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Buckle (BKE) Q3 Earnings Miss, Revenues Meet Estimates

Zacks Equity Research
Updated

The Buckle, Inc. BKE reported negative earnings surprise for the third quarter in a row. The company reported third-quarter fiscal 2016 earnings per share of 48 cents that missed the Zacks Consensus Estimate of 51 cents and also declined 35.1% year over year.

The company’s net sales of $239.2 million were in line with the Zacks Consensus Estimate but declined 14.6% year over year.

Women’s merchandise sales decreased nearly 18.5% in the quarter, while Men’s merchandise sales dropped 9%. Women’s merchandise contributed 54% to total sales, while the Men’s business input was pegged at 46%.

Combined accessory sales fell nearly 16.5%, whereas footwear sales were down 19.5%. These two categories contributed nearly 8.5% and 6%, respectively, to third-quarter net sales.

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Comparable-store sales dipped 15.3% from the prior-year quarter. Moreover, online sales (not included in comparable-store sales) declined 8.5% year over year to $23.7 million.

We observe that Buckle’s net sales decreased 15.1% in October, 14.8% in September and 14% in August. On the other hand, comparable sales declined 15.5% in both October and September and 14.8% in August.

Buckle’s gross profit declined 17.4% to $96.9 million, while gross margin contracted 140 basis points (bps) to 40.5%. The contraction can be attributed to de-leveraged occupancy, buying and distribution expenditures cropping up from the decline in comparable-store sales. The drop in comparable sales impacted gross margin by 270 bps. On the other hand, operating margin was at 15.4% compared with 20.1% in the prior-year quarter.

BUCKLE INC Price, Consensus and EPS Surprise

 

BUCKLE INC Price, Consensus and EPS Surprise | BUCKLE INC Quote

Other Financial Aspects

Buckle ended the quarter with cash and cash equivalents of $163 million, receivables of $13.4 million and shareholders’ equity of $443.2 million. Further, the company had accounts payable of $36.3 million.

In the quarter under review, the company incurred capital expenditures of $10 million cumulating to $27 million for the first nine months of fiscal 2016. For fiscal 2016, the company expects capex at around $28–$32 million to be deployed toward outlet construction/remodel and technology upgrade.

As of Oct 29, 2016, Buckle operated 470 retail stores across 44 states. During the quarter, the company opened one store and closed one store.

Zacks Rank &Stocks to Consider

The company’s shares, which have declined more than 21% year to date, currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail space include Boot Barn Holdings, Inc. BOOT, The Children's Place, Inc. PLCE and Foot Locker, Inc. FL. All of these stocks carry a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Boot Barn Holdings have gained more than 24% in the past three months and it has an impressive long-term earnings growth rate of 14.5%.

The Children's Place has a long-term earnings growth rate of 10.3%.

Foot Locker has a long-term earnings growth rate of 9.9%.

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