Buckle, Inc. (The) (BKE)

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The Buckle, Inc. (BKE)

Q4 2007 Earnings Call Transcript

March 11, 2008 9:30 am ET

Executives

Karen Rhoads – VP Finance, CFO

Dennis Nelson – President, CEO

Analysts

Thomas Filandro – Susquehanna Financial Group

Shaun Smolarz – Sidoti & Co.

Marc Bettinger – Stanford Group Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter yearend earnings release conference call. (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 fourth quarter and fiscal year which ended February 2, 2008, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: All forward looking statements made by the company may involve material risks and uncertainties and are subject to change based on 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 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. And I would now like to turn the conference over to your host, Ms. Karen Rhoads, please go ahead.

Karen Rhoads

Thank you. Good morning everyone. I’ll start off reviewing some of our financial results and then I’ll turn it over to Dennis who is calling in from the road today. But to start off with, our March 11th 2008 press release reported our net income for the fourth quarter that ended February 2nd 2008 was $29.1 million or $0.94 per share on a diluted basis and that compared to $22.1 million or $0.73 per share on a diluted basis for the prior year quarter that ended February 3rd of 2007.

Our net income for the fiscal year ended February 2nd 2008 was $75.2 million or $2.44 per share on a diluted basis and that compared to $55.7 million or $1.86 per share on a diluted basis for the fiscal year that ended February 3rd, 2007. Our net sales for the 13 week fourth quarter increased 18.3% to $207 million compared to net sales of $175 million for the prior year 14 week fourth quarter. Compared to the same 13 week period in the prior year, our comparable store sales for the quarter increased 18.7% and total net sales for that 13 week comparison increased 25.2%.

Our net sales for the 52 week fiscal year increased 16.9% to $619.9 million from net sales of $530.1 million for the prior year 53 week fiscal year. And compared to the same 52 weeks of the prior year, our comparable store sales increased 13.2% and our total net sales increased 18.7%. Gross margin for the quarter improved approximately 120 basis points to 44.4%. This improvement was driven by an increase in merchandise margins which had about a 65 basis point impact and also by leveraging buying occupancy and distribution costs which had about a 95 basis point impact and then also by a reduction in the stock option compensation expense for the quarter.

These improvements were partially offset by an increase in expense related to the incentive bonus accrual. For the fiscal year, our gross margin improved approximately 200 basis points to 41.1%. This improvement was driven primarily by an increase in merchandise margins which had about a 100 basis point impact and by leveraging buying, distribution and occupancy costs which had a 120 basis point impact and then those improvements were partially offset by an increase in the expense that’s related to the incentive bonus accruals. Selling expense for the quarter was 18.5% of net sales which was a reduction of approximately 180 basis points from the fourth quarter of fiscal 2006.

The decrease was driven primarily by reductions as a percentage of net sales in stock option compensation expense, store payroll expense, advertising expense and by the leveraging of certain other selling expenses. And these improvements were partially offset by an increase in our bank card fees as a percentage of net sales. For the fiscal year, selling expense was 19.2% of net sales which was a reduction of approximately 110 basis points from the prior year. The decrease was driven primarily by reductions as a percentage of net sales in store payroll expense, stock option compensation expense, advertising expense and again by the leveraging of certain other selling expenses.

These improvements were partially offset by increases in expense that related to our incentive bonus accruals, bank card fees and health insurance expense. General and administrative expenses for the quarter were 5.1% of net sales which was an increase of approximately 30 basis points from the fourth quarter of fiscal 2006. The increase was primarily attributable to an increase in expense related to the incentive bonus accrual which was partially offset by a reduction in equity compensation and by the leveraging of certain other G&A expenses.

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