The Buckle, Inc. (NYSE:BKE) Q3 2017 Earnings Conference Call Transcript

Nov 17, 2017 • 09:30 am ET

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The Buckle, Inc. (NYSE:BKE) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter Earnings Release Conference Call. At this time all lines are in a listen-only mode. (Operator Instructions) As a reminder, today's call is being recorded.

Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Vice President of Finance, Treasurer and CFO; Kelli Molczyk, Vice President of Women's Merchandising; Bob Carlberg, Senior Vice President of Men's Merchandising; and Kyle Hanson, Vice President, General Counsel and Corporate Secretary.

(Forward-Looking Cautionary Statements)

I would now like to turn the conference over to our host, Mr. Tom Heacock. Please go ahead.

Executive
Thomas Heacock

Good morning, and thanks for joining us this morning. Our November 17, 2017, press release reported a net income for the 13-week third quarter ended October 28, 2017, of $19.9 million or $0.41 per share on diluted basis, which compares to net income of $23.4 million or $0.48 per share on diluted basis for the prior year 13-week third quarter, which ended on October 29, 2016. Year-to-date, net income for the 39-week period ended October 28, 2017, was $47.7 million or $0.99 per share on a diluted basis, which compares to net income of $62 million or $1.28 per share on a diluted basis for the prior year 39-week period ended October 29, 2016.

Net sales for the 13-week third quarter decreased 6.2% to $224.3 million compared to net sales of $239.2 million for the prior year 13-week third quarter. Comparable store sales for the quarter were down 5.9% in comparison to the same 13-week period in the prior year, and our online sales decreased 1.2% to $23.4 million. Year-to-date net sales decreased 9% to $632.2 million for the 39-week fiscal period ended October 28, 2017, compared to net sales of $694.9 million for the prior year 39-week fiscal period ended October 29, 2016.

Comparable store sales for the year-to-date period were down 8.8% in comparison to the same 39-week period in the prior year, and online sales decreased 4.3% to $64.7 million. For both the quarter and year-to-date periods, UPTs increased approximately 2.5%, the average unit retail decreased approximately 6.5%, and the average transaction value decreased approximately 4%.

Gross margin for the quarter was 40.5%, even with the third quarter of last year. Despite deleveraged occupancy, buying and distribution expenses resulting from the comparable store sales decline, gross margin was flat year-over-year due a 55 basis point improvement in merchandise margins and a 60 basis point benefit as a result of the fiscal 2016 sunset of our old Primo Card loyalty program, under which rewards were recorded to cost of goods sold at the time of redemption.

For the year-to-date period, gross margin was 39% compared to 39.1% for the same period last year, with the slight year-to-date decrease being due to deleveraged occupancy, buying and distribution expenses resulting from the comparable store sales decline and being offset by a 70 basis point improvement in merchandise margins and a 120 basis point benefit