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The Buckle Execs Talk Denim Pricing, Vietnam Shutdown

Helped by high consumer demand, The Buckle Inc. easily beat Wall Street’s second-quarter estimates, although the recent Vietnam lockdown is expected to slow merchandise in-flows.

In a Nutshell: The specialty chain saw strong sales across its young men’s and women’s categories, as well as in boys and girls.

But inventory levels fell 18 percent to $95.3 million in the second quarter from $116.5 million in the year-ago quarter, treasurer and chief financial officer Tom Heacock told Wall Street analysts on a call Friday.

“It’s not a level of inventory that we want to maintain. We know we’re missing some sales,” CEO Dennis H. Nelson added.

Challenges in the supply chain, such as the shutdown in Vietnam, mean that some deliveries will arrive late, Nelson said. Buckle has been working with vendor partners to develop more product. While the company had hoped to get inventory back to a normal level by this fall, that will likely take longer because of Vietnam, he said, adding, “We still have some great selection and a substantial part of our planned inventory coming in.”

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Nelson also debated if slowing consumer demand might help the chain get its arms around merchandise in-flows.

“We don’t like to put off what we can sell today, but if there is any slowness preceding that, and that helps us catch up, then I guess that is a small win,” he said.

During the call, Kelli Molczyk, vice president of women’s merchandising, said sales in the women’s business rose 31.5 percent in the quarter while average denim prices were $74.65, up from the average of $74.16 a year ago. The overall average price increase for women’s merchandise was about 3.5 percent, from $38.50 to $40.

Our private label denim continues to represent a larger share of our mix. That was a key contributor to driving organic sales for the quarter,” Molczyk said. 

In men’s, sales for the quarter rose 40.5 percent against results from the year-ago period, according to Robert M. Carlberg, senior vice president of men’s merchandising. Average denim price points were $85.10, down from $87.85 in the year-ago quarter. The overall price points for men’s rose slightly to $45.85 from $45.80. He said the business saw strong strength in rock revival with its street brands and shirts, especially graphic tees. The men’s accessories category also did well, rising 43 percent against year-ago results, while footwear sales rose 14.5 percent, Carlberg said.

The Buckle saw high demand from consumers in Q2, but inventory levels fell 18% due to supply chain disruption, including Vietnam shutdown.
A look from the women’s offerings for fall, from The Buckle Inc. Company Website

 

 

CL King & Assoc. analyst Steven L. Marotta said the specialty chain’s earnings beat was a result of both “higher-than-expected gross margin at 48.1 percent versus 43.2 percent in the year-ago period, with lower-than estimated SG&A (selling, general and administrative) expenses.”

The specialty chain operates 442 retail stores across 42 states. Although the retailer sells apparel, accessories and footwear, it is known as a denim destination for young men and women.

Net Sales: Net sales for the quarter ended July 31 rose 37 percent to $295.1 million from $216.0 million. Compared with the same 2019 pre-pandemic quarter, net sales rose 44.8 percent from $203.8 million.

Buckle said that because of Covid restrictions that began March 18, 2020, including temporary store closures, it was not providing comparable store sales information.

The company also said online sales fell 5.5 percent to $43.4 million, versus $46.0 million a year ago. Compared with 2019 figures for the same comparable quarter, online sales rose 88.1 percent from $23.1 million.

For the six months, net sales were up 79 percent to $594.2 million from $331.4 million.

Earnings: Net income rose 48 percent to $51.4 million, or $1.04 a diluted share, from $34.7 million, or 71 cents, a year ago.

Wall Street was expecting diluted earnings per share of 56 cents on revenue of $226 million.

For the six months, net income jumped to $108.7 million, or $2.20 a diluted share, from $22.9 million, or 47 cents, in the year-ago period.

CEO’s Take: “We feel really good about what we have going on with our stores and our online. The one thing we’ve noticed is we’ve added over 40 percent new guests over this past year. In addition, we’ve relocated some of our mall stores in the outdoor, power centers and lifestyle centers, which we’ve had very good response,” Nelson said.