Buckle, Inc. (The) (BKE)

BKE 
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Buckle, Inc (BKE)

Q2 2009 Earnings Call

August 20, 2009 10:00 pm ET

Executives

Karen Rhoads - VP of Finance and CFO

Dennis Nelson - President and CEO

Analysts

Adrienne Tennant - Friedman Billings Ramsey

Margaret Whitfield - Sterne, Agee & Leach

Elizabeth Montgomery - Longbow Research

Anna Andreeva - JPMorgan

Tom Filandro - Susquehanna Financial Group

Liz Pierce - Roth Capital Partners LLC

Laura Champine - Cowen and Company

Dana Telsey - Telsey Advisory Group

Michael Smith - Gartner Research

Ronald Bookbinder - Global Hunter Securities LLC

Linda Tsai - MKM Partners LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Earnings Release. At this time all participants are in a listen-only-mode. Later there will be an opportunity for questions and an answer session. Instructions will be given at that time. (Operator Instructions). Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Vice President of Finance and CFO; Kyle Hanson, Corporate Secretary and General Counsel; and Tom Heacock, Corporate Controller.

As they review the operating results for the second quarter, which ended August 1, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change, based on the factors which may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission.

The company does not undertake to publicly update or revise any forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company’s quarterly conference calls without its expressed written consent. Any unauthorized reproductions or recordings of the calls should not be relied upon, as the information may be inaccurate.

I would now like to turn the conference over to our host, Ms. Karen Rhoads. Please go ahead.

Karen Rhoads

Thank you, and good morning everyone. Our August 20, 2009 press release reported that net income for the second quarter ended August 1, 2009 was $25 million or $0.54 per share on a diluted basis compared to $22.3 million or $0.48 per share on a diluted basis for the prior year's second quarter that ended August 2, 2008. Our year-to-date net income for the 26-week period ended August 1, 2009 was $51.9 million, or $1.11 per share on a diluted basis and that compares to $41 million or $0.88 per share on a diluted basis for the 26-week period ended August 2, 2008.

Please note that the prior year's earnings per share have been adjusted to reflect the impact of our 3-for-2 stock split paid in the form of a stock dividend on October 30, 2008. Additionally, as highlighted in this morning's press release, prior year general and administrative expenses for the second quarter and year-to-date period were reported net of a $3 million gain from the involuntary conversion of one of our company's corporate aircraft which was destroyed in a tornado a year ago. We converted that to a monetary asset upon the receipt of insurance proceeds.

This gain had a $0.04 per share after-tax impact on the reported basic and diluted earnings per share for both the quarter and the year-to-date period. Net sales for the 13-week second quarter increased 13.6% to $192.9 million compared to net sales of $169.8 million for the prior year second quarter. Comparable store sales for the quarter increased 8.6%, compared to the same period in the prior year. Our online sales which are not included in comparable store sales increased 39%, to $10.1 million for the second quarter.

Net sales for the 26-week year-to-date period ended August 1, 2009, increased 18.9% to $392.6 million compared to net sales of $330.1 million for the prior period, 26 weeks ended August 2, 2008. Comparable store sales for the year-to-date period increased 13.1%, compared to the same period of the prior year. Our online sales for the year-to-date period increased 56.4%, to $21.8 million.

Gross margin for the quarter improved approximately 130 basis points to 42.7%. This improvement was driven by an increase in merchandise margins, which had a 90-basis point impact and by the leveraging of buying, distribution and occupancy costs which had a 40-basis point impact. The improvement in merchandise margins for the quarter was primarily a reflection of reduced markdowns a as result of strong sell-throughs on new product, which was partially offset by an increase in redemptions through our Primo Card loyalty program.

For the year-to-date period, gross margin improved approximately 190-basis points to 43%. This improvement was driven by an increase in merchandise margins which had a 90-basis point impact and by the leveraging of buying, distribution and occupancy costs which had a 100-basis point impact. The improvement in merchandise margins for the year-to-date period was primarily a reflection of reduced markdown, as a result of strong sell-throughs on new product and again partially offset by an increase in the redemption of our Primo Card loyalty program.

Selling expense for the quarter was 19.4% of net sales, which was a reduction of approximately 30-basis points from the second quarter of fiscal 2008. The reduction was driven primarily by reductions as a percentage of net sales in the expense related to our incentive bonus accruals and by the leveraging of certain other selling expenses, which were partially offset by an increase in internet-related fulfillment and marketing expenses.

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