Buckle, Inc. (The)

Hello, everyone. Thank you for standing by. You are currently holding for today's Buckles first courting earnings release webcast. We will be getting started momentarily. Thank you for your patience. And again, everyone, thank you for standing by. You're currently holding for today's Buckles first quarter earnings release webcast. We are still awaiting and allowing additional attendees. We thank you for your patience and please continue to stand by. And for those of you just now joining, you're currently holding for today's Buckles first quarter earnings release webcast. Thank you so much for joining us today. We'll be getting started momentarily. Well, good morning and thank you for standing by and welcome to Buckles first quarter earnings release webcast. As a reminder, all participants are currently in a listen-only mode, but 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, and Adam Ackerson, Vice President of Finance and Corporate Controller. As they review operating results for the first quarter, which ended April 29, 2023, 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 is as follows. 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 will turn things over to your host, Tom Heacock. Tom, over to you.

Good morning and thanks for joining us this morning. Our May 26, 2023 press release report that net income for the 13-week first quarter ended April 29, 2023 was $42.9 million, or $0.86 per share on a diluted basis, which compares to net income of $55.3 million, or $1.12 per share on a diluted basis for the prior year 13-week first quarter that ended April 30, 2022. Net sales for the 13-week first quarter decreased 8.5% to 282.8 million compared to net sales of 309.1 million for the prior year 13-week first quarter. Comparable source sales for the quarter decreased 9.2% in comparison to the same 13-week period in the prior year, and our online sales were down 5.6% to 51.3 million. For the quarter, UPTs decreased or increased approximately 2.5%, the average unit retail decreased approximately 0.5%, and the average transaction value increased about 1.5%. Gross margin for the quarter was 47.1%, down 210 basis points from 49.2% for the first quarter of 2022. The current quarter decline is the result of 140 basis points of deleveraged buying distribution and occupancy expense, along with a 70 basis point decline in merchandise margins. Selling general administrative expenses for the quarter were 28.1% of net sales, compared to 25.6% for the first quarter of 2022. The first quarter increase was primarily due to a 200 basis point increase in store labor-related expenses, along with increases across several other SG&A expense categories, which had a combined 150 basis point impact and were offset by a reduction in expense related to accruals for incentive compensation expense, which had 100 basis point impact. Our operating margin for the quarter was 19.0% compared to 23.6% for the first quarter of fiscal 2022. Income tax expense as a percentage of pre-tax net income for both the current and prior year fiscal quarter was 24.5%, bringing first quarter net income to $42.9 million for fiscal 2023, compared to $55.3 million for fiscal 2022. Our press release also included a balance sheet as of April 29, 2023, which included the following. Inventory of $137.7 million, which was up 13.7% from $121.2 million as of April 30, 2022, and $300 million in total cash and investments. We ended the quarter with $116.1 million in fixed assets and out of accumulated depreciation. Our capital expenditures for the quarter were $9.3 million and depreciation expense was $4.9 million. The first quarter capital spending is broken down as follows. $8.8 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 opened two new stores, completed four full remodels, three of which were relocations into new outdoor shopping centers and closed three stores. For the remainder of the year, we plan on opening seven additional new stores and completing 13 more full remodel projects. Buckle ended the quarter with 440 retail stores in 42 states compared with 439 stores in 42 states at the end of the first quarter of fiscal 2022. And now I'll turn it over to Adam Ackerson, Vice President of Finance. Thanks, Tom.

Women's merchandise sales for the quarter were down about 10.5% against the prior year and represented approximately 47.5% of sales compared to 48.5% in the prior year. Average denim price points increased from $76.60 in the first quarter of fiscal 22 to $79.80 in the first quarter of fiscal 23, while the overall average women's price point increased about 4.5% from $45.45 to $47.40. On the men's side, merchandise sales for the quarter were down about 8% against the prior year, representing approximately 52.5% of total sales compared to 51.5% in the prior year. average denim price points increased from $86 in the first quarter of fiscal 22 to $88.80 in the first quarter of fiscal 23. For the quarter, overall average men's price points increased approximately 3.5% from $50.75 to $52.60. On a combined basis, accessory sales for the quarter were up approximately 9.5% against the prior year, while footwear sales were down about 39%. These two categories accounted for approximately 11% and 8%, respectively, of the first quarter net sales, which compares to 9% and 12% for each in the first quarter of fiscal 22. For the quarter, average accessory price points were up approximately 12%, and average footwear price points were up 6.5%. For the quarter, Denim accounted for approximately 41.5% of total sales and Topps accounted for approximately 27%, which compares to 40% and 27.5% for each in the first quarter of fiscal 22. Our buying teams continued to introduce new brands and provide a diverse assortment of private label product. For the quarter, private label represented 44% of sales versus 42.5% in the first quarter of 2022. During a difficult spring selling season, we were pleased with the performance of both our men's and women's business. Outside of footwear, which accounted for approximately half of the total sales decline for the quarter, we saw good selling across several categories. Denim on the men's side performed well, and we believe our selection of pillows, short sleeve tees, and shorts have us well positioned moving into the summer selling season. On the women's side, Dems sure performed well, and we anticipate that carrying through to the back to school season, pairing well with continued newness in our summer and fashion tops. And with that, we will end your questions. Thank you.