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 goods sold (COGS), as further described in Footnote 10, "Segment Reporting".

Previous wording

Net sales decreased from $303.5 million in the third quarter of fiscal 2023 to $293.6 million in the third quarter of fiscal 2024, a 3.2% decrease. Comparable store net sales for the thirteen week quarter ended November 2, 2024 decreased 0.7% from comparable store net sales for the prior year thirteen week period ended November 4, 2023. Due to the 53rd week in fiscal 2023, comparable store net sales for the quarter are compared to the 13-week period ended November 4, 2023. The reduction in total sales for the period was the result of a 3.8% decrease in the number of transactions and a 0.8% decrease in the average number of units sold per transaction, which were partially offset by a 2.8% increase in the average unit retail. Online sales for the quarter increased 1.1% to $46.6 million for the thirteen week period ended November 2, 2024 compared to $46.1 million for the thirteen week period ended October 28, 2023.

Current wording

Net sales increased from $262.5 million in the first quarter of fiscal 2024 to $272.1 million in the first quarter of fiscal 2025, a 3.7% increase. Comparable store net sales for the thirteen week quarter ended May 3, 2025 increased 3.0% from comparable store net sales for the prior year thirteen week period ended May 4, 2024. The increase in total sales for the period was the result of a 2.4% increase in the number of transactions, a 0.2% increase in the average number of units sold per transaction, and a 1.1% increase in the average unit retail. Online sales for the quarter increased 4.5% to $46.4 million for the thirteen week period ended May 3, 2025, compared to $44.4 million for the thirteen week period ended May 4, 2024.

Previous wording

The Company's average retail price per piece of merchandise sold increased $1.40, or 2.8%, during the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. This $1.40 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 2.0% increase in average knit shirt price points ($0.23), a 0.9% increase in average denim price points ($0.21), a 7.1% increase in average footwear price points ($0.17), an increase in average price points for certain other merchandise categories ($0.09), and a shift in the merchandise mix ($0.70). 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 $0.53, or 1.1%, during the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. This $0.53 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 2.9% increase in average denim price points ($0.63) along with increased average price points across several other merchandise categories ($0.21), which were partially offset by a shift in the merchandise mix (-$0.31). 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 expenses was $140.1 million in the third quarter of fiscal 2024, compared to $147.2 million in the third quarter of fiscal 2023. As a percentage of net sales, gross profit was 47.7% in the third quarter of fiscal 2024, compared to 48.5% in the third quarter of fiscal 2023. The current quarter margin decline was the result of increases in buying, distribution, and occupancy expenses (1.35%, as a percentage of net sales) which were partially offset by an improvement in merchandise margins (0.55%, as a percentage of net sales).

Current wording

Gross profit after buying, distribution, and occupancy expenses was $127.0 million in the first quarter of fiscal 2025, compared to $120.7 million in the first quarter of fiscal 2024. As a percentage of net sales, gross profit was 46.7% in the first quarter of fiscal 2025, compared to 46.0% in the first quarter of fiscal 2024. The current quarter gross margin increase was the result of an increase in merchandise margins (0.60%, as a percentage of net sales) along with leveraged buying, distribution, and occupancy expenses (0.10%, as a percentage of net sales).

Previous wording

Selling, general, and administrative expenses were 29.1% of net sales for the third quarter of fiscal 2024, compared to 27.4% for the third quarter of fiscal 2023. The increase was the result of increases in store labor-related expenses (0.90%, as a percentage of net sales), digital commerce investments (0.35%, as a percentage of net sales), general and administrative salary expense (0.30%, as a percentage of net sales), and other selling, general and administrative expense categories (0.55%, as a percentage of net sales). These increases were partially offset by a reduction in expense related to incentive compensation accruals (0.40%, as a percentage of net sales).

Current wording

Selling, general, and administrative expenses were 30.7% of net sales for the first quarter of fiscal 2025, compared to 29.8% for the first quarter of fiscal 2024. The increase was the result of increases in incentive compensation accruals (0.45%, as a percentage of net sales), health insurance related costs (0.25%, as a percentage of net sales), equity compensation expense (0.20%, as a percentage of net sales), and certain other selling, general, and administrative expense categories (0.40%, as a percentage of net sales). These increases were partially offset by reductions in expense related to e-Commerce shipping expenses (0.25%, as a percentage of net sales) and certain marketing expenses (0.15%, as a percentage of net sales).

Previous wording

As a result of the above changes, the Company's income from operations was $54.5 million, or 18.6% of net sales, for the third quarter of fiscal 2024, compared to income from operations of $64.1 million, or 21.1% of net sales, for the third quarter of fiscal 2023. Income tax expense as a percentage of pre-tax income was 24.5% for the third quarter of both fiscal 2024 and fiscal 2023, bringing the Company's net income to $44.2 million in the third quarter of fiscal 2024 compared to $51.8 million in the third quarter of fiscal 2023.

Current wording

As a result of the above changes, the Company's income from operations was $43.5 million, or 16.0% of net sales, for the first quarter of fiscal 2025, compared to income from operations of $42.4 million, or 16.2% of net sales, for the first quarter of fiscal 2024. Income tax expense as a percentage of pre-tax income was 24.5% for the first quarter of both fiscal 2025 and fiscal 2024, bringing the Company's net income to $35.2 million in the first quarter of fiscal 2025, compared to $34.8 million in the first quarter of fiscal 2024.

Previous wording

As of November 2, 2024, the Company had working capital of $292.2 million, including $302.0 million of cash and cash equivalents and $23.5 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 the first three quarters of fiscal 2024 and fiscal 2023, the Company's cash flow from operations was $121.2 million and $145.3 million, respectively. Changes in operating cash flow between periods 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 Company's reduction in operating cash flow for the first three quarters of fiscal 2024 compared to the first three quarters of fiscal 2023 is primarily attributable to the reduction 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.

Current wording

As of May 3, 2025, the Company had working capital of $237.9 million, including $268.9 million of cash and cash equivalents and $22.9 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 the first quarter of fiscal 2025 and fiscal 2024, the Company's cash flow from operations was $31.0 million and $29.9 million, respectively. Changes in operating cash flow between periods 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.

Previous wording

The uses of cash for both thirty-nine week periods primarily include payment of annual bonuses accrued at fiscal year end, inventory purchases, dividend payments, construction costs for new and remodeled stores, other capital expenditures, and purchases of investment securities.

Current wording

The uses of cash for both thirteen week periods primarily include payment of annual bonuses accrued at fiscal year end, inventory purchases, dividend payments, construction costs for new and remodeled stores, other capital expenditures, and purchases of investment securities.

Previous wording

During the first three quarters of fiscal 2024 and 2023, the Company invested $31.7 million and $27.0 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $0.8 million and $1.0 million in the first three quarters of fiscal 2024 and 2023, respectively, in capital expenditures for the corporate headquarters and distribution facility.

Current wording

During the first quarter of fiscal 2025 and 2024, the Company invested $10.0 million and $10.5 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $1.4 million and $0.3 million in the first quarter of fiscal 2025 and 2024, respectively, in capital expenditures for the corporate headquarters and distribution facility.

Previous wording

During the remainder of fiscal 2024, the Company anticipates completing 1 new store and an additional 7 full store remodels. Management estimates that total capital expenditures during fiscal 2024 will be approximately $36.0 to $40.0 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 a consistent record of generating positive cash flow from operations each year and, as of November 2, 2024, had total cash and investments of $352.7 million, including $27.3 million of long-term investments.

Current wording

During the remainder of fiscal 2025, the Company anticipates opening 7 new stores and completing an additional 16 full store remodels. 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 a consistent record of generating positive cash flow from operations each year and, as of May 3, 2025, had total cash and investments of $320.0 million, including $28.3 million of long-term investments.

Previous wording

The Company has available an unsecured line of credit of $25.0 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. 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 is available for letters of credit. Borrowings under the line of credit provide for interest to be paid at a rate based on SOFR. The Company has, from time to time, borrowed against these lines of credit. There were no bank borrowings during the first three quarters of fiscal 2024 or 2023. The Company had no bank borrowings as of November 2, 2024 and was in compliance with the terms and conditions of the line of credit agreement.

Current wording

The Company has available an unsecured line of credit of $25.0 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. 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 is available for letters of credit. The Company is in the process of extending the maturity date of its existing line of credit facility. Borrowings under the line of credit provide for interest to be paid at a rate based on SOFR. The Company has, from time to time, borrowed against these lines of credit. There were no bank borrowings during the first quarter of fiscal 2025 or 2024. The Company had no bank borrowings as of May 3, 2025 and was in compliance with the terms and conditions of the line of credit agreement.

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 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 cards and gift certificates was $12.6 million and $16.7 million as of November 2, 2024 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 condensed 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 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 cards and gift certificates was $14.8 million and $17.0 million as of May 3, 2025 and February 1, 2025, 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 condensed 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 $3.6 million as of November 2, 2024 and $2.6 million as of February 3, 2024.

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 $3.9 million as of May 3, 2025 and $2.6 million as of February 1, 2025.

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 November 2, 2024 and February 3, 2024, $10.0 million and $10.4 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 May 3, 2025 and February 1, 2025, $9.7 million and $10.3 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 $11.2 million as of November 2, 2024 and $9.1 million as of February 3, 2024.

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 $9.7 million as of May 3, 2025 and $9.2 million as of February 1, 2025.

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 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 the first three quarters of fiscal 2024 or the first three quarters of fiscal 2023. The Company had outstanding letters of credit totaling $3.1 million and $3.2 million as of November 2, 2024 and February 3, 2024, 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 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 the first quarter of fiscal 2025 or the first quarter of fiscal 2024. The Company had outstanding letters of credit totaling $1.1 million and $2.2 million as of May 3, 2025 and February 1, 2025, respectively. The Company has no other off-balance sheet arrangements.