In This Article:
As apparel, footwear, and accessories retailer The Buckle (NYSE: BKE) continues to adapt its business to the changing conditions of physical store-based selling, it's also dealing with evolving consumer preferences. These include the rising popularity of mid-priced jeans, a category outside of the company's traditional premium sweet spot. Buckle stock lost nearly 6% on May 24 after the organization reported fiscal first-quarter 2019 earnings in which both revenue and same-store sales sagged. Below, we'll review the factors behind the quarter's performance, and other key details from the last three months of operations. Note that all comparative numbers in the following discussion refer to the prior-year quarter.
The Buckle: The raw numbers
| Metric | Q1 2019 | Q1 2018 | YOY Change (Decline) |
|---|---|---|---|
| Revenue | $201.2 million | $204.9 million | (1.8%) |
| Net income | $15.1 million | $18.3 million | (17.5%) |
| Diluted earnings per share | $0.31 | $0.38 | (18.4%) |
Data source: The Buckle. YOY = Year over year.
What happened with The Buckle this quarter?
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The Buckle's revenue decline was paced by a 1.3% drop in comparable store sales. Online sales, however, increased by 5.6% to $24.4 million.
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Women's merchandise sales dipped 4.5%, as average denim prices dropped to $76.70 compared with $82.45 in the prior-year quarter. Consumers have recently opted for denim apparel at sub-$80 price points, and Buckle's top line is subject to some pressure as the company introduces more competitively priced products.
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Average women's price points (across denim, shorts, footwear, fashion, and accessories) dropped 5% to $42.65.
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Men's merchandise sales were "up slightly" compared with the prior-year period, with average denim prices falling to $86.70 from $88.05 in the prior-year quarter. Management cited men's footwear, shorts, and private label brands as enjoying a particularly strong quarter.
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Average men's price points slipped 2.5% to $50.60.
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The company's weaker revenue caused slight gross margin compression. Buckle's gross margin dipped by 80 basis points to 38.1%. Management attributed the lower margin in part to higher occupancy, buying, and distribution expenses relative to the revenue level.
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Slimmer gross profits, combined with higher general and administrative expenses driven by rising payroll expenses, resulted in an operating margin of 9.3% -- a decline of 200 basis points.
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The company continues to optimize its retail footprint, ending the quarter with 449 stores, compared with 456 stores in the first quarter of 2018 and 450 stores in the prior sequential quarter.