BKE
#Thank you.
Good morning, everyone.
Thank you for joining the call.
Our May 18, 2017, press release reported that net income for the 13-week first quarter that ended April 29, 2017, was $16.3 million or $0.34 per share on a diluted basis.
That is compared to net income of $23.1 million or $0.48 per share on a diluted basis for the prior year 13-week first quarter that ended April 30, 2016.
Our net sales for the 13-week first quarter decreased 12.8% to $212.3 million compared to net sales of $243.5 million for the prior year 13-week first quarter.
Comparable store sales for the quarter were down 12.7% in comparison to the same 13-week period in the prior year, and our online sales decreased 7.2% to $21.8 million.
Gross margin for the quarter was 38.5%, down approximately 40 basis points from 38.9% for the first quarter last year.
The decrease was driven primarily by deleveraged occupancy, buying and distribution expenses resulting from the comparable store sales decline, which had about a 300 basis point impact.
That was partially offset by a 70 basis point improvement in merchandise margins for the quarter.
Furthermore, gross margin benefited approximately 200 basis points as a result of the fiscal 2016 sunset of our old Primo Card loyalty program.
And under that program, the rewards were recorded as a cost of goods sold at the time of redemption.
Selling expense was 22.1% of net sales for the first quarter of fiscal 2017, and that compared to 19.5% of net sales for the first quarter of fiscal 2016, with increases as a percentage of net sales in store payroll, online marketing and fulfillment, health insurance and certain other selling expenses.
This was partially offset by a reduction in expense related to the incentive bonus accrual.
General and administrative expenses for the quarter were 4.6% of net sales, and that compared to 4.4% of net sales for the first quarter of fiscal 2016, with increases as a percentage of net sales across several general and administrative expense categories.
Our operating margin for the quarter was 11.8% compared to 15% for the first quarter of fiscal 2016.
Other income for the quarter was $0.9 million compared to $0.4 million for the first quarter of fiscal 2016.
Income tax expense as a percentage of pretax net income was 37.3% for the first quarter of both fiscal 2017 and fiscal 2016, bringing our first quarter net income to $16.3 million for fiscal 2017 versus $23.1 million for fiscal 2016.
Our press release also includes a balance sheet as of April 29, 2017.
The balance sheet includes the following: inventory of $119.4 million, which was down approximately 14% from inventory of $138.8 million as of April 30, 2016; and total cash and investments of $276.7 million, which compares to $264.6 million at the end of fiscal 2016 and $223.9 million as of April 30, 2016.
As of the end of the quarter, inventory on a comparable store basis was down approximately 13.5% compared to the same time a year ago, while total markdown inventory was down compared to the same time a year ago.
We also ended the quarter with $164.9 million in fixed assets, net of accumulated depreciation.
Our capital expenditures for the quarter were $3.9 million, and depreciation expense was $7.9 million.
Capital spending for the quarter is broken down as follows: $3.5 million for new store construction, store remodels and store technology upgrades; and $0.4 million for capital spending at the corporate headquarters and distribution center.
We still expect our fiscal 2017 capital expenditures to be in the range of $25 million to $30 million, which includes primarily new store and store remodeling projects and certain IT investments.
For the quarter, UPTs increased approximately 3.5%.
The average transaction value decreased approximately 3.5%, and the average unit retail decreased approximately 6.5%.
Buckle ended the quarter with 462 retail stores in 44 states compared to 468 stores in 44 states at the end of the first quarter of fiscal 2016.
Additionally, our total square footage was 2.367 million square feet as of the end of the quarter, and that compared to 2.383 million square feet at the same time a year ago.
And at this time, I'd like to turn the call over to Tom <UNK>, our Vice President of Finance, Treasurer and Corporate Controller.
Good morning, and thanks for being with us this morning.
I'd like to start by highlighting the performance from our various merchandise categories for the quarter.
Men's merchandise sales for the quarter were down approximately 11%.
Our average denim price points decreased from $95.85 in the first quarter of fiscal 2016 to $90.65 in the first quarter of fiscal 2017.
For the quarter, our men's business was approximately 47% of net sales compared to 45.5% last year, and our average men's price points decreased approximately 5.5% from $56.10 to $53.10.
Women's merchandise sales for the quarter were down approximately 16%, and our average denim price points decreased from $93.95 in the first quarter of fiscal 2016 to $85.50 in the first quarter of fiscal 2017.
For the quarter, our women's business was approximately 53% of net sales compared to 54.5% last year, and our average women's price points decreased approximately 9% from $50.20 to $45.60.
For the quarter, combined accessories sales were down approximately 13% and combined footwear sales were down approximately 16%.
These 2 categories accounted for approximately 8.5% and 6.5%, respectively, of first quarter net sales, which compares to 8% and 6.5% for each in the first quarter last year.
Average accessory price points were down approximately 4%, and average footwear price points were down approximately 9% for the quarter.
For the quarter, denim accounted for approximately 42% of sales, and tops accounted for approximately 30%, which compares to 43.5% and 28% for each in the first quarter last year.
Our private-label business was up just slightly as a percentage of sales for the quarter and represented approximately 34% of sales.
During the quarter, we didn't open any new stores but did complete 2 full remodels and closed 5 stores.
As of the end of the quarter, 390 of our 462 stores were in our newest format.
For the full year fiscal 2017, we still anticipate opening 2 new stores, which includes 1 for back-to-school and 1 for holiday, and we also still anticipate completing 7 full remodels in total, which includes 3 that have already moved back into their remodeled space in May and 2 additional for back-to-school.
And with that, we'll welcome your questions.
Thank you, <UNK>.
<UNK>, this is <UNK>.
While we continue to look at new ways to market the online and make improvements there, I think some of the decline is due to the retail prices being down an average of 6.5%, I believe, for the company.
And that had some effect.
We've also reduced probably some of the markdown in denim, which, sometimes, when we need to clear certain denim, that sells well online.
So I think a combination of those factors have made the difference there and that ---+ we'll continue to work on growing that business.
<UNK>, we don't give forward guidance, so I'll pass on that one.
Thank you.
Well, we've taken the approach to really focus on the buy now, wear now, and the teams have done a very good job, both the merchandising teams and the store teams, getting behind the new product.
As you see, we not only have lower price points in the store but less inventory.
And so I think we're managing the business.
The teams are doing a very nice job of managing the business.
And so we're just trying to maximize the retail and develop continued long-term guests as we go forward.
In the second quarter, I don't foresee much of a change as far as retail prices and such, but we have had a nice response to the new product and our approach, which has made the growth in total sales a little more challenging, but we think that's smart business and will play well in the future.
<UNK>, do you want to take any of those questions.
Sure.
On the selling expense, you're right, <UNK>.
The biggest portion of selling expense would be our payroll expense at the store, and kind of like <UNK> talked about, the product and the people side also.
We want to make sure that we're investing for the future, looking at the long-term view.
So we have continued to invest in our team, both our store managers and the leadership on the sales floor, making sure that we are able to attract and retain the top talented people.
So we have invested more in payroll.
We feel like that, that is the best decision for the long term.
Also, you mentioned, I think, marketing was one of the categories, too.
And given the current retail environment, we're just continuing to try and make sure that we are staying on top of whether it's social media or other types of marketing and making sure that we're not falling behind in that regard.
So I think we're still ---+ we still try and be very smart with how we spend our dollars, but we want to make sure we're investing in the right areas for the long-term growth of the company.
<UNK>, I just wanted to say congratulations and good luck in your retirement.
Thank you, <UNK>.
And just a couple of questions.
Can you just remind me when you start lapping, on a calendar basis, the denim price declines that are hitting you so hard and also the loyalty program.
<UNK> and Tom, do you want to take the loyalty program.
Yes.
I mean, there's kind of 2 components of the change in the loyalty.
We had a new program that we launched a year ago in the first quarter.
And so really, we're apples to apples on that for the whole quarter.
In the first quarter, it created a little bit of disruption in April a year ago, so we called that out in the April sales release.
So that's apples to apples.
And then we also were winding down our old Primo Card program through most of last year and have expired that program.
So we saw a positive to gross margin in the first quarter that we called out.
That was about 200 basis points.
And we'll continue to see an impact through the rest of the year but at a lower level and kind of step down as we move through the year.
And <UNK>, on the denim pricing, I'd see the decline in, percentage-wise, in price probably consistent through second quarter, and then we'll review in third quarter.
We'll probably see some improvement in the pricing, but we'll analyze that better for the next call.
And do you have anything where you see like average prices starting to go up at this point right now throughout the store.
As we get into fall, I think we'll see an improvement there.
We will not be overlapping so many of the tall boots, the leather boots that we had over the last 2 years.
And as I mentioned, the denim pricing level might improve some.
So I think we'll see some progress there.
But we cover a lot of lifestyles, and we have a lot of different price points, and we're staying focused on the buy now and wear now and what the guests are looking for.
So it's kind of a fluid process with our merchandising and buying toward that price point.
Okay.
And then you didn't mention any store closures planned for this year.
Do you have any planned for the year.
I think most of what we'll do is finish for this year.
We continue to review everything, and we'll look at it again for next year.
But at this point, I think we've made our changes.
If there are no further questions, again, we'd like to thank everyone for joining the call today.
We appreciate your time.
And this will conclude the call.
