The Buckle - Earnings Call - Q3 2026

Transcript

Speaker 3

Good morning. Thank you for standing by, and welcome to Buckle's Third 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 Buckle's management on the call today are Dennis Nelson, President and CEO; Tom 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, Tom Heacock.

Speaker 1

Good morning, and thanks for being with us this morning. Our November 21, 2025 press release reported that net income for the 13-week third quarter ended November 1, 2025, was $48.7 million, or $0.96 per share on a diluted basis, compared to net income of $44.2 million, or $0.88 per share on a diluted basis for the prior year 13-week third quarter, which ended November 2, 2024. Year-to-date net income for the 39-week period ended November 1, 2025, was $128.9 million, or $2.55 per share on a diluted basis, compared to net income of $118.3 million, or $2.35 per share on a diluted basis for the prior year 39-week period ended November 2, 2024. Net sales for the 13-week third quarter increased 9.3% to $320.8 million, compared to net sales of $293.6 million for the prior year 13-week third quarter.

Comparable store sales for the quarter increased 8.3% in comparison to the same 13-week period in the prior year, and our online sales increased 13.6% to $53 million. Year-to-date net sales increased 7.2% to $898.7 million, compared to net sales of $838.5 million for the prior year 39-week fiscal period. Comparable store sales for the year-to-date period increased 6.3% in comparison to the same 39-week period in the prior year, and our online sales increased 11.6% to $142.9 million. For the quarter, UPTs decreased approximately 1.5%. The average unit retail increased approximately 4%, and the average transaction value increased about 2.5%. Year-to-date, UPTs decreased approximately 1%. The average unit retail increased approximately 3%, and the average transaction value increased approximately 2%. Our gross margin for the quarter was 48%, a 30 basis point increase from 47.7% in the third quarter of 2024.

The current quarter margin expansion was the result of 40 basis points of leverage buying distribution and occupancy expenses, partially offset by a 10 basis point reduction in merchandise margins. Our year-to-date gross margin was 47.4%, up 50 basis points from 46.9% for the same period last year. The year-to-date increase was the result of a 20 basis point increase in merchandise margin, along with 30 basis points of leverage buying distribution and occupancy expenses. Selling general administrative expenses for the quarter were 29% of net sales, compared to 29.1% for the third quarter last year. In year-to-date, SG&A was 29.5% of net sales, compared to 29.6% for the same period in the prior year.

The third quarter decrease was due to a 35 basis point reduction related to non-recurring digital commerce investments made a year ago, a 35 basis point decrease in store labor-related expenses, and a 5 basis point decrease in certain other SG&A expense categories. These decreases were partially offset by a 50 basis point increase in incentive compensation accruals and a 15 basis point increase in G&A compensation-related expenses. Our operating margin for the quarter was 19%, compared to 18.6% for the third quarter of fiscal 2024. For the year-to-date period, our operating margin was 17.9%, compared to 17.3% 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 third quarter net income to $48.7 million for fiscal 2025, compared to $44.2 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 $128.9 million for fiscal 2025, compared to $118.3 million in fiscal 2024. Our press release also included a balance sheet as of November 1st, 2025, which included the following: inventory of $165.8 million, which was up 11% from the same time a year ago, and $371.3 million of total cash and investments. We ended the quarter with $162.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $11.1 million, and depreciation expense was $6.2 million. For the year-to-date period, capital expenditures were $34.5 million, and depreciation expense was $18.2 million.

Year-to-date capital spending is broken down as follows: $30.4 million for new store construction, store remodels, and technology upgrades, and $4.1 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened two new stores and completed six full store remodels, three of which were relocations and new outdoor shopping centers. Additionally, post-quarter end and during November, we have opened two new stores and completed two store relocation projects in advance of the holiday selling season, which brings our year-to-date count through today to six new stores, 17 full remodels, and three store closures. For the remainder of the year, we anticipate completing four additional full remodeling projects. The Buckle ended the quarter with 442 retail stores in 42 states, compared to 445 stores in 42 states as of the end of the third quarter last year.

I'll turn it over to Adam Akerson, Vice President of Finance.

Speaker 2

Thanks, Tom, and good morning. Our women's business continued its acceleration in year-over-year growth rate during the quarter, with merchandise sales increasing about 19%, which was on top of 3% same-week growth a year ago. For the quarter, our women's business represented approximately 51% of sales, which compares to 47% last year. This growth continued to be led by the performance of our denim category, with women's denim increasing approximately 17.5%, and average denim price points increasing from $81.15 in the third quarter of fiscal 2024 to $86.95 in the third quarter of fiscal 2025. This AUR increase continues to be primarily the result of strong growth in our Buckle Black label, which has outperformed the total denim business, along with strong growth of other higher price point national brands. Complementing our strong women's denim selection, our team continued delivering compelling trends and fashions for our guests.

For the quarter, we achieved growth across all women's merchandise categories, with the most notable growth in knits and sweaters, casual and fashion bottoms, and accessories. In total, average women's price points increased about 6% from $49.95 to $53.05. On the men's side, we were pleased to see growth for the second consecutive quarter, with men's merchandise sales up about 1% against the prior year, representing approximately 49% of total sales, compared to 53% in the prior year. This growth was also led by our men's denim category, which was up about 1% for the quarter. Average denim price points increased from $88.10 in the third quarter of fiscal 2024 to $88.15 in the third quarter of fiscal 2025. In other categories, we saw nice performance in both our short and long-sleeve tees business and a variety of lifestyles, as well as strong selling of our vests, jackets, and accessories.

For the quarter, overall average men's price points increased approximately 2.5% from $54.30 to $55.70. On a combined basis, accessory sales for the quarter increased approximately 7.5% against the prior year, while footwear sales were essentially flat. These two categories accounted for approximately 10% and 4.5%, respectively, of third quarter net sales, which compares to 10% and 5% for each in the third quarter of fiscal 2024. For the quarter, average accessory price points were up approximately 3.5%, and average footwear price points were up 4.5%. Also, on a combined basis, our kids' business continued its strong growth trend, increasing approximately 22% year-over-year. This continues to be a category where our teams are excited to keep building the business and the selection for our guests.

For the quarter, denim accounted for approximately 46% of sales, and tops accounted for approximately 29%, which compares to 46% and 29.5% for each in the third quarter of fiscal 2024. As previously mentioned, with strong selling and trends in many of our branded styles, our private label business decreased as a percentage of our total mix for the quarter. For the quarter, private label represented 47.5% of sales versus 48.5% for the third quarter of fiscal 2024. With that, we welcome your questions.

Speaker 3

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 questions, please state your name and firm affiliation. Our first question comes from Mauricio. Mauricio, I'll go ahead and prompt you to unmute at this time.

Speaker 0

Hi, good morning. This is Mauricio Sarna from UBS Research. Thank you for taking my questions. First, maybe could you speak on a high level what you're seeing on the health of the U.S. consumer coming into the holiday season? There's been some talks about maybe some pressure on the lower-income consumers, so I was interested in hearing from your side what have you been seeing. Also, could you speak about the denim business? I think you talked about the momentum in women's being up 17%. How do you think, how are you thinking about the sustainability of this growth? Maybe could you talk about what you saw in men's denim demand over the quarter? Thank you.

Speaker 4

Good morning, and thank you for the question. On the consumer, we haven't seen a big change in our stores. I mean, the team and guests seem excited about our product response. There's probably a slight caution in some, as our units per sale are off very slightly. Overall, we feel good about it. If the guest is excited about the product and the quality we have, it's been going pretty well. The ladies' denim business continues to be excellent. There's still a lot of variety of styles and fits. We've added some of our branded sources to the mix, which has added some higher price points and been good for the business. Our fashion brands and our private brands continue to sell well. We are optimistic about the girls' denim business throughout the rest of the year.

On the men's denim, our private label brands are consistent and doing well, having good sell-throughs. We haven't seen as much from other brands adding to the private brands mix, but I feel our denim business is solid in men's as well.

Speaker 3

Thank you. There are no further questions in queue. As a reminder, if you would 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 you to unmute at this time.

Speaker 0

Great. Thanks for the follow-up. Just on the other thing that I wanted to ask was the merchandise margin. It was down 10 basis points. Maybe could you elaborate on what were the puts and takes behind the merchandise margin trend in this quarter? Yeah, thank you.

Speaker 3

Yeah, thank you, Mauricio. This is Tom. Yeah, merchandise margins were down 10 basis points for Q3 and up 10 basis points for Q2. I think if you look year-to-date with everything going on with tariffs, we feel really strong about where we're at from a merchandise margin perspective. We've been operating at a high level of merchandise margins for a long time and have continued to improve that. Both Q1 and Q2 were all-time highs merchandise margins, and we're off just a little bit in Q3. I feel really good about where we're at. The biggest drivers are really, Adam called out the decrease slightly in private label business with some of the brands performing really well, especially in women's denim. That's the biggest driver probably of the shift this year and especially Q2 compared to Q3.

was a slight increase in costs with tariffs and other flow-throughs.

Speaker 0

Understood. Thank you very much.

Speaker 3

There are no further queues and no further questions in queues. As a reminder, if you'd like to ask a question, please raise your hand in the Zoom app. Okay. It looks like there are no further questions. I will now turn the call back over to Buckle for any closing remarks.

Speaker 4

Thank you for your participation today. It'll be a quick call, but wish everyone a wonderful weekend and a wonderful holiday season. Thank you for joining us.