BUCKLE INC

Previous wording

Net Merchandise Margins – 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.

Current wording

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".

Previous wording

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.

Current wording

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 operating cash flow will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years.

Previous wording

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. Comparable store net sales for the 53-week fiscal year decreased 8.0% from comparable store net sales for the prior year 53-week period ended February 4, 2023. 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.

Current wording

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 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.

Previous wording

The Company’s average retail price per piece of merchandise sold increased $0.47, or 1.0%, during fiscal 2023 compared to fiscal 2022. This $0.47 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). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.

Current wording

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 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.

Previous wording

Gross profit after buying, distribution, and occupancy costs decreased from $676.0 million in fiscal 2022 to $619.1 million in fiscal 2023. As a percentage of net sales, gross profit was 49.1% in fiscal 2023 compared to 50.3% in fiscal 2022. 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.

Current wording

Gross profit after buying, distribution, and occupancy costs decreased from $619.1 million in fiscal 2023 to $592.8 million in fiscal 2024. 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 (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.

Previous wording

Selling expenses decreased from $293.9 million in fiscal 2022 to $291.0 million in fiscal 2023. As a percentage of net sales, selling expenses increased from 21.9% in fiscal 2022 to 23.1% in fiscal 2023.

Current wording

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.

Previous wording

General and administrative expenses increased from $54.0 million in fiscal 2022 to $57.0 million in fiscal 2023. As a percentage of net sales, general and administrative expenses increased from 4.0% in fiscal 2022 to 4.5% in fiscal 2023.

Current wording

General and administrative expenses increased from $57.0 million in fiscal 2023 to $58.2 million in fiscal 2024. As a percentage of net sales, general and administrative expenses increased from 4.5% in fiscal 2023 to 4.8% in fiscal 2024.

Previous wording

In total, selling, general, and administrative expenses were 27.6% of net sales for fiscal 2023 compared to 25.9% of net sales for fiscal 2022. 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).

Current wording

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 (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).

Previous wording

As a result of the above changes, the Company’s income from operations decreased from $328.1 million for fiscal 2022 to $271.1 million for fiscal 2023. Income from operations was 21.5% as a percentage of net sales in fiscal 2023 compared to 24.4% as a percentage of net sales in fiscal 2022.

Current wording

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. Income from operations was 19.8% as a percentage of net sales in fiscal 2024 compared to 21.5% as a percentage of net sales in fiscal 2023.

Previous wording

Other income was $18.2 million in fiscal 2023 compared to $6.9 million in fiscal 2022. The Company’s other income is derived primarily from investment income related to the Company’s cash and investments.

Current wording

Other income was $16.4 million in fiscal 2024 compared to $18.2 million in fiscal 2023. The Company’s other income is derived primarily from investment income related to the Company’s cash and investments.

Previous wording

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.

Current wording

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.

Previous wording

As of February 3, 2024, the Company had working capital of $222.8 million, including $268.2 million of cash and cash equivalents and $22.2 million of short-term investments. The Company’s cash receipts are generated from retail sales and from investment income, and the Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, remodeling, and other capital expenditures. Historically, the Company’s primary source of working capital has been cash flow from operations. During fiscal 2023, 2022, and 2021 the Company's cash flow from operations was $254.6 million, $242.4 million, and $311.8 million, respectively. Changes in operating cash flow between each of the three years is primarily a function of changes in net income, along with changes in inventory and accounts payable based on the timing and amount of merchandise purchased in each respective period. 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.

Current wording

As of February 1, 2025, the Company had working capital of $225.3 million, including $266.9 million of cash and cash equivalents and $23.8 million of short-term investments. The Company’s cash receipts are generated from retail sales and from investment income, and the Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, remodeling, and other capital expenditures. Historically, the Company’s primary source of working capital has been cash flow from operations. During fiscal 2024, 2023, and 2022 the Company's cash flow from operations was $242.0 million, $254.6 million, and $242.4 million, respectively. Changes in operating cash flow between each of the three years is primarily a function of changes in net income, along with changes in inventory and accounts payable based on the timing and amount of merchandise purchased in each respective period. Operating cash flow is also impacted by the timing of certain other payments, including rent, income taxes, and annual incentive bonuses. 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.

Previous wording

During fiscal 2023, 2022, and 2021, the Company invested $35.9 million, $29.5 million, and $18.3 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company spent $1.4 million, $0.9 million, and $0.8 million in fiscal 2023, 2022, and 2021, respectively, in capital expenditures for the corporate headquarters and distribution facility.

Current wording

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. The Company spent $2.0 million, $1.4 million, and $0.9 million in fiscal 2024, 2023, and 2022, respectively, in capital expenditures for the corporate headquarters and distribution facility.

Previous wording

During fiscal 2024, the Company anticipates opening 8 new stores and completing approximately 15-19 store remodels and/or relocations. Management estimates that total capital expenditures during fiscal 2024 will be approximately $32.0 to $38.0 million, which includes primarily planned store projects and technology investments. The Company believes that existing cash and cash equivalents, 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 has had a consistent record of generating positive cash flow each year and, as of February 3, 2024, had total cash and investments of $315.4 million, including $25.0 million of long-term investments.

Current wording

During fiscal 2025, the Company anticipates opening 7 new stores and completing approximately 18-22 store remodels and/or relocations. Management estimates that total capital expenditures during fiscal 2025 will be approximately $50.0 to $55.0 million, which includes primarily planned store projects and technology investments. The Company believes that existing cash and cash equivalents, 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 has had a consistent record of generating positive cash flow each year and, as of February 1, 2025, had total cash and investments of $318.8 million, including $28.1 million of long-term investments.

Previous wording

Dividend payments - During fiscal 2023, the Company paid total cash dividends of $196.7 million as follows: $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 2022, the Company 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. 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.

Current wording

Dividend payments - During fiscal 2024, the Company paid total cash dividends of $198.0 million as follows: $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 2023, the Company paid total cash dividends of $196.7 million as follows: $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 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.

Previous wording

Revenue Recognition. Retail store sales are recorded, net of expected returns, upon the purchase of merchandise by customers. Online sales are recorded, net of expected returns, when the merchandise is tendered for delivery to the common carrier. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. The Company recognizes revenue from sales made under its layaway program upon delivery of the merchandise to the customer. Revenue is not recorded when gift cards and gift certificates are sold, but rather when a card or certificate is redeemed for merchandise. 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. Gift card and gift certificate breakage is recognized as revenue in proportion to the redemption pattern of customers by applying an estimated breakage rate. The estimated breakage rate is based on historical issuance and redemption patterns and is re-assessed by the Company on a regular basis. Sales tax collected from customers is excluded from revenue and is included as part of accrued store operating expenses on the Company's consolidated balance sheets.

Current wording

Revenue Recognition. Retail store sales are recorded, net of expected returns, upon the purchase of merchandise by customers. Online sales are recorded, net of expected returns, when the merchandise is tendered for delivery to the common carrier. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. The Company recognizes revenue from sales made under its layaway program upon delivery of the merchandise to the customer. Revenue is not recorded when gift cards and gift certificates are sold, but rather when a card or certificate is redeemed for merchandise. 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 $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. The estimated breakage rate is based on historical issuance and redemption patterns and is re-assessed by the Company on a regular basis. Sales tax collected from customers is excluded from revenue and is included as part of accrued store operating expenses on the Company's consolidated balance sheets.

Previous wording

The Company establishes a liability for estimated merchandise returns, based upon the historical average sales return percentage, that is recognized at the transaction value. The Company also recognizes a return asset and a corresponding adjustment to cost of sales for the Company's right to recover returned merchandise, which is measured at the estimated carrying value, less any expected recovery costs. 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.

Current wording

The Company establishes a liability for estimated merchandise returns, based upon the historical average sales return percentage, that is recognized at the transaction value. The Company also recognizes a return asset and a corresponding adjustment to cost of sales for the Company's right to recover returned merchandise, which is measured at the estimated carrying value, less any expected recovery costs. 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 both February 1, 2025 and February 3, 2024.

Previous wording

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. In addition, through partnership with Bread Financial and Comenity Bank (collectively the "Bank"), the Company offers a private label credit card ("PLCC") program. Buckle Rewards members with a PLCC earn additional points under the Buckle Rewards program for every qualifying purchase on their PLCC card. Reported revenue is net of both current period reward redemptions and accruals for estimated future rewards earned under the Buckle Rewards program. 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.

Current wording

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. In addition, through partnership with Bread Financial and Comenity Bank (collectively the "Bank"), the Company offers a private label credit card ("PLCC") program. Buckle Rewards members with a PLCC earn additional points under the Buckle Rewards program for every qualifying purchase on their PLCC card. Reported revenue is net of both current period reward redemptions and accruals for estimated future rewards earned under the Buckle Rewards program. 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 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.

Previous wording

Inventory. Inventory is valued at the lower of cost or net realizable value. Cost is determined using an average cost method that approximates the first-in, first-out (FIFO) method. Management makes adjustments to inventory and cost of goods sold, based upon estimates, to account for merchandise obsolescence and markdowns that could affect net realizable value, based on assumptions using calculations applied to current inventory levels within each different markdown level. Management also reviews the levels of inventory in each markdown group and the overall aging of the inventory versus the estimated future demand for such product and the current market conditions. Such judgments could vary significantly from actual results, either favorably or unfavorably, due to fluctuations in future economic conditions, industry trends, consumer demand, and the competitive retail environment. 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.

Current wording

Inventory. Inventory is valued at the lower of cost or net realizable value. Cost is determined using an average cost method that approximates the first-in, first-out (FIFO) method. Management makes adjustments to inventory and cost of goods sold, based upon estimates, to account for merchandise obsolescence and markdowns that could affect net realizable value, based on assumptions using calculations applied to current inventory levels within each different markdown level. Management also reviews the levels of inventory in each markdown group and the overall aging of the inventory versus the estimated future demand for such product and the current market conditions. Such judgments could vary significantly from actual results, either favorably or unfavorably, due to fluctuations in future economic conditions, industry trends, consumer demand, and the competitive retail environment. 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 $9.2 million as of February 1, 2025 and $9.1 million as of February 3, 2024.

Previous wording

The Company has available an unsecured line of credit of $25.0 million, which is excluded from the preceding table. The line of credit agreement has an expiration date of July 31, 2025 and provides that $10.0 million of the $25.0 million line of credit is available for letters of credit. Certain merchandise purchase orders require that the Company open letters of credit. When the Company takes possession of the merchandise, it releases payment on the letters of credit. The amounts of outstanding letters of credit reported reflect the open letters of credit on merchandise ordered, but not yet received or funded. The Company believes it has sufficient credit available to open letters of credit for merchandise purchases. There were no bank borrowings during fiscal 2023, 2022, and 2021. 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 has no other off-balance sheet arrangements.

Current wording

The Company has available an unsecured line of credit of $25.0 million, which is excluded from the preceding table. The line of credit agreement has an expiration date of July 31, 2025 and provides that $10.0 million of the $25.0 million line of credit is available for letters of credit. Certain merchandise purchase orders require that the Company open letters of credit. When the Company takes possession of the merchandise, it releases payment on the letters of credit. The amounts of outstanding letters of credit reported reflect the open letters of credit on merchandise ordered, but not yet received or funded. The Company believes it has sufficient credit available to open letters of credit for merchandise purchases. There were no bank borrowings during fiscal 2024, 2023, and 2022. 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.

Previous wording

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. 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. The note accrues interest at 5% of the principal balance per year and is to be paid from the life insurance proceeds. The note is secured by a life insurance policy on the Chairman.

Current wording

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. The note accrues interest at 5% of the principal balance per year and is to be paid from the life insurance proceeds. The note is secured by a life insurance policy on the Chairman.