What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-30 compared with 2021-03-31 · 33 added, 31 removed, 172 unchanged (27% of the section changed)

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For Fiscal Years Ended (Decrease)

2021 February 1,

2022 January 30,

2021 February 1,

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Fiscal 2021 Compared to Fiscal 2020

Net sales for the 52-week fiscal year ended January 30, 2021, increased 0.1% to $901.3 million from net sales of $900.3 million for the 52-week fiscal year ended February 1, 2020.

Comparable store net sales for the 52-week fiscal year increased 0.4% from comparable store net sales for the prior year 52-week period ended February 1, 2020.

The comparable store sales increase was primarily attributable to a 2.7% increase in the average unit retail, partially offset by a 1.9% decrease in the number of transactions and a 0.5% decrease in the average number of units sold per transaction.

Net sales for the year were impacted by the temporary closure of all brick and mortar stores beginning March 18, 2020 due to the COVID-19 pandemic, as further described in Footnote M.

Total net sales were also impacted by the Company's permanent closing of 4 stores during fiscal 2019 and by the opening of 3 new stores and permanent closure of 8 stores during fiscal 2020.

Online sales for the fiscal year increased 72.0% to $190.6 million for the 52-week fiscal year ended January 30, 2021 compared to $110.8 million for the 52-week fiscal year ended February 1, 2020.

Average sales per square foot for fiscal 2020 decreased 8.9% from $341 to $311.

Total square footage as of January 30, 2021 was 2.301 million compared to 2.320 million as of February 1, 2020.

Results for the 52-week fiscal year ended January 30, 2021 were significantly impacted by the Company's closure of all brick and mortar stores due to the COVID-19 pandemic beginning March 18, 2020.

Net sales for the 52-week fiscal year ended January 29, 2022, increased 43.6% to $1.295 billion from net sales of $901.3 million for the 52-week fiscal year ended January 30, 2021.

Comparable store net sales for the 52-week fiscal year increased 43.8% from comparable store net sales for the prior year 52-week period ended January 30, 2021.

Total sales growth for the year was the result of a 43.5% increase in the number of transactions and a 2.0% increase in the average unit retail, partially offset by a 1.9% decrease in the average number of units sold per transaction.

Online sales for the fiscal year increased 15.9% to $220.8 million for the 52-week fiscal year ended January 29, 2022 compared to $190.6 million for the 52-week fiscal year ended January 30, 2021.

Average sales per square foot for fiscal 2021 increased 50.6% from $311 to $468.

Total square footage as of January 29, 2022 was 2.292 million compared to 2.301 million as of January 30, 2021.

The Company’s average retail price per piece of merchandise sold increased $0.93, or 2.0%, during fiscal 2021 compared to fiscal 2020.

This $0.93 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece):

a 3.8% increase in average knit shirt price points ($0.39), an increase in average price points for certain other merchandise categories ($0.13), and a shift in the merchandise mix ($0.68).

a 3.9% increase in average knit shirt price points ($0.40), a 9.0% increase in average accessory price points ($0.36), an increase in average price points for certain other merchandise categories ($0.20), and a shift in the merchandise mix ($0.30);

which were partially offset by a 1.8% decrease in average denim price points (-$0.33).

These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.

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As a percentage of net sales, gross profit was 50.4% in fiscal 2021 compared to 44.5% in fiscal 2020.

The increase was attributable to an improvement in merchandise margins (1.40%, as a percentage of net sales) in addition to reductions in occupancy costs (0.95%, as a percentage of net sales) and buying and distribution expenses (0.25%, as a percentage of net sales).

The gross margin increase was the result of leveraged occupancy, buying, and distribution expenses (5.05%, as a percentage of net sales) and an improvement in merchandise margins (0.85%, as a percentage of net sales).

Merchandise shrinkage was 0.3% of net sales for fiscal 2021 compared to 0.4% of net sales for fiscal 2020.

Selling expenses decreased from $204.5 million in fiscal 2019 to $191.2 million in fiscal 2020.

Selling expenses increased from $191.2 million in fiscal 2020 to $266.4 million in fiscal 2021.

As a percentage of net sales, selling expenses decreased from 21.2% in fiscal 2020 to 20.6% in fiscal 2021.

General and administrative expenses were $41.5 million, or 4.6% of net sales, in both fiscal 2019 and fiscal 2020.

General and administrative expenses increased from $41.5 million in fiscal 2020 to $51.1 million in fiscal 2021.

As a percentage of net sales, general and administrative expenses decreased from 4.6% in fiscal 2020 to 3.9% in fiscal 2021.

In total, selling, general, and administrative expenses were 24.5% of net sales for fiscal 2021 compared to 25.8% of net sales for fiscal 2020.

Reductions in store labor-related expenses (2.40%, as a percentage of net sales) and certain other expense categories (1.00%, as a percentage of net sales) were partially offset by increased shipping costs associated with the Company's strong online sales growth (1.00%, as a percentage of net sales) and increased expense related to incentive compensation accruals (0.90%, as a percentage of net sales).

The decrease was the result of a decrease in store labor-related expenses (1.15%, as a percentage of net sales) and sales leverage across several other expense categories (1.30%, as a percentage of net sales), which were partially offset by an increase in expense related to incentive compensation accruals (1.15%, as a percentage of net sales).

As a result of the above changes, the Company’s income from operations increased from $168.0 million for fiscal 2020 to $335.5 million for fiscal 2021.

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Fiscal 2020 Compared to Fiscal 2019

A discussion of fiscal 2018 and year-over-year comparisons between fiscal 2019 and fiscal 2018 can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020, filed with the United States Securities and Exchange Commission on April 1, 2020.

A discussion of fiscal 2019 and year-over-year comparisons between fiscal 2020 and fiscal 2019 can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, filed with the United States Securities and Exchange Commission on March 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

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Operating cash flow is also impacted by the timing of certain other payments, including rent and income taxes.

In addition to an increase in net income, the Company's strong operating cash flow for fiscal 2020 was largely due to changes in inventory and accounts payable as the Company managed and adjusted to changing trends as a result of COVID-19.

The Company's growth in operating cash flow for fiscal 2021 compared to both fiscal 2020 and fiscal 2019 is attributable to the strong increase in both net sales and net income for the year.

During fiscal 2021, 2020, and 2019, the Company invested $18.3 million, $5.5 million, and $6.4 million, respectively, in new store construction, store renovation, and store technology upgrades.

The Company spent $0.8 million, $2.2 million, and $0.9 million in fiscal 2021, 2020, and 2019, respectively, in capital expenditures for the corporate offices and distribution facility.

During fiscal 2021, the Company anticipates opening 1 new store and completing approximately 8 to 12 store remodels and/or relocations.

During fiscal 2022, the Company anticipates opening 5 new stores and completing approximately 15-20 store remodels and/or relocations.

Management estimates that total capital expenditures during fiscal 2022 will be approximately $22.0 to $27.0 million, which includes primarily planned store projects and technology investments.

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The line of credit agreement has an expiration date of July 31, 2023 and provides that $10.0 million of the $25.0 million line is available for letters of credit.

Borrowings under the line of credit provide for interest to be paid at a rate based on LIBOR.

Borrowings under the line of credit provide for interest to be paid at a rate based on SOFR.

The Company has, from time to time, borrowed against these lines of credit.

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The Company had no bank borrowings as of January 29, 2022 and was in compliance with the terms and conditions of the line of credit agreement.

Dividend payments - During fiscal 2020, the Company's Board of Directors suspended the Company's quarterly cash dividends during the first two quarters of the fiscal year as a result of the global COVID-19 pandemic.

Dividend payments - During fiscal 2021, the Company paid total cash dividends of $347.8 million as follows:

$0.33 per share in each of the first three quarters, $0.35 per share in the fourth quarter, and a special cash dividend of $5.65 per share in the fourth quarter.

During fiscal 2020, the Company's Board of Directors suspended the Company's quarterly cash dividends during the first two quarters of the fiscal year as a result of the global COVID-19 pandemic.

During the last two quarters of the fiscal year, the Company paid total cash dividends of $128.5 million as follows:

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$0.25 per share in each of the first three quarters, $0.30 per share in the fourth quarter, and a special cash dividend of $1.25 per share in the fourth quarter.

During fiscal 2018, the Company paid total cash dividends of $97.7 million as follows:

$0.25 per share in each of the four quarters and a special cash dividend of $1.00 per share in the fourth quarter.

Stock repurchase plan - During fiscal 2020, the Company repurchased 25,000 shares of its common stock at an average price of $14.83 per share.

Stock repurchase plan - The Company did not repurchase any shares of its common stock during fiscal 2021.

During fiscal 2020, the Company repurchased 25,000 shares of its common stock at an average price of $14.83 per share.

The Company did not repurchase any shares of its common stock during fiscal 2018.

During fiscal 2019, the Company repurchased 4,552 shares of its common stock at an average price of $14.92 per share.

As of January 29, 2022, 410,655 shares remained available under the Company's current 1,000,000 share repurchase plan that was approved by the Board of Directors on November 20, 2008.

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A current liability for unredeemed gift cards and certificates is recorded at the time the card or certificate is purchased.

The liability recorded for unredeemed gift certificates and gift cards was $14.3 million and $15.3 million as of January 30, 2021 and February 1, 2020, respectively.

The liability recorded for unredeemed gift certificates and gift cards was $16.5 million and $14.3 million as of January 29, 2022 and January 30, 2021, respectively.

Gift card and gift certificate breakage is recognized as revenue in proportion to the redemption pattern of customers by applying an estimated breakage rate.

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Customer returns could potentially exceed the historical average, thus reducing future net sales results and potentially reducing future net earnings.

The accrued liability for reserve for sales returns was $2.6 million as of January 30, 2021 and $2.3 million as of February 1, 2020.

The accrued liability for reserve for sales returns was $3.0 million as of January 29, 2022 and $2.6 million as of January 30, 2021.

The Company's Buckle Rewards program allows participating guests to earn points for every qualifying purchase, which (after achievement of certain point thresholds) are redeemable as a discount off a future purchase.

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A liability has been recorded for future rewards based on the Company's estimate of how many earned points will turn into rewards and ultimately be redeemed prior to expiration.

As of January 30, 2021 and February 1, 2020, $10.2 million and $9.6 million was included in "accrued store operating expenses" as a liability for estimated future rewards.

As of January 29, 2022 and January 30, 2021, $10.6 million and $10.2 million was included in "accrued store operating expenses" as a liability for estimated future rewards.

Through partnership with Comenity Bank, the Company offers a private label credit card ("PLCC").

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In October 2020, the Company merged the B-Rewards program and the Buckle Rewards program enabling participating guests to earn additional points for qualifying purchases on their PLCC card under the newly enhanced Buckle Rewards program.

Effective January 30, 2021, and for all future periods, the accrual for points earned under the combined Buckle Rewards program is included in "accrued store operating expenses" on the Company's consolidated balance sheets as referenced in the previous paragraph.

Inventory is valued at the lower of cost or net realizable value.

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Such changes in market conditions could negatively impact the sale of markdown inventory, causing further markdowns or inventory obsolescence, resulting in increased cost of goods sold from write-offs and reducing the Company’s net earnings.

The adjustment to inventory for markdowns and/or obsolescence was $10.8 million as of January 30, 2021 and $12.2 million as of February 1, 2020.

The adjustment to inventory for markdowns and/or obsolescence was $5.6 million as of January 29, 2022 and $10.8 million as of January 30, 2021.

Income Taxes .

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Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.

The Company records its lease liabilities at the present value of the lease payments not yet paid, discounted at the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term.

As the Company's leases do not provide an implicit interest rate, the Company obtains an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The Company has elected to apply the practical expedient to account for lease components (e.g.

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Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.

Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company has made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, has not applied the lease modification guidance in ASC 842.

Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, did not apply the lease modification guidance in ASC 842.

Investments .

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There were no bank borrowings during fiscal 2021, 2020, and 2019.

The Company had outstanding letters of credit totaling $1.8 million and $1.5 million as of January 30, 2021 and February 1, 2020, respectively.

The Company had outstanding letters of credit totaling $2.7 million and $1.8 million as of January 29, 2022 and January 30, 2021, respectively.

The Company has no other off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

Included in other assets is a note receivable of $1.4 million as of January 30, 2021 and $1.3 million as of February 1, 2020, from a life insurance trust fund controlled by the Company’s Chairman.

Included in other assets is a note receivable of $1.4 million as of January 29, 2022 and $1.4 million as of January 30, 2021, from a life insurance trust fund controlled by the Company’s Chairman.

The note was created over three years, beginning in July 1994, when the Company paid life insurance premiums of $0.2 million each year for the Chairman on a personal policy.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis