The Buckle - Earnings Call - Q2 2026

Executive Summary

• BKE delivered a clean beat: revenue $305.7M (+8.3% YoY) and diluted EPS $0.89 versus S&P Global consensus of ~$292.6M* revenue and ~$0.83* EPS; EBITDA also ahead (actual ≈$62.4M vs ~$54.1M*). Comparable sales +7.3% and online sales +17.7% supported the upside.
• Gross margin expanded 50 bps to 47.4% and operating margin rose to 18.4%, driven by strong full-price sell-through and leverage on buying/distribution/occupancy; sequentially, private label mix moderated and occupancy expenses stepped up due to off-mall relocations and higher percentage rent.
• Women’s outperformance accelerated (merchandise sales +18.5% YoY; women’s denim +20.5%; private label mix 43.5% of sales), while men’s returned to growth (+1.5%); kids grew ~23% and now ~4.5% of sales.
• Capital allocation and balance sheet remained supportive: quarterly dividend maintained at $0.35/share; inventory +8.4% YoY into back-to-school; cash and investments ~$349.6M at quarter end.

What Went Well and What Went Wrong

• What Went Well

  • Margin execution: “Gross margin for the quarter was 47.4%, a 50 basis point increase… the result of a 10 basis point increase in merchandise margin, along with 40 basis points of leverage buying, distribution and occupancy expenses.” — CFO.
  • Merchandising strength led by women’s/denim: Women’s merchandise sales +18.5% YoY; women’s denim +20.5% with AURs rising from $80.6 to $85.35; strong regular-price selling across categories.
  • Digital momentum and SG&A tailwinds: Lapping last year’s “nonrecurring digital commerce investments” reduced SG&A rate by ~65 bps in Q2, with some benefit continuing into Q3, per management.

• What Went Wrong

  • Sequential mix headwind: Private label mix was lower in Q2 vs Q1 (while still up YoY), moderating merchandise margin growth versus Q1, per CFO.
  • Occupancy costs ticked higher: “Q2 increased about 5.5% for occupancy expense (vs ~3.5% in Q1)… related to new stores/remodels and moving out of malls into better off-mall locations; strong sales also increased percentage rent,” weighing on leverage vs what comps might imply.
  • UPT softness and footwear: UPTs fell ~1.5% (AUR +3% and ATV +1.5% offset), while footwear was down ~0.5% YoY for the quarter.

Transcript

Speaker 1

Good morning. Thank you for standing by and welcome to The Buckle's second quarter earnings release webcast. As a reminder, all participants are currently in a listen-only mode. A question-and-answer session will be conducted following the company's prepared remarks with instructions given at that time. Members of The Buckle's management on the call today are Dennis Nelson, President and CEO; Thomas Heacock, Senior Vice President of Finance, Treasurer, and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary. Before beginning, the company would like to reiterate its policy of not providing future sales or earnings guidance. All forward-looking statements made on the call are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to risks and uncertainties described in the company's SEC filings.

The company undertakes no obligation to publicly update or revise these statements except as required by law. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its express written consent. Any unauthorized reproductions or recordings of the calls should not be relied upon, as the information may be inaccurate. As a reminder, today's webcast is being recorded, and I'd now like to turn the conference over to your host, Thomas Heacock.

Speaker 2

Good morning and thanks for joining us this morning. Our August 22, 2025, press release reported that net income for the 13-week second quarter ended August 2, 2025, was $45.89 million or $0.89 per share on a diluted basis, which compares to net income of $39.3 million or $0.78 per share on a diluted basis for the prior year's 13-week second quarter, which ended August 3, 2024. Year-to-date net income for the 26-week period ended August 2, 2025, was $80.2 million or $1.59 per share on a diluted basis, which compares to net income of $74.1 million or $1.48 per share on a diluted basis for the prior year's 26-week period ended August 3, 2024. Net sales for the 13-week second quarter increased 8.3% to $305.7 million, compared to net sales of $282.4 million for the prior year's 13-week second quarter.

Comparable store sales for the quarter increased 7.3% in comparison to the same 13-week period in the prior year, and online sales increased 17.7% to $43.6 million. Year-to-date net sales increased 6.1% to $577.9 million, compared to net sales of $544.9 million for the prior year's 26-week fiscal period. Comparable store sales for the year-to-date period increased 5.2% in comparison to the same 26-week period in the prior year, and our online sales increased 10.5% to $90 million. For the quarter, UPTs decreased approximately 1.5%, the average unit retail increased approximately 3%, and the average transaction value increased about 1.5%. Year-to-date UPTs decreased approximately 1%, the average unit retail increased approximately 2%, and the average transaction value increased approximately 1.5%. Gross margin for the quarter was 47.4%, a 50 basis point increase from 46.9% in the second quarter of 2024.

The current quarter margin expansion was the result of a 10 basis point increase in merchandise margin, along with 40 basis points of leverage buying, distribution, and occupancy expenses. Year-to-date gross margin was 47.1%, up 60 basis points from 46.5% for the same period in the prior year, and the year-to-date increase was the result of a 30 basis point increase in merchandise margin, along with 30 basis points of leverage buying, distribution, and occupancy expenses. Selling, general, and administrative expenses for the quarter were 29% of sales, compared to 29.8% for the second quarter of 2024, and year-to-date SG&A was 29.8% of sales, compared to 29.9% for the same period in the prior year.

The second quarter decrease was due to a 65 basis point reduction related to non-recurring digital commerce investments made a year ago, a 45 basis point decrease in store labor-related expenses, and a 55 basis point decrease in other SG&A expense categories. These increases were partially offset by an 85 basis point increase in incentive compensation accruals. Our operating margin for the quarter was 18.4%, compared to 17.1% for the second quarter of fiscal 2024, and for the year-to-date period, our operating margin was 17.3%, compared to 16.6% for the same period last year. Income tax expense as a percentage of pre-tax net income for both the current and prior year fiscal quarter was 24.5%, bringing second quarter net income to $45 million for fiscal 2025, compared to $39.3 million for fiscal 2024.

Income tax expense as a percentage of pre-tax net income for both the current and prior year year-to-date periods was also 24.5%, bringing year-to-date net income to $80.2 million for fiscal 2025, compared to $74.1 million for fiscal 2024. Our press release also included a balance sheet as of August 2, 2025, which included the following: inventory of $142.5 million, which was up 8.4% from the same time a year ago, and $349.6 million of total cash and investments. We ended the quarter with $158.8 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $12 million, and depreciation expense was $6.1 million. For the year-to-date period, capital expenditures were $23.4 million, and depreciation expense was $12 million.

Year-to-date capital spending is broken down as follows: $20.2 million for new store construction, store remodels, and technology upgrades, and $3.2 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened two new stores, completed four full store remodels, one of which was a relocation into a new outdoor shopping center, and closed one store, which brings our year-to-date counts to two new stores, nine full remodels, and three store closures. For the remainder of the year, we now anticipate opening four additional new stores and completing 12 more full remodeling projects. The Buckle ended the quarter with 440 retail stores in 42 states, which is consistent with the store count as of a year ago. Now I'll turn it over to Adam Akerson, Vice President of Finance.

Speaker 1

Thanks, Tom, and good morning. Our women's business growth accelerated from the prior quarter, with merchandise sales increasing about 18.5% against the prior year, presenting approximately 47.5% of sales, which compares to 43.5% last year. Growth in the women's business continues to be anchored in the performance of our denim category. For the quarter, women's denim increased approximately 20.5%, with average denim price points increasing from $80.60 in the second quarter of fiscal 2024 to $85.35 in the second quarter of fiscal 2025. This average unit retail increase continues to be the result of strong growth in our private label, which has outperformed the total denim business, along with strong growth of other higher price point national brands. Through the second quarter, there have been minimal average unit retail impacts as a result of tariffs.

Complementing our strong women's denim selection, our merchandising team continued to evolve our strategy of customer-centric buying, sharpening their focus on key styles, brands, and trends, which has resulted in strong guest response. This strategy delivered double-digit growth in every category, with the exception of shorts, which still saw nice growth for the quarter. In total, average women's price points increased about 5% from $43.15 to $45.35. On the men's side, we were pleased to see the business return to growth for the quarter, with merchandise sales up about 1.5% against the prior year, representing approximately 52.5% of total sales, which compares to 56.5% in the prior year. This growth was led by our men's denim category, which was up about 4.5% for the quarter. Average denim price points increased from $89.20 in the second quarter of fiscal 2024 to $89.30 in the second quarter of fiscal 2025.

In other categories, we saw strong performance in our short-sleeve wovens, polos, denim shorts, hats, and fragrance selections. For the quarter, overall average men's price points increased approximately 2% from $50.20 to $51.20. On a combined basis, accessory sales for the quarter increased approximately 9.5% against the prior year, while footwear sales were down about 0.5%. These two categories accounted for approximately 11.5% and 5%, respectively, of the second quarter net sales, which compares to 11.5% and 5.5% for each in the second quarter of fiscal 2024. For the quarter, average accessory price points were up approximately 3%, and average footwear price points were up about 8%. Also, on a combined basis, our kids' business had an outstanding summer and start to the back-to-school season, increasing approximately 23% year over year.

We are excited to see the increased awareness and continued growth for our kids' selection, which grew to approximately 4.5% of our total business for the quarter. For the quarter, denim accounted for approximately 36% of sales, and tops accounted for approximately 29.5%, which compares to 35.5% and 30% for each in the second quarter of fiscal 2024. For the 10th consecutive quarter, private label continued to grow as an overall percentage of our mix. For the quarter, private label represented 43.5% of sales versus 43% in the second quarter of 2024. With that, we welcome your questions.

Speaker 4

Thank you. As a reminder for participants, if you would like to ask a question, please raise your hand in the Zoom app. Prior to asking your question, please state your name and firm affiliation. Our first question is from Mauricio. Mauricio, go ahead and I prompt you to unmute at this time.

Speaker 3

Great, good morning. Can you hear me okay?

Speaker 4

Yes.

Speaker 3

Yes, thank you.

Speaker 4

Great. Thanks for taking my questions. I guess just on the merchandise margin expansion, could you elaborate a little bit more on the drivers behind it? It seems, I think, relative to the prior quarter, it decelerated. Just wondering there if there's like any impact that you're seeing from tariffs already in your margins.

Speaker 3

Hey, good morning, Mauricio. Thanks for the question. This is Tom. I'll take the first part and then let Dennis talk a little bit more about kind of vendors and how we're dealing with tariffs. I mean, anytime you know, you look at the first quarter, second quarter a year ago, and the comparisons we're up against, anytime you can grow merchandise margins up off record levels, we're certainly pleased with that. The team did a really nice job of maintaining really strong full regular price selling. Again, pleased to be able to grow that, even if not at the same rate in Q2 as it was in Q1. I think the biggest driver of why we didn't see that same growth rate in Q2 compared to Q1 is really probably tied to private label.

Private label, as in, I mean, a percentage of the mix was down in Q2 compared to Q1, which is kind of the natural cycle. Looking at the year-over-year growth in the percentage of the mix, that's private label slowed a little bit as well, just with the strong selling of some of our nationally branded products. Let Dennis talk about tariffs.

Speaker 0

Good morning. On the tariffs, we continue to see kind of the same as earlier, at least as of today, where we're seeing low to mid-single digits on average on cost increase. We have several vendors. We have such a wide range of vendors, but several we're not seeing any increase. We have started to see with select brands a few higher single-digit increase on cost. Probably the average overall is in the low to mid-single-digit cost increase that we're seeing going forward.

Speaker 4

Got it. Very helpful. Just one, if I could elaborate on the other part of the gross margin where you had 40 basis points of leverage on buying, occupancy, and distribution. Just wondering, like I would have maybe thought that it would have been like a higher leverage just given how strong the comps were in the quarter. Any particular line item within buying, occupancy, or distribution where maybe there's been a little bit of more expense happening that maybe didn't let that leverage flow through? Thank you.

Speaker 3

Thank you, Mauricio. Really, the driver there is occupancy expense. We saw the growth in occupancy expense tick up in Q2 compared to Q1. Q2 increased about 5.5% for occupancy expense compared to about 3.5% in Q1. That is related to the store projects we're doing, the new store openings, the remodels where we're moving out of a lot of malls and into better locations off malls. That has driven base rent up. With the strong sales performance in Q2, we also saw an uptick in percentage rent with several of our stores.

Speaker 4

Wonderful. Thank you so much. As a reminder for participants, if you would like to ask a question, please raise your hand in the Zoom app. Prior to asking your question, please state your name and firm affiliation. There are no further questions in queue. As a reminder, if you'd like to ask a question, please raise your hand in the Zoom app. Okay, looks like we have another question from Mauricio. Mauricio, go ahead and ask it on mute at this time.

Speaker 3

Great. I guess just a quick follow-up on the SG&A when you were breaking down the components of the change as a percentage of sales. I just wanted to make sure the 65 basis points from non-recurring digital investments, is this just like a, so it's a lapping from last year, I suppose. Is this just happening on the second quarter or just as a reminder? Could that be like maybe like another quarter where we're also lapping that in Q3 or something like that? Yeah.

Speaker 2

That does flow into the third quarter as well. We talked a lot about, you know, our focus on digital, focus on growing e-comm a year ago. We brought in consultants and third parties and really put a lot of effort around improving the buckle.com experience. That started late in Q1, but really picked up in Q2 and into Q3. We will continue to see some benefit there in Q3 as well.

Speaker 4

Thank you so much. Okay, there are no further questions. I will now turn the call back over to The Buckle for any closing remarks.

Speaker 2

No further questions. We'll wrap it up quick today. Thanks everyone for your participation today, and have a great day and enjoy your weekend.