increased approximately 5.5%. Year-to-date, UPTs decreased approximately 0.5%, the average unit retail increased approximately 3.5%, and the average transaction value increased approximately 3%. Gross margin for the quarter was 49.8%. down 60 basis points from 50.4% in the third quarter of 2021. Year-to-date gross margin was 49.1%, down 20 basis points from 49.3% for the same period last year. Merchandise margins were down about 75 basis points for the quarter and down 35 basis points for the year-to-date period. Selling general administrative expenses for the quarter were 25.9% of sales, compared to 24.7% for the third quarter of 2021. Year-to-date, SG&A was 26% of net sales, compared to 24.6% for the same period last year. The third quarter increase was due to a 90 basis point increase in stored labor-related expenses, in addition to increases across several other SG&A expense categories, which had a 90 basis point impact and were partially offset by a 60 basis point reduction in incentive compensation accruals. Our operating margin for the quarter was 23.9% compared to 25.7% for the third quarter of fiscal 2021. And for the year-to-date period, our operating margin was 23.1% compared to 24.7% 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 third quarter net income to $61.4 million for fiscal 2022 compared to $62.2 million for fiscal 2021. Income tax expense as a percentage of pre-tax net income for both the current and prior year year-to-date periods was also 24.5%, bringing year-to-date net income to $166.8 million for fiscal 2022, compared to $170.9 million for fiscal 2021. Our press release also included a balance sheet as of October 29, 2022, which included the following. inventory of $152.3 million, and total cash and investments of $344.7 million. Third quarter inventory comparisons for the last several years included $100.6 million at the end of Q3 2021, $118.7 million in Q3 2020, and $138.9 million in Q3 2019. We ended the quarter with $109.6 million in fixed assets and out of accumulated depreciation. Our capital expenditures for the quarter were $7.5 million, and depreciation expense was $4.4 million. For the year-to-date period, capital expenditures were $22.4 million, and depreciation expense was $13.6 million. Year-to-date capital spending is broken down as follows. $22 million for new store construction, store remodels, and technology upgrades, and $0.4 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened one new store, completed three full remodels, two of which were relocations into new outdoor shopping centers and closed one store. This brings our year-to-date totals to three new stores, 16 full remodels and two store closures. For the remainder of the year, we anticipate completing eight additional full remodel projects and opening one additional new store. Based on current store plans, we expect our capital expenditures to be in the range of $26 to $30 million for the year, which includes both plan store projects and IT investments. Buckle ended the quarter with 441 retail stores in 42 states, consistent with the store count as of the end of the third quarter last year. Now we'll turn it over to Adam Ackerson, Vice President of Finance. Thanks, Tom.