Buckle, Inc. (The)

Good morning and thank you for standing by. Welcome to Bucco's second 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 Mackerson, Vice President of Finance and Corporate Controller, and 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 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 Hicka.

Good morning and thanks for joining us this morning. Our August 23, 2024 press release reported that net income for the 13-week second quarter, which ended August 3, 2024, was $39.3 million, or $0.78 per share on a diluted basis compared to net income of $45.6 million, or $0.92 per share on a diluted basis for the prior year 13-week second quarter, which ended July 29, 2023. Year-to-date net income for the 26-week period ended August 3, 2024, was $74.1 million, or $1.48 per share on a diluted basis, compared to net income of $88.6 million, or $1.78 per share on a diluted basis for the prior year 26-week period ended July 29, 2023. Net sales for the 13-week second quarter decreased 3.4% to $282.4 million compared to net sales of $292.4 million for the prior year 13-week second quarter. Comparable store sales for the 13-week fiscal quarter decreased 6.6% in comparison to the same 13-week period in the prior year. And our online sales decreased 15.2% to $37 million for the 13-week fiscal quarter, compared to $43.6 million for the prior year 13-week fiscal quarter. Compared to the same 13-week period a year ago, online sales were down 15%. Year-to-date net sales decreased 5.3% to $544.9 million compared to net sales of $575.3 million for the prior year 26-week fiscal period. Comparable store sales for the year-to-date period decreased 7.7% in comparison to the same 26-week period in the prior year, and online sales decreased 14.2% to $81.4 million for the year-to-date period, compared to $94.9 million for the prior year 26-week fiscal period. Compared to the same 26-week period a year ago, online sales were down 14%. For the quarter, UPTs decreased approximately 1.5%, the average unit retail increased approximately 2%, and the average transaction value increased about 0.5%. Year-to-date, UPTs decreased approximately 3.5%, the average unit retail increased approximately 4%, and the average transaction value increased approximately 0.5%. Gross margin for the quarter was 46.9%, down 40 basis points from 47.3% in the second quarter of 2023. The current quarter decline was the result of a 90 basis point increase in occupancy costs, along with a 20 basis point increase in distribution and buying costs, both of which were partially offset by a 70 basis point improvement in merchandise margins. Year-to-date gross margin was 46.5%, down 70 basis points from 47.2% in the prior year. The year-to-date decline was the result of 110 basis point increase in occupancy costs and a 20 basis point increase in distribution and buying costs, which were partially offset by a 60 basis point improvement in merchandise margins. Selling general administrative expenses for the quarter were 29.8% of net sales compared to 27.9% for the second quarter of 2023. And year-to-date SG&A was 29.9% of net sales compared to 28% for the same period last year. The second quarter increase was due to 125 basis point increase in store labor-related expenses a 65 basis point increase related to digital commerce investments, a 25 basis point increase in marketing spend, a 25 basis point increase in G&A salaries, and a 35 basis point increase in certain other SG&A expense categories. These increases were partially offset by a 60 basis point decrease in incentive compensation accruals and a 25 basis point decrease in e-commerce shipping expenses. Our operating margin for the quarter was 17.1% compared to 19.4% for the second quarter of fiscal 2023. And for the year-to-date period, our operating margin was 16.6% compared to 19.2% 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 $39.3 million for fiscal 2024 compared to $45.6 million for fiscal 2023. 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 $74.1 million in 2024 compared to $88.6 million in 2023. Our press release also included a balance sheet as of August 3, 2024, which included the following. Inventory of $131.4 million, down 3.4% from the same time a year ago, and $336.1 million in total cash and investments. We ended the quarter with 139.3 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were 11.5 million, and depreciation expense was 5.7 million. For the year-to-date period, capital expenditures were 22.3 million, and depreciation expense was 11.1 million. Year-to-date capital spending is broken down as follows. 21.8 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 seven full remodels, one of which was a relocation into a new outdoor shopping center, and closed two stores, which brings our year-to-date counts to two new stores, 12 full remodels, and six store closures. For the remainder of the year, we plan on opening five additional new stores and completing six more 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 second quarter of 2023. And now we'll turn it over to Adam Ackerson, our Vice President of Finance. Thanks, Tom.

Women's merchandise sales for the quarter were down about 3% against the prior year fiscal quarter and represented approximately 43.5% of total sales. On a 13-week comparable basis, women's merchandise sales were down approximately 5.5%. Average denim price points increased from $79.10 in the second quarter of fiscal 2023 to $80.60 in the second quarter of fiscal 2024, while overall average women's price points increased about 0.5% from $42.85 to $43.15. On the men's side, merchandise sales for the quarter were down about 3.5% against the prior year fiscal quarter, representing approximately 56.5% of total sales. On a 13-week comparable basis, men's merchandise sales were down approximately 6.5%. Average denim price points decreased from $89.50 in the second quarter of fiscal 2023 to $89.20 in the second quarter of fiscal 2024. For the quarter, overall average men's price points increased approximately 2% from $49.25 to $50.20. On a combined basis, accessory sales for the 13-week quarter were down approximately 4% against the prior year 13-week comparable period, while footwear sales were down about 27%. These two categories accounted for approximately 11.5% and 5.5%, respectively, of the second quarter net sales, which compares to 11.5% and 7.5% for each in the second quarter of fiscal 2023. For the quarter, average accessory price points were up slightly, while average footwear price points were up 5%. For the quarter, denim accounted for approximately 35.5% of sales, and tops accounted for approximately 30%, which compares to 33% and 30% for each in the second quarter of fiscal 2023. Compared to the same 13 weeks a year ago, our combined denim categories continued to outperform the total business and were down about 1.5%. Denim built momentum throughout the quarter and was down just slightly in fiscal July. We were particularly pleased with the performance of our women's denim business, being down just slightly for the quarter and up about 4.5% in fiscal July. Our women's business also saw strength in other bottom categories, with growth in both casual fashion pants and shorts for the quarter. On a combined basis, our tops categories were down about 7%. Our men's short sleeve woven business was strong for the quarter, as were our women's basics and trend silhouettes. Additionally, we were pleased with the merchandise margin expansion for the quarter, even with down sales. We continue to be excited about the performance, along with the depth, quality, and variety of our private brands. For the quarter, private label represented 43% of sales versus 41% in the second quarter of 2023. With that, we welcome your questions.