The Buckle Inc. Q2 2008 Earnings Call Transcript

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The Buckle Inc., (BKE)

Q2 2008 Earnings Call

August 21, 2008 10:30 am ET

Executives

Dennis Nelson - President and Chief Executive Officer

Karen Rhoads - Vice President of Finance and Chief Financial Officer

Kyle Hanson - Corporate Secretary and General Counsel

Tom Heacock - Corporate Controller

Analysts

Tom Filandro - SIG

Anna Andreeva - JP Morgan

Margaret Whitfield - Sterne, Agee

Marc Bettinger - Wasserman & Associates

Stephanie Wissink - Piper Jaffray

[Steven Cheng] - [Red Gear Capital]

Roy Berger - Private Investor

Steve Kernkraut - Berman Capital

David Berman - Berman Capital

Presentation

Operator

Ladies and gentlemen, thank you for standing by. 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 the 2nd, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement, the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change, based on factors which made 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.

I'll now turn the meeting over to Ms. Karen Rhoads. Please go ahead.

Karen Rhoads - Vice President of Finance and Chief Financial Officer

Thank you and good morning. Our August 21, 2008 press release reported that our net income for the second quarter that ended August 2, 2008 was 22.3 million or $0.72 per share on a diluted basis and compares to 11.8 million, or $0.38 per share on a diluted basis for the prior year second quarter that ended August 4, of 2007.

Our year-to-date net income for the 26-week period ended August 2, 2008 was 41 million, or $1.32 per share on a diluted basis and that compares to 24 million, or $0.78 per share on a diluted basis for the 26-week period ended August 4, of 2007.

Please note, that as we highlighted in this morning's press release, our current year general and administrative expenses for both the quarter and year-to-date period have been reported net of a $3 million gain that was from the involuntary conversion of one of our Company's corporate aircraft to a monetary asset upon receipt of our insurance proceeds. The aircraft was destroyed by a tornado that hit the Kearney airport back in May. And the gain had a $0.06 per share after-tax impact on reported basic and diluted earnings per share for both the quarter and year-to-date period.

Our net sales for the 13-week second quarter increased 36.6% to $169.8 million, compared to net sales of $124.3 million for the prior year second quarter. Our comparable store sales for the quarter increased 27.8% and that's compared to the same period of the prior year.

Net sales for the 26-week year-to-date period ended August 2, 2008 increase 34.5% to $330.1 million compared to net sales of $245.4 million for the prior year 26-week period ended August 4, 2007. Our comparable store sales for the period increased 26.7% compared to the same period of the prior year.

Our gross margin for the quarter improved approximately 400 basis points to 41.4% and this improvement was driven by an increase in merchandise margins, which had about a 95 basis point impact, and then also by the leveraging of our buying and occupancy costs, which had about a 295 basis point impact. And then, these improvements were partially offset by an increase in expense related to the incentive bonus accrual.

For the year-to-date period, our gross margin improved approximately 300 basis points to 41.2%. This improvement was driven by an increase in merchandise margins which had about a 90 basis point impact on the year-to-date period and by the leveraging of buying and occupancy costs, which had about 295 basis point impact. These improvements were partially offset by an increase in expense, related to the incentive bonus accrual.

Our selling expense for the quarter was 19.7% of net sales, which was a reduction of approximately 50 basis points from the second quarter of fiscal 2007. The reduction was driven primarily by a decrease as a percentage in net sales in the store payroll expense and by leveraging certain other selling expenses. The reductions were partially offset by an increase in expense related, again, to that incentive bonus accrual and also to a lesser extent to an increase in Internet related fulfillment and marketing expenses.

For the year-to-date period, selling expense was 19.7% of net sales, which was a reduction of approximately 2 basis points compared to the same period of fiscal 2007. This reduction was driven primarily by a reduction as a percentage of net sales, in-store payroll expense, and by leveraging of certain other selling expenses. And, again, these reductions were almost equally offset by an increase in expense related to the incentive bonus accrual and, to a lesser extent, to an increase in the Internet-related fulfillment end marketing expenses.

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