Buckle Beats, Increases Y/Y

Buckle Inc. ( BKE - Snapshot Report ) reported better-than-expected third-quarter financial results. The quarterly earnings of 88 cents a share surpassed the Zacks Consensus Estimate of 83 cents, and rose 8.6% from 81 cents earned in the year-ago quarter.

Further, Buckle’s performance significantly exceeded that of its peer, The Cato Corporation ( CATO ) . Cato Corp reported third-quarter earnings of 16 cents a share, reflecting a fall of about 24.0% from the year-ago quarter.

Quarter in Detail

For the third quarter of 2012 (ending on October 27, 2012), Buckle reported net sales of $284.1 million compared with $273.4 million, reflecting an augmentation of 3.9% year over year. Same-store sales over this period grew 2.4%. Increase in comps and net sales were witnessed mainly due to rises in both women’s and men's segments. Moreover, revenue beat the Zacks Consensus Estimate of $283.0 million.

Further, the company registered an elevation of 3.8% in online business to $19.6 million compared to the prior-year quarter.

Buckle witnessed a rise of roughly 5.5% and 3.0% in men’s and women’s side business, respectively. The men’s segment accounted for roughly 38.5% and the women’s side accounted for 61.5% of total sales for the quarter.

For Buckle, its denim, woven tops, sweaters, accessories and footwear categories performed well. During the quarter, accessory sales in both men's and women's categories surged approximately 7.5% year over year, while footwear business jumped 11.0%.

Gross profit for the quarter came in at $125.4 million, representing an escalation of 5.7% year over year. Further, we observe an expansion of 70 basis points in gross margin, which came in at 44.1%. The improvement in gross margin came on the back of an expansion of 90 basis points in merchandise margin, partially offset by rise in occupancy, distribution and buying costs.

Selling, general and administrative (SG&A) expenses inched up 1.7% year-over-year to $59.3 million. However, SG&A expenses as percentage of revenue contracted about 40 basis points to 20.9% compared to the prior-year quarter.

Increased merchandise gross profit, leverage on operating expenses and rise in comparable store sales led to a 9.6% increase in operating income to $66.2 million from the prior-year level of $60.4 million. Consequently, operating margin for the quarter expanded 120 basis points to 23.3%.

Other Financial Aspects

Buckle ended the quarter with cash and cash equivalents of $213.0 million compared to $48.0 million in the last-year period. The increase in cash and cash equivalents is mainly due to dividend payments of $106.7 million, made in the third quarter of the prior year.

Inventory at the end of the quarter stood at $134.5 million, falling about 4.5% from $140.8 million in the prior-year period. Shareholders’ equity came in at $448.5 million at the end of the quarter.

Capital expenditure for the quarter was $6.5 million, whereas year-to-date, the company incurred $26.1 million as capital expenditures.

Headquartered in Kearney, Nebraska, Buckle ended the quarter with 440 retail locations in 43 states compared with 429 outlets in 43 states at the end of prior-year quarter. The company had opened one new store during the quarter and remodeled seven stores into a new format.

Buckle, which mainly caters to older teens and young adults, currently retains a Zacks #2 Rank that translates into a short-term Buy rating, based on positive earnings surprise history averaging about 4.2% for the last four quarters, including the current reported quarter.