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Item 7. Management’s Discussion and Analysis

2025-04-02 compared with 2024-04-03 · 25 added, 31 removed, 170 unchanged (25% of the section changed)

9 unchanged sentences

Negative comparable store sales results could reduce net sales and have a negative impact on operating leverage, thus reducing net earnings.

Net Merchandise Margins – Management evaluates the components of merchandise margin including initial markup and the amount of markdowns during a period.

Merchandise Margin – Management evaluates the components of merchandise margin including initial markup and the amount of markdowns during a period.

Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s use of markdowns could have an adverse effect on the Company’s gross margin and results of operations.

Merchandise margin is net sales less merchandise cost of good sold (COGS), as further described in Footnote N, "Segment Reporting".

Operating Margin – Operating margin is a good indicator for management of the Company’s success.

1 unchanged sentence

Cash Flow and Liquidity (working capital) – Management reviews current cash and short-term investments along with cash flow from operating, investing, and financing activities to determine the Company’s short-term cash needs for operations and expansion.

The Company believes that existing cash, short-term investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years.

The Company believes that existing cash, short-term investments, and operating cash flow will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years.

RESULTS OF OPERATIONS

2 unchanged sentences

For Fiscal Years Ended (Decrease)

2024 January 28,

2025 February 3,

2024 January 28,

14 unchanged sentences

Fiscal 2024 Compared to Fiscal 2023

Net sales for the 53-week fiscal year ended February 3, 2024, decreased 6.3% to $1.261 billion from net sales of $1.345 billion for the 52-week fiscal year ended January 28, 2023.

Net sales for the 52-week fiscal year ended February 1, 2025, decreased 3.4% to $1.218 billion from net sales of $1.261 billion for the 53-week fiscal year ended February 3, 2024.

Comparable store net sales for the 52-week fiscal year decreased 2.7% from comparable store net sales for the prior year 52-week period ended February 3, 2024.

The reduction in total net sales for the year was the result of a 7.3% decrease in the number of transactions, partially offset by a 1.0% increase in the average unit retail and a 0.2% increase in the average number of units sold per transaction.

Total net sales for the year were impacted by an extra week of sales due to the fact that 2023 was a 53-week fiscal year while 2022 was a 52-week fiscal year.

Online sales for the fiscal year decreased 10.3% to $206.5 million for the 53-week fiscal year ended February 3, 2024 compared to $230.4 million for the 52-week fiscal year ended January 28, 2023.

The reduction in total net sales for the year was the result of a 4.2% decrease in the number of transactions and a 2.0% decrease in average number of units sold per transaction, partially offset by a 2.8% increase in the average unit retail.

The decline in total net sales (and transactions) was partially attributable to the fact that fiscal 2024 was a 52-week fiscal year, while fiscal 2023 was a 53-week fiscal year.

Online sales for the fiscal year decreased 4.3% to $197.7 million for the 52-week fiscal year ended February 1, 2025 compared to $206.5 million for the 53-week fiscal year ended February 3, 2024.

The Company’s average retail price per piece of merchandise sold increased $1.37, or 2.8%, during fiscal 2024 compared to fiscal 2023.

This $1.37 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece):

a 2.2% increase in average denim price points ($0.42), a 5.2% increase in average accessory price points ($0.26), an 8.1% increase in average footwear price points ($0.25), a 2.0% increase in average knit shirt price points ($0.22), and an increase in average price points for certain other merchandise categories ($0.32);

which were partially offset by a shift in the merchandise mix (-$1.00).

a 1.9% increase in average knit shirt price points ($0.21), a 6.2% increase in average footwear price points ($0.16), a 0.6% increase in average denim price points ($0.13), an increase in average price points for certain other merchandise categories ($0.19), and a shift in the merchandise mix ($0.68).

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

1 unchanged sentence

As a percentage of net sales, gross profit was 48.7% in fiscal 2024 compared to 49.1% in fiscal 2023.

The gross margin decline was the result of deleveraged occupancy, buying, and distribution expenses (1.00%, as a percentage of net sales) along with a decline in merchandise margins (0.20%, as a percentage of net sales).

Merchandise shrinkage was 0.5% of net sales for fiscal 2023 compared to 0.4% of net sales for fiscal 2022.

Selling expenses decreased from $293.9 million in fiscal 2022 to $291.0 million in fiscal 2023.

The gross margin decline was the result of deleveraged occupancy, buying, and distribution expenses (0.95%, as a percentage of net sales), which was partially offset by an increase in merchandise margins (0.55%, as a percentage of net sales).

Merchandise shrinkage was 0.5% of net sales for both fiscal 2024 and fiscal 2023.

Selling expenses increased from $291.0 million in fiscal 2023 to $293.2 million in fiscal 2024.

As a percentage of net sales, selling expenses increased from 23.1% in fiscal 2023 to 24.1% in fiscal 2024.

2 unchanged sentences

In total, selling, general, and administrative expenses were 28.9% of net sales for fiscal 2024 compared to 27.6% of net sales for fiscal 2023.

The increase was the result of increases in store labor-related expenses (1.35%, as a percentage of net sales), general and administrative salary expense (0.30%, as a percentage of net sales), marketing spend (0.25%, as a percentage of net sales), equity compensation expense (0.20%, as a percentage of net sales), and certain other expense categories (0.20%, as a percentage of net sales);

which were partially offset by a decrease in expense related to incentive compensation accruals (0.60%, as a percentage of net sales).

The increase was the result of increases in store labor-related expenses (0.70%, as a percentage of net sales), digital commerce investments (0.25%, as a percentage of net sales), general and administrative salary expense (0.20%, as a percentage of net sales), marketing spend (0.10%, as a percentage of net sales), and certain other expense categories (0.20%, as a percentage of net sales).

These increases were partially offset by a reduction in expense related to incentive compensation accruals (0.15%, as a percentage of net sales).

As a result of the above changes, the Company’s income from operations decreased from $271.1 million for fiscal 2023 to $241.4 million for fiscal 2024.

2 unchanged sentences

The Company’s other income is derived primarily from investment income related to the Company’s cash and investments.

Income tax expense as a percentage of pre-tax income was 24.0% for both fiscal 2023 and fiscal 2022, bringing net income to $219.9 million in fiscal 2023 versus $254.6 million in fiscal 2022.

Income tax expense as a percentage of pre-tax income was 24.2% for fiscal 2024 and 24.0% for fiscal 2023, bringing net income to $195.5 million in fiscal 2024 versus $219.9 million in fiscal 2023.

Fiscal 2023 Compared to Fiscal 2022

A discussion of fiscal 2021 and year-over-year comparisons between fiscal 2022 and fiscal 2021 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 28, 2023, filed with the United States Securities and Exchange Commission on March 29, 2023.

A discussion of fiscal 2022 and year-over-year comparisons between fiscal 2023 and fiscal 2022 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 3, 2024, filed with the United States Securities and Exchange Commission on April 3, 2024.

LIQUIDITY AND CAPITAL RESOURCES

5 unchanged sentences

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

The increase in operating cash flow for fiscal 2023 compared to fiscal 2022 is primarily attributable to changes in inventory and accounts payable as the Company continued to manage and adjust to changing trends, along with a reduction in income tax payments corresponding to the reduction in net income.

The reduction in operating cash flow compared to fiscal 2021, was attributable to changes in inventory and accounts payable as the Company built inventory back to more normalized levels in 2022 and 2023 in addition to the payment of incentive bonuses in the first quarter of both 2023 and 2022 based on the Company's strong financial results in fiscal 2022 and fiscal 2021.

The primary drivers of change in operating cash flow for fiscal 2024 compared to both fiscal 2023 and fiscal 2022 were the reductions in net income, partially offset by the impact of changes in inventory and accounts payable as the Company continued to manage and adjust to changing trends over the last several years.

During fiscal 2024, 2023, and 2022, the Company invested $40.3 million, $35.9 million, and $29.5 million, respectively, in new store construction, store renovation, and store technology upgrades.

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$0.35 per share in each of the four quarters and a special cash dividend of $2.50 per share in the fourth quarter.

During fiscal 2021, the Company's paid 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 2022, the Company's paid total cash dividends of $202.9 million as follows:

$0.35 per share in each of the four quarters and a special cash dividend of $2.65 per share in the fourth quarter.

Stock repurchase plan - The Company did not repurchase any shares of its common stock during fiscal 2024, fiscal 2023, or fiscal 2022.

15 unchanged sentences

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 $16.7 million and $16.8 million as of February 3, 2024 and January 28, 2023, respectively.

The liability recorded for unredeemed gift certificates and gift cards was $17.0 million and $16.7 million as of February 1, 2025 and February 3, 2024, 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.

4 unchanged sentences

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 February 3, 2024 and $3.0 million as of January 28, 2023.

The accrued liability for reserve for sales returns was $2.6 million as of both February 1, 2025 and February 3, 2024.

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.

3 unchanged sentences

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 February 3, 2024 and January 28, 2023, $10.4 million and $10.1 million was included in accrued store operating expenses as a liability for estimated future rewards.

Effective July 1, 2022, the Company entered into a new five year agreement (the "Agreement") with the Bank, to continue providing guests with PLCC services.

Each PLCC bears the Buckle brand logo and can only be used at the Company's retail locations and eCommerce platform.

The Bank is the sole owner of the accounts issued under the PLCC program and bears full risk associated with guest non-payment.

As part of the Agreement, the Company receives a percentage of PLCC sales from the Bank, along with other incentive payments upon the achievement of certain performance targets.

All amounts received from the Bank under the Agreement are recorded in net sales in the consolidated statements of income.

As of February 1, 2025 and February 3, 2024, $10.3 million and $10.4 million was included in accrued store operating expenses as a liability for estimated future rewards.

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

4 unchanged sentences

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 $9.1 million as of February 3, 2024 and $6.3 million as of January 28, 2023.

The adjustment to inventory for markdowns and/or obsolescence was $9.2 million as of February 1, 2025 and $9.1 million as of February 3, 2024.

Income Taxes .

43 unchanged sentences

There were no bank borrowings during fiscal 2024, 2023, and 2022.

The Company had outstanding letters of credit totaling $3.2 million and $3.3 million as of February 3, 2024 and January 28, 2023, respectively.

The Company had outstanding letters of credit totaling $2.2 million and $3.2 million as of February 1, 2025 and February 3, 2024, respectively.

The Company has no other off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

Included in other assets is a note receivable of $1.5 million as of February 3, 2024 and $1.4 million as of January 28, 2023, from a life insurance trust fund controlled by the Company’s Chairman.

Included in other assets is a note receivable of $1.5 million as of both February 1, 2025 and February 3, 2024, 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.

13 unchanged sentences

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