Buckle Management Discusses Q2 2012 Results - Earnings Call Transcript

Buckle (BKE)

Q2 2012 Earnings Call

August 16, 2012 10:00 am ET

Executives

Karen B. Rhoads - Director and Member of Executive Committee

Thomas B. Heacock - Treasurer and Corporate Controller

Dennis H. Nelson - Chief Executive Officer, President, Director and Member of Executive Committee

Robert M. Carlberg - Vice President of Men's Merchandising

Analysts

Paul Alexander - BofA Merrill Lynch, Research Division

Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division

Simeon A. Siegel - JP Morgan Chase & Co, Research Division

John D. Kernan - Cowen and Company, LLC, Research Division

Travis Williams - Stephens Inc., Research Division

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Adrienne Tennant - Janney Montgomery Scott LLC, Research Division

Janine M. Stichter - Telsey Advisory Group LLC

Presentation

Operator

Ladies and gentlemen, we do appreciate your patience. And welcome to the Buckle Conference Call.

Members of the Buckle's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Vice President of Finance and Chief Financial Officer; Pat Whisler, Vice President of Women's Merchandising; Bob Carlberg, Vice President of Men's Merchandising; Kyle Hanson, Corporate Secretary and General Counsel; and Tom Heacock, Treasurer and Corporate Controller.

As they review the operating results for the second quarter, which ended July 28, 2012, 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 of 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 expressed written consent. Any unauthorized reproduction or recording of the call shouldn't be relied upon, as the information may be inaccurate.

At this time, this conference is being recorded. And I would now like to turn the conference over to our host, Karen Rhoads. Please go ahead.

Karen B. Rhoads

Thank you. Good morning, everyone, and thank you for joining the call. Our August 16, 2012 press release reported that net income for the second quarter that ended July 28, 2012 was $23.2 million or $0.49 per share on a diluted basis. That was down 1.4% from net income of $23.6 million or $0.50 per share on a diluted basis for the prior year second quarter that ended July 30, 2011. Our year-to-date net income for the 26-week period that ended July 28, 2012 was $61 million or $1.28 per share on a diluted basis, which was up 7% from net income of $57 million or $1.21 per share on a diluted basis for the 26-week period that ended July 30, 2011.

Our net sales for the 13-week second quarter increased 1.5%, to $215.5 million compared to net sales of $212.4 million for the prior year second quarter. Comparable store sales for the quarter decreased just 0.8%, and online sales, which are not included in comparable store sales, increased 12.1%, to $16.0 million.

Net sales for the 26-week year-to-date period increased 5.9%, to $479.2 million compared to net sales of $452.5 million for the same period in the prior year.

Comparable store sales for the year-to-date period increased 3.6%, and online sales, which again are not included in comparable store sales, increased 13.7%, to $35.7 million. Gross margin for the quarter was 40.1%, down approximately 90 basis points from 41% for the second quarter last year. The decline was driven by the deleveraging of certain buying, occupancy and distribution costs, which had about a 75 basis point impact and by a 25 basis point reduction in merchandise margins, which were partially offset by a reduction in expense related to our incentive bonus accrual.

For the year-to-date period, gross margin was 41.9%, down approximately 10 basis points from 42.0% for the same period last year. The decline was driven by a slight reduction in merchandise margins.

Selling expense for the quarter was 19.2% of net sales, which was a reduction of approximately 80 basis points from the second quarter of fiscal 2011. The reduction was driven by decreases as a percentage of sales in expense related to the incentive bonus accrual and bank card fees. For the year-to-date period, selling expense was 18.3% of net sales, which was a reduction of approximately 50 basis points from the same period last year. The reduction was driven by decreases as a percentage of net sales in expense related to the incentive bonus accrual and bank card fees.

General and administrative expense for the quarter was 4% of net sales, up approximately 30 basis points from the second quarter of fiscal 2011. Increases in expense related to our accrued vacation pay and equity compensation expense were partially offset by a reduction as a percentage of net sales in expense related to the incentive bonus accrual and certain other general and administrative expenses. For the year-to-date period, general and administrative expenses were 3.9% of net sales, up approximately 20 basis points from the same period last year. Increases in expense related to accrued vacation pay and equity compensation expense, and these expenses were partially offset by reductions as a percentage of net sales in expense related to our incentive bonus accrual and, again, certain other general and administrative expenses.

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