Buckle, Inc. (The)

Good morning and thank you for standing by and welcome to Bucco's first 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 Bucco's management on the call today are Dennis Nelson, President and CEO, Tom Heacock, Senior Vice President of Finance, Treasurer and CFO, Adam Akerson, Vice President of Finance and Corporate Controller. Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary. As they review operating results, 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 cause without its express written consent. Any unauthorized reproductions or recordings of the cause should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. And I'd now like to turn the conference over to your host, Tom Heacock.

Good morning and thanks for joining us this morning. Our May 24, 2024 press release reported that net income for the 13-week first quarter ended May 4, 2024 was $34.8 million or $0.69 per share on a diluted basis compared to net income of $42.9 million or $0.86 per share on a diluted basis for the prior year 13-week first quarter which ended April 29, 2023. Net sales for the 13-week first quarter decreased 7.2% to 262.5 million compared to net sales of 282.8 million for the prior year 13-week first quarter. Comparable store sales for the 13-week fiscal quarter decreased 9% in comparison to the same 13-week period in the prior year. And our online sales decreased 13.4% to $44.4 million for the 13-week fiscal quarter this year, compared to $51.3 million for the prior year 13-week fiscal quarter. Compared to the same 13-week period a year ago, online sales were down 13.2%. For the quarter, UPTs decreased approximately 5.5%, the average unit retail increased approximately 6.5%, and the average transaction value increased about 1%. Gross margin for the quarter was 46%, down 110 basis points from 47.1% for the first quarter of 2023. The current quarter decline was the result of deleveraged buying, distribution, and occupancy expenses partially offset by a 50 basis point improvement in merchandise margins. Selling general administrative expenses for the quarter were 29.8% of net sales compared to 28.1% for the first quarter last year. The first quarter increase was due to a 105 basis point increase in store labor-related expenses a 35 basis point increase in expense for accrued PTO, a 30 basis point increase in G&A salaries, a 30 basis point increase in marketing spend, and a 30 basis point increase in other SG&A expense categories. And these increases were partially offset by a 40 basis point reduction in incentive compensation accruals and a 20 basis point decrease in e-commerce shipping expenses. Our operating margin for the quarter was 16.2% compared to 19% for the first quarter of fiscal 2023. 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 $34.8 million for fiscal 2024 compared to $42.9 million for fiscal 2023. Our press release also included a balance sheet as of May 4, 2024, which included the following. Inventory of $130.7 million, which was down 5.1% from the same time a year ago, and $317.2 million of total cash and investments. We ended the quarter with 132.1 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were 10.8 million and depreciation expense was 5.4 million. First quarter capital spending is broken down as follows, 10.5 million for new store construction, store remodels and technology upgrades, and 0.3 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed five full-store remodels, four of which were relocations into new outdoor shopping centers, and closed four stores, one of which was a used store which was combined back with the full-line store upon remodel. For the remainder of the year, we anticipate opening seven new stores and completing 14 additional full remodeling projects. Buckle ended the quarter with 440 retail stores in 42 states, which is consistent with the store count at the end of the first quarter last year. 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 8.5% against the prior year fiscal quarter and represented approximately 47% of sales compared to 47.5% in the prior year. On a 13-week comparable basis, women's merchandise sales were down approximately 9.5%. Average denim price points increased from $79.80 in the first quarter of fiscal 23 to $80.85 in the first quarter of fiscal 24, while overall average women's price points increased about 1.5% from $47.40 to $48. On the men's side, merchandise sales for the quarter were down about 5.5% against the prior year fiscal quarter, representing approximately 53% of total sales compared to 52.5% in the prior year. On a 13-week comparable basis, men's merchandise sales were down approximately 7.5%. Average gen and price points decreased from $88.80 in the first quarter of fiscal 2023 to $88.65 in the first quarter of fiscal 2024. For the quarter, overall average men's price points increased approximately 2% from $52.60 to $53.60. On a combined basis, accessory sales for the 13-week quarter were down approximately 8.5% against the prior year's 13-week comparable period, while footwear sales were down about 34%. These two categories accounted for approximately 11% and 6%, respectively, of first quarter net sales, which compares to 11% and 8% for each in the first quarter of fiscal 2023. For the quarter, average accessory price points were up approximately 2%, and average footwear price points were up about 6.5%. Denim accounted for approximately 43% of sales, and tops accounted for approximately 27.5%, which compares to 41.5% and 27% for each in the first quarter of fiscal 23. Compared to the same 13 weeks a year ago, our combined denim categories outperformed the total business, and we're down about 3.5%, with strength in our private brands, including Buckle Black and Salvage. Our shorts categories were challenged during the quarter due to lack of newness in the market, but we were able to sell through the category and ended the quarter with inventory down 17.5% from elevated levels a year ago. On a combined basis, our tops categories were down about 8%. Despite tougher first quarter top line results, we were pleased that our teams were able to grow merchandise margins in both our private label and branded business and effectively manage inventory levels. As part of our merchandising strategy, our buying teams continue to invest in the development of our private brands and have kept introducing new labels to our assortment. For the quarter, private label represented 46% of sales versus 44% in the first quarter of 2023. And with that, we welcome your questions.