The Daily Magic Formula Stock for 10/26/2008 is Buckle Inc. (The). According to the Magic Formula Investing Web Site, the ebit yield is 14% and the EBIT ROIC is 75-100 %.
Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.
Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.
The Buckle, Inc. (the "Company") is a retailer of medium to better-priced casual apparel, footwear and accessories for fashion conscious young men and women. As of February 2, 2008, the Company operated 368 retail stores in 38 states throughout the continental United States, excluding the northeast, under the names "Buckle" and "The Buckle." The Company markets a wide selection of mostly brand name casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company emphasizes personalized attention to its customers and provides customer services such as free hemming, free gift-wrapping, easy layaways, the Buckle private label credit card and a frequent shopper program. Most stores are located in regional, high-traffic shopping malls and lifestyle centers, and this is the Company's strategy for future expansion. The majority of the Company's central office functions, including purchasing, pricing, accounting, advertising and distribution, are controlled from its headquarters and distribution center in Kearney, Nebraska. However, the Company has had a portion of its menâ€™s buying team and marketing team in an office in Kansas City, Missouri for several years and the Company recently relocated its entire menâ€™s buying team and the portion its marketing team that was previously in Kansas City, Missouri to new office space in Overland Park, Kansas during fiscal 2007.
Incorporated in Nebraska in 1948, the Company commenced business under the name Mills Clothing, Inc., a conventional men's clothing store with only one location. In 1967, a second store, under the trade name Brass Buckle, was purchased. In the early 1970s, the store image changed to that of a jeans store with a wide selection of denims and shirts. The first branch store was opened in Columbus, Nebraska, in 1976. In 1977, the Company began selling young women's apparel and opened its first mall store. The Company has experienced significant growth over the past ten years, growing from 199 stores at the start of 1998 to 368 stores by the end of fiscal 2007. The Company changed its corporate name to The Buckle, Inc. on April 23, 1991. All references herein to fiscal 2007 refer to the 52-week period ended February 2, 2008. Fiscal 2006 refers to the 53-week period ended February 3, 2007 and fiscal 2005 refers to the 52-week period ended January 28, 2006.
The Company's principal executive offices and distribution center are located at 2407 West 24th Street, Kearney, Nebraska 68845. The Company's telephone number is (308) 236-8491. The Company publishes its corporate web site at www.buckle.com .
The Companyâ€™s annual reports on Form 10-K, along with all other reports and amendments filed with or furnished to the Securities and Exchange Commission, are publicly available free of charge on the Investor Information section of the Companyâ€™s website at www.buckle.com as soon as reasonably practicable after the Company files such materials with, or furnishes them to, the Securities and Exchange Commission. The Companyâ€™s corporate governance policies, ethics code and Board of Directorsâ€™ committee charters are also posted within this section of the website. The information on the Companyâ€™s website is not part of this or any other report The Buckle, Inc. files with, or furnishes to, the Securities and Exchange Commission.
Marketing and Merchandising
The Company's marketing and merchandising strategy is designed to create customer loyalty by offering a wide selection of key brand name and private label merchandise and providing a broad range of value-added services. The Company believes it provides a unique specialty apparel store experience with merchandise designed to appeal to the fashion conscious 12 to 24-year old. The merchandise mix includes denims, casual bottoms, tops, sportswear, outerwear, accessories and footwear. Denim is a significant contributor to total sales (43.2% of fiscal 2007 net sales) and is a key to the Company's merchandising strategy. The Company believes it attracts customers with its wide selection of key brands plus private label denim and a wide variety of fits, finishes and styles. Shirts and tops are also significant contributors to total sales (36.1% of fiscal 2007 net sales). The Company strives to provide a continually changing selection of the latest casual fashions. Brand name merchandise accounted for approximately 70% of the Company's sales during fiscal 2007. The remaining balance is comprised of private label merchandise that is manufactured to the Company's specifications. The Company's merchandisers continually work with manufacturers and vendors to produce brand name merchandise that they believe is unique in color and style. While the brands offered by the Company change to meet current customer preferences, the Company currently offers brands such as Lucky Brand Dungarees, Big Star, Silver, Hurley, Affliction, Fossil, MEK, Billabong, Guess, Quiksilver/Roxy, 7 Diamonds, OBEY and Manchester. The Company expects that brand name merchandise will continue to constitute the majority of sales.
Management believes the Company provides a unique store environment by maintaining a high level of personalized service and by offering a wide selection of fashionable, quality merchandise. The Company believes it is essential to create an enjoyable shopping environment and, in order to fulfill this mission, it employs highly motivated employees who provide personal attention to customers. Each salesperson is educated to help create a complete look for the customer by helping them find the best fits and showing merchandise as coordinating outfits. The Company also incorporates specialized services such as free alterations, free gift wrapping, layaways, a frequent shopper card, the Buckle private label credit card and a special order system that allows stores to obtain specifically requested merchandise from other Company stores. Customers are encouraged to use the Company's layaway plan, which allows customers to make a partial payment on merchandise that is then held by the store until the balance is paid. For the past three fiscal years, an average of approximately 2% - 3% of net sales has been made on a layaway basis.
Merchandising and pricing decisions are made centrally; however, the Company's distribution system allows for variation in the mix of merchandise distributed to each store. This allows individual store inventories to be tailored to reflect differences in customer buying patterns at various locations. In addition, to assure a continually fresh look in its stores, the Company ships new merchandise daily to most stores. The Company also has a transfer program that shifts certain merchandise to locations where it is selling best. This distribution and transfer system helps to maintain customer satisfaction by providing in-stock popular items and reducing the need to mark down slow-moving merchandise at a particular location. The Company believes the reduced markdowns justify the incremental distribution costs associated with the transfer system. The Company does not hold storewide off-price sales at anytime.
The Company continually evaluates its store design as part of the overall shopping experience and feels the fiscal 2002 re-design continues to be very well received by guests and developers. This store design contains warm woods, real brick finishes and an appealing ceiling and lighting layout that creates a comfortable environment for the guest to shop. The Company has been able to modify the store design for specialized venues including lifestyle centers and larger mall fronts. The signature Buckle-B icon and red color are used throughout the store on fixtures, graphic images and print materials to reinforce the brand identity. To enhance selling and product presentation, new tables and fixtures have been added to the Companyâ€™s signature store design in each of the last three fiscal years. The new tables and fixtures were also rolled out to select existing stores to update their looks as well.
In fiscal 2007, the Company spent $6.4 million or 1.0% of net sales on seasonal marketing campaigns, advertising, promotions, online marketing and in-store point of sale materials. Seasonal image and promotional signage is presented in store window displays and on merchandising presentations throughout the store to complement the product and reinforce the brand's image. Promotions such as sweepstakes, gift with purchase offers and special events are offered to enhance the guestâ€™s shopping experience. Seasonal image guides, featuring current fashion trends and product selection, are distributed in the stores, at special events and in new markets. Magazine advertising in leading teen publications is used during key seasons to introduce new merchandise, build awareness and brand the Buckle's image. Editorial product placement in national and regional magazines creates exposure for seasonal merchandise and the Buckle's private label brands. The Buckle partners with key merchandise vendors on joint advertising and promotional opportunities that expand the marketing reach and position the Buckle as the destination store for these specialty branded fashions.
The Company also offers programs to strengthen its relationships with loyal guests. The Company continues to support a frequent shopper program (the Buckle Primo Card), a rewards program designed to build customer loyalty. Private label credit card marketing is another avenue for marketing to loyal guests. The Company extends exclusive benefits to active Buckle Cardholders such as bonus rewards and special targeted mailings. The Buckle continues to build on its B-Rewards incentive program, which is offered exclusively to Buckle Cardholders. Qualifying Cardholders are mailed B-Rewards merchandise certificates at the end of each Rewards period inviting them back into the store at the start of the next season. The Company successfully added a student credit card program for all stores in July 2006 and in October 2007 launched the Buckle Black credit card program. The Buckle Black program is an exclusive account for the company's most loyal cardholders. To qualify for the Buckle Black program, existing cardholders must make at least $500 in purchases during a 12 month period using their account. These guests receive special benefits including free ground shipping on special orders and online purchases. The Buckle Card marketing program is partially funded by WFNNB, a third-party bank that owns the Buckle Card accounts .
The Company publishes a corporate web site at www.buckle.com. The Companyâ€™s web site serves as a second retail touch-point for cross-channel marketing, reaching a growing online audience. Buckle.com is an eCommerce enabled channel with an interactive, entertaining, informative and brand building environment where guests can shop, enter sweepstakes, fill out a wish list, find out about career opportunities and read the Companyâ€™s latest financial news. The Company has an opt-in email database. National email campaigns are sent bi-monthly and targeted weekly messages are sent notifying guests of the latest store promotions and product offerings. Search engine and affiliate marketing programs are managed to increase online and in-store traffic as well as conversion rates. Buckleâ€™s online store was launched April 26, 1999 as a marketing tool, to extend the Companyâ€™s brand beyond the physical locations. Offering a growing selection of its merchandise online, the Company presents the online store as a â€śtaste testâ€ť in new markets as well as a cross-channel tool in existing markets, which means guests can shop both in the physical stores and via the online store. On October 19, 2006, the Company launched a redesigned Buckle.com on the Escalate E-Commerce platform. The new Buckle.com includes enhanced search features, which allow guests to shop by special attributes, including brand and size.
The Company has an Executive Vice President of Sales, a Vice President of Sales, 24 district managers and 66 area managers. The majority of the district managers and each of the area managers also serve as manager of their home base store. In general, each store has one manager, one or two assistant managers, one to three additional full-time salespeople and up to 20 part-time salespeople. Most stores have peak levels of staff during the back-to-school and Christmas seasons. Almost every location also employs a seamstress.
The Company places great importance on educating quality personnel. In addition to sharing career opportunities with current Buckle employees, the Company also recruits interns and management trainees from college campuses. A majority of the Companyâ€™s store managers, all of its area and district managers and most of its upper level management are former salespeople, including the President and CEO, Dennis H. Nelson, and Chairman, Daniel J. Hirschfeld. Recognizing talent and promoting managers from within allows the Company to build a strong foundation for management.
Store managers receive compensation in the form of a base salary and incentive bonuses. District and area managers also receive added incentives based upon the performance of stores in their district/area. Store managers perform sales training for new employees at the store level. Salespeople displaying particular talent are generally assigned to stores operated by district managers for training to become a store manager.
The Company has established a comprehensive program stressing the prevention and control of shrinkage losses. Steps taken to reduce shrinkage include monitoring cash refunds, voids, inappropriate discounts, employee sales and returns-to-vendor. The Company also has electronic article surveillance systems in all of the Companyâ€™s stores as well as surveillance camera systems in approximately 99% of the stores. As a result, the Company achieved a merchandise shrinkage rate of 0.5% of net sales for fiscal 2007, 0.7% of net sales for fiscal 2006 and 0.6% for fiscal year 2005.
The average store is approximately 5,000 square feet (of which the Company estimates an average of approximately 80% is selling space), and stores range in size from 2,600 square feet to 8,475 square feet.
Purchasing and Distribution
The Company has an experienced buying team. The buying team includes the President, Vice President of Womenâ€™s Merchandising, Vice President of Menâ€™s Merchandising, six womenâ€™s buyers and five menâ€™s buyers. The two Vice Presidents of Merchandising have over 50 years of combined experience with the Company. The experience and leadership within the buying team contributes significantly to the Companyâ€™s success by enabling the buying team to react quickly to changes in fashion and by providing extensive knowledge of sources for both branded and private label goods.
The Company purchases products from manufacturers within the United States as well as from agents who source goods from foreign manufacturers. The Company's merchandising team shops and monitors U.S. fashion centers (in New York and on the West Coast) to stay abreast of the latest trends. The Company continually monitors fabric selection, quality and delivery schedules. The Company has not experienced any material difficulties with merchandise manufactured in foreign countries. The Company does not have long-term or exclusive contracts with any brand name manufacturer, private label manufacturer or supplier. The Company plans its private label production with several private label vendors three to six months in advance of product delivery. The Company requires its vendors to sign and adhere to its Code of Conduct and Standards of Engagement, which addresses adherence to legal requirements regarding employment practices and health, safety and environmental regulations.
In fiscal 2007, Koos Manufacturing, Inc. (the Company that produces part of our private label product as well as the Big Star branded merchandise) and Lucky Brand Dungarees made up 25.7% and 10.5% of the Companyâ€™s net sales, respectively. No other vendor accounted for more than 10% of the Companyâ€™s sales. Other current significant vendors include Silver, Hurley, Affliction, Fossil, MEK, Billabong, Guess, Quiksilver/Roxy, 7 Diamonds, OBEY and Manchester. The Company continually strives to offer brands that are currently popular with its customers and, therefore, the Company's suppliers and purchases from specific vendors may vary significantly from year to year.
The Buckle stores generally carry the same merchandise, with quantity and seasonal variations based upon historical sales data, climate and perceived local customer demand. The Company uses a centralized receiving and distribution center located within the corporate headquarters building in Kearney, Nebraska. Merchandise is received daily in Kearney where it is sorted, tagged with bar-coded tickets (unless the vendor UPC code can be used or the merchandise is pre-ticketed) and packaged for distribution to individual stores primarily via United Parcel Service. The Company's goal is to ship the majority of its merchandise out to the stores within one to two business days of receipt. This system allows stores to receive new merchandise almost daily, creating excitement within the store and providing customers with a reason to shop often.
The Company completed an 82,200 square foot expansion to its corporate headquarters facility during fiscal 2005. This expansion houses the Companyâ€™s online fulfillment and customer service center and provides additional space for the supplies and returns-to-vendor departments. The online fulfillment center occupies approximately 100,000 square feet of space on three levels. The Company plans to renovate the space vacated by supplies and returns during fiscal 2008 to add new office space. The current distribution center should allow for handling of up to 450 stores. The Company has developed an effective computerized system for tracking merchandise from the time it is checked in at the Company's distribution center until it arrives at the stores and is sold to a customer. The system's function is to insure that store shipments are delivered accurately and promptly, to account for inventory and to assist in allocating merchandise among stores. Management can track, on a daily basis, which merchandise is selling at specific locations and direct transfers of merchandise from one store to another as necessary. This allows stores to carry a reduced inventory while at the same time satisfying customer demands.
To reduce inter-store shipping costs and provide timely restocking of in-season merchandise, the Company warehouses a portion of initial shipments for later distribution. Sales reports are then used to replenish, on a basis of one to three times each week, those stores that are experiencing the greatest success selling specific styles, colors and sizes of merchandise. This system is also designed to prevent an over-crowded look in the stores at the beginning of a season.
Store Locations and Expansion Strategies
As of April 1, 2008, the Company operated 371 stores in 38 states, including 3 stores opened during fiscal 2008. The existing stores are in 4 downtown locations, 9 strip centers, 27 lifestyle centers and 331 shopping malls.
The Buckle has grown significantly over the past ten years, with the number of stores increasing from 199 at the beginning of 1998 to 368 at the end of fiscal 2007. The Company's plan is to continue expansion by developing the geographic region it currently serves and by expanding into contiguous markets. The Company intends to open new stores only when management believes there is a reasonable expectation of satisfactory results.
The Company generally seeks sites of 4,250 to 5,000 square feet for its stores. The projected cost of opening a store with the new design is approximately $900,000, including construction costs of approximately $684,000 (prior to any construction allowance received) and inventory costs of approximately $216,000, net of accounts payable.
The Company anticipates opening approximately 19 new stores during fiscal 2008 and completing approximately 13 remodels. Remodels range from partial to full, with construction costs for a full remodel being nearly the same as those for a new store. Of the stores scheduled for remodeling during fiscal 2008, it is estimated that all stores will receive full remodeling. The Company has budgeted a total of $30 to $32 million for new store construction, remodeling, technology upgrades and improvements at the corporate headquarters during fiscal 2008.
The Company plans to expand in 2008 by opening stores in existing markets as well as adding two stores in Maryland which will be its 39 th state. The Company believes that, given the time required for training personnel, staffing a store and developing adequate district and regional managers, its current management infrastructure is sufficient to support its currently planned rate of growth.
The Company's ability to expand in the future will depend, in part, on general business conditions, the ability to find suitable malls with acceptable sites on satisfactory terms, the availability of financing and the readiness of trained store managers. There can be no assurance that the Company's expansion plans will be fulfilled in whole or in part, or that leases under negotiation for planned new sites will be obtained on terms favorable to the Company.
Management Information Systems
The Company's management information systems (MIS) and electronic data processing systems (EDP) consist of a full range of retail, financial and merchandising systems, including purchasing, inventory distribution and control, sales reporting, accounts payable and merchandise management.
The system includes PC based point-of-sale (POS) registers in each store. These registers are polled nightly by the central computer (IBM iSeries) using a virtual private network for collection of comprehensive data, including complete item-level sales information, employee time clocking, merchandise transfers and receipts, special orders, supply orders and returns-to-vendor. In conjunction with the nightly polling, the central computer sends the PC server messages from various departments at the Company headquarters and price changes for the price lookup (PLU) file maintained within the POS registers.
Each weekday morning, the Company initiates an electronic "sweep" of the individual store bank accounts to the Company's primary concentration account. This allows the Company to meet its obligations with a minimum of borrowing and to invest cash on a timely basis.
Management monitors the performance of each of its stores on a continual basis. Daily information is used to evaluate inventory, determine markdowns, analyze profitability and assist management in the scheduling and compensation of employees.
The PLU system allows management to control merchandise pricing centrally, permitting faster and more accurate processing of sales at the store and the monitoring of specific inventory items to confirm that centralized pricing decisions are carried out in each of the stores. Management is able to direct all price changes, including promotional, clearance and markdowns on a central basis and estimate the financial impact of such changes.
The virtual private network for communication with the stores also supports the Companyâ€™s intranet site. The intranet allows stores to view various types of information from the corporate office. Stores also have access to a variety of tools such as a product search with pictures, product availability, special order functions, printable forms, links to transmit various requests and information to the corporate office, training videos, email and information/guidelines from each of the departments at the corporate office. Our network is also structured so that we can support additional functionality such as digital video monitoring and digital music content programming at each of our locations.
Daniel J. Hirschfeld, age 66. Mr. Hirschfeld is Chairman of the Board of the Company. He has served as Chairman of the Board since April 19, 1991. Prior to that time, Mr. Hirschfeld served as President and Chief Executive Officer. Mr. Hirschfeld has been involved in all aspects of the Company's business, including the development of the Company's management information systems.
Dennis H. Nelson, age 58. Mr. Nelson is the President and Chief Executive Officer and a Director of the Company. He has served as President and Director since April 19, 1991. Mr. Nelson was elected as Chief Executive Officer by the Board of Directors on March 17, 1997. Mr. Nelson began his career with the Company in 1970 as a part-time salesman while he was attending Kearney State College (now the University of Nebraska - Kearney). While attending college, he became involved in merchandising and sales supervision for the Company. Upon graduation from college in 1973, Mr. Nelson became a full-time employee of the Company and he has worked in all phases of the Company's operations since that date. Prior to his election as President and Chief Operating Officer on April 19, 1991, Mr. Nelson performed all of the functions normally associated with those positions.
Karen B. Rhoads, age 49. Ms. Rhoads is the Vice-President of Finance, Treasurer, Chief Financial Officer and a Director of the Company. Ms. Rhoads was elected a Director on April 19, 1991. She worked in the corporate offices during college and later worked part-time on the sales floor. Ms. Rhoads practiced as a CPA for 6 1/2 years, during which time she began working on tax and accounting matters for the Company as a client. She has been employed with the Company since November 1987.
James E. Shada, age 52. Mr. Shada is the Executive Vice-President of Sales and a Director of the Company. Effective June 30, 2008, Mr. Shada will step down from his current position, but remain with the Company as a member of the sales management team and as a Director. Mr. Shada was elected Vice-President of Sales on April 19, 1991 and Executive Vice-President of Sales on May 31, 2001. He was elected as a Director on March 11, 2002. Mr. Shada began his career with the Company in November 1978 as a part-time salesman while attending Kearney State College (now the University of Nebraska - Kearney). He later served as store manager for the Company before returning to the corporate office in 1985 as the Company's sales manager. He is also involved in site selection and development, and education of personnel as store managers and as area and district managers.
Robert E. Campbell, age 65. Mr. Campbell has been a Director of the Company since July 1, 1991. Since 1985, Mr. Campbell served as Chairman and Chief Executive Officer, and currently President and Operating Manager, of Miller & Paine LLC, a company which owns and manages office and retail properties in Lincoln, Nebraska. Before 1988, Miller & Paine owned and operated department stores in Lincoln and Grand Island, Nebraska, which were sold to Dillards Department Stores, Inc. Since September 1997, Mr. Campbell has also served as Development Officer for the Madonna Foundation, which supports the Madonna Rehabilitation Hospital in Lincoln, Nebraska.
Ralph M. Tysdal, age 70. Mr. Tysdal has served as a Director of the Company since July 1, 1991. Mr. Tysdal retired in 2002. He previously owned and operated McDonald's restaurants in Broken Bow, North Platte and Ogallala, Nebraska. He began his McDonald's ownership in 1978. Mr. Tysdal also serves on the Board of Directors for Standard Ethanol with plants in Madrid, NE and Cambridge, NE.
Bill L. Fairfield, age 61. Mr. Fairfield has served as a Director of the Company since May 30, 1996. Mr. Fairfield is currently the Chairman of DreamField Partners, a company focused on economic development of the Mid-Plains region through management services and venture capital assistance. Mr. Fairfield currently serves on the Board of Directors of MSI, Inc. and serves as the Lead Independent Director for InfoUSA and is Chairman of their Audit Committee. In 2003 and 2004 Mr. Fairfield was the Executive Vice-President of Sitel Corporation, and from 1991 until October 2000, Mr. Fairfield was President and Chief Executive Officer of Inacom Corp., a technology management services company. Prior to 1991 Mr. Fairfield was Chief Executive Officer of Valcom, the predecessor company to Inacom Corp.
Bruce L. Hoberman, age 61. Mr. Hoberman has served as a Director of the Company since June 2, 2000. He is currently the Chief Executive Officer of Proxibid, Inc., an internet auction service provider, and a member of the MSI, Inc. Board of Directors. Mr. Hoberman was the Founder and President of Homerâ€™s, Inc., a music retail chain and distribution company, based in Omaha, Nebraska, from 1971-1993.
David A. Roehr, age 51 . Mr. Roehr has served as a Director of the Company since September 18, 2000. Mr. Roehr currently does independent business consulting. He was previously with Cabelaâ€™s, Inc., the worldâ€™s foremost outfitter of hunting, fishing, camping and outdoor gear, serving in various capacities from 1994 to 2006, including Executive Vice-President of Cabelaâ€™s, Inc., President and Chief Financial Officer of Cabelaâ€™s, Inc., and Chairman, President and Chief Executive Officer of Worldâ€™s Foremost Bank, a bank subsidiary of Cabelaâ€™s. Prior to Mr. Roehrâ€™s association with Cabelaâ€™s, he served as a tax partner at Grant Thornton, LLP in Lincoln, Nebraska where he practiced public accounting from 1981-1994.
John P. (Jack) Peetz, III, age 58 . Mr. Peetz has served as a Director of the Company since June 2, 2006. Mr. Peetz is currently the Executive Vice-President and Chief Operating Officer for Crete Carrier Corporation, one of the largest privately held trucking companies in the United States, located in Lincoln, Nebraska. He has held this position since 1991 and held other positions with that organization prior to that date. He is also President of Shaffer Trucking, a division of Crete Carrier. Prior to joining the Crete organization, Mr. Peetz practiced law in Sidney, Nebraska with the firm of Peetz, Peetz & Sonntag.
Approval of this Proposal requires a favorable vote of the holders of a majority of the votes cast by all holders of the outstanding shares of Common Stock voting together as a single class at the meeting. Therefore, an abstention will not have the effect of a vote for or against the Proposal and will not be counted in determining the number of votes required for approval, but will be counted in determining the presence of a quorum.
MANAGEMENT DISCUSSION FOR LATEST QUARTER
Company management considers the following items to be key performance indicators in evaluating Company performance.
Comparable Store Sales â€“ Stores are deemed to be comparable stores if they were open in the prior year on the first day of the fiscal period being presented. Stores which have been remodeled, expanded, and/or relocated, but would otherwise be included as comparable stores, are not excluded from the comparable store sales calculation. Online sales are excluded from comparable store sales. Management considers comparable store sales to be an important indicator of current Company performance, helping leverage certain fixed costs when results are positive. Negative comparable store sales results could reduce net sales and have a negative impact on operating leverage, thus reducing net earnings.
Net Merchandise Margins â€“ 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 Companyâ€™s use of markdowns could have an adverse effect on the Companyâ€™s gross margin and results of operations.
Operating Margin â€“ Operating margin is a good indicator for management of the Companyâ€™s success. Operating margin can be positively or negatively affected by comparable store sales, merchandise margins, occupancy costs, and the Companyâ€™s ability to control operating costs.
Cash Flow and Liquidity (working capital) â€“ Management reviews current cash and short-term investments along with cash flow from operating, investing, and financing activities to determine the Companyâ€™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.
RESULTS OF OPERATIONS
Net sales increased from $124.3 million in the second quarter of fiscal 2007 to $169.8 million in the second quarter of fiscal 2008, a 36.6% increase. Comparable store sales increased by $33.1 million, or 27.8%, for the thirteen week period ended August 2, 2008, compared to the thirteen week period ended August 4, 2007. The comparable store sales increase was primarily due to an increase in the number of transactions at comparable stores during the period, in addition to a 4.8% increase in the average retail price per piece of merchandise sold during the period and a 3.0% increase in the average number of units sold per transaction. Sales growth for the thirteen week period was also attributable to the inclusion of a full quarter of operating results for the 16 new stores opened after the first quarter of fiscal 2007, to the opening of 14 new stores during the first two quarters of fiscal 2008, and to growth in online sales.
The Companyâ€™s average retail price per piece of merchandise sold increased $1.76, or 4.8%, during the second quarter of fiscal 2008 compared to the second quarter of fiscal 2007. This $1.76 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 13.6% increase in knit shirt price points ($1.55), a 5.8% increase in denim price points ($0.74), a 12.6% increase in woven shirt price points ($0.28), a 2.3% increase in sportswear/fashion price points ($0.09), and a 2.6% increase in accessory price points ($0.08). These increases were partially offset by the impact of a shift in the merchandise mix (-$0.88) and by reduced price points in certain other categories. These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.
Net sales increased from $245.4 million in the first two quarters of fiscal 2007 to $330.1 million for the first two quarters of fiscal 2008, a 34.5% increase. Comparable store sales increased by $62.2 million, or 26.7%, for the twenty-six week period ended August 2, 2008, compared to the twenty-six week period ended August 4, 2007. The comparable store sales increase was primarily due to an increase in the number of transactions at comparable stores during the period, in addition to a 5.3% increase in the average retail price per piece of merchandise sold during the period and a 2.0% increase in the average number of units sold per transaction. Sales growth for the twenty-six week period was also attributable to the inclusion of a full two quarters of operating results for the 20 new stores opened during fiscal 2007, to the opening of 14 new stores during the first two quarters of fiscal 2008, and to growth in online sales. Average sales per square foot increased 25.8% from $134.09 for the twenty-six week period ended August 4, 2007 to $168.69 for the twenty-six week period ended August 2, 2008.
The Companyâ€™s average retail price per piece of merchandise sold increased $2.00, approximately 5.3%, during the first two quarters of fiscal 2008 compared to the first two quarters of fiscal 2007. This $2.00 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 15.1% increase in knit shirt price points ($1.62), a 5.3% increase in denim price points ($0.76), a 11.2% increase in woven shirt price points ($0.27), and a 3.6% increase in accessory price points ($0.10). These increases were partially offset by the impact of a shift in the merchandise mix (-$0.68) and by reduced price points in certain other categories. These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.
Gross profit after buying, distribution, and occupancy expenses increased $23.9 million in the second quarter of fiscal 2008 to $70.3 million, a 51.4% increase. As a percentage of net sales, gross profit increased from 37.4% in the second quarter of fiscal 2007 to 41.4% in the second quarter of fiscal 2008. This increase was attributable to a 0.95% improvement in actual merchandise margins, which was achieved through an increase in regular-price selling during the period that was partially offset by a slight reduction, as a percentage of net sales, in private label merchandise sales. The increase was also attributable to a 3.25% reduction, as a percentage of net sales, related to leveraged buying and occupancy costs. These improvements were, however, partially offset by an increase in expense related to the incentive bonus accrual (0.20%, as a percentage of net sales).
Year-to-date, gross profit increased $44.0 million for the first twenty-six weeks of fiscal 2008 to $135.9 million, a 47.8% increase. As a percentage of net sales, gross profit increased from 37.5% for the first two quarters of fiscal 2007 to 41.2% for the first two quarters of fiscal 2008. This increase was attributable to a 0.90% improvement in actual merchandise margins, which was achieved through an increase in regular-price selling during the period that was partially offset by a slight reduction, as a percentage of net sales, in private label merchandise sales. The increase was also attributable to a 2.95% reduction, as a percentage of net sales, related to leveraged buying and occupancy costs. These improvements were, however, partially offset by an increase in expense related to the incentive bonus accrual (0.15%, as a percentage of net sales).
Selling expenses increased from $25.1 million for the second quarter of fiscal 2007 to $33.5 million for the second quarter of fiscal 2008, a 33.6% increase. As a percentage of net sales, selling expenses decreased from 20.2% in the second quarter of fiscal 2007 to 19.7% in the second quarter of fiscal 2008. The decrease was primarily attributable to a 1.10% reduction, as a percentage of net sales, in store payroll expense as well as a 0.70% reduction related to the leveraging of certain other selling expenses. These reductions were, however, partially offset by increases in expense related to the incentive bonus accrual (1.10%, as a percentage of net sales) and internet related fulfillment and marketing expenses (0.20%, as a percentage of net sales).
Year-to-date, selling expenses increased from $48.5 million in the first two quarters of fiscal 2007 to $65.0 million in the first two quarters of fiscal 2008, a 34.1% increase. As a percentage of net sales, selling expenses decreased from 19.8% in fiscal 2007 to 19.7% in fiscal 2008. The decrease was primarily attributable to a 0.80% reduction, as a percentage of net sales, in store payroll expense as well as a 0.40% reduction related to the leveraging of certain other selling expenses. These reductions were, however, partially offset by increases in expense related to the incentive bonus accrual (1.00%, as a percentage of net sales) and internet related fulfillment and marketing expenses (0.10%, as a percentage of net sales).
General and administrative expenses decreased from $4.9 million in the second quarter of fiscal 2007 to $3.5 million in the second quarter of fiscal 2008, a 28.9% decrease. As a percentage of net sales, general and administrative expenses decreased from 3.9% in the second quarter of fiscal 2007 to 2.1% in the second quarter of fiscal 2008. General and administrative expenses for the second quarter of fiscal 2008 are reported net of a $3.0 million gain from the involuntary conversion of one of the Companyâ€™s corporate aircrafts to a monetary asset upon receipt of $11.5 million in insurance proceeds. The aircraft was destroyed by a tornado that hit the airport in Kearney, Nebraska on May 29, 2008. Excluding the aircraft gain, general and administrative expenses were 3.8% of net sales in the second quarter of fiscal 2008 compared to 3.9% in the second quarter of fiscal 2007. The reduction was driven by a 0.40% reduction, as a percentage of net sales, related to the leveraging of certain general and administrative expenses; which was almost equally offset by an increase in expense related to the incentive bonus accrual (0.30%, as a percentage of net sales).
Year-to-date, general and administrative expense increased from $9.9 million for the first two quarters of fiscal 2007 to $10.2 million for the first two quarters of fiscal 2008, a 3.0% increase. As a percentage of net sales, general and administrative expenses decreased from 4.0% in the first two quarters of fiscal 2007 to 3.1% for the first two quarters of fiscal 2008. Excluding the $3.0 million gain recognized during the second quarter of fiscal 2008 on the involuntary disposal of a corporate aircraft, general and administrative expenses were 4.0% of net sales for both fiscal 2008 and fiscal 2007. An increase in expense related to the incentive bonus accrual (0.30%, as a percentage of net sales) was offset by a 0.30% reduction, as a percentage of net sales, related to the leveraging of certain general and administrative expenses.
As a result of the above changes, the Company's income from operations increased 102.4% to $33.3 million for the second quarter of fiscal 2008 compared to $16.5 million for the second quarter of fiscal 2007. Income from operations was 19.6% of net sales for the second quarter of fiscal 2008 compared to 13.3% for the second quarter of fiscal 2007. Income from operations, for the twenty-six week period ended August 2, 2008, increased 80.8% to $60.7 million compared to $33.6 million for the twenty-six week period ended August 4, 2007. Income from operations was 18.4% of net sales for the first two quarters of fiscal 2008 compared to 13.7% for the first two quarters of fiscal 2007. Excluding the $3.0 million gain on the involuntary disposal of a corporate aircraft, income from operations for the thirteen and twenty-six week periods ended August 2, 2008, was 17.9% and 17.5%, respectively.
Other income decreased from $2.3 million for the quarter ended August 4, 2007 to $2.1 million for the quarter ended August 2, 2008, a decrease of 9.4%. Other income for the year-to-date period decreased 0.3% and was approximately $4.4 million for both the twenty-six week period ended August 4, 2007 and the twenty-six week period ended August 2, 2008. See Note 7 to the financial statements for the components of other income for the quarter and year-to-date periods.
Income tax expense as a percentage of pre-tax income was 37.0% in both the second quarter of fiscal 2007 and the second quarter of fiscal 2008, bringing net income to $22.3 million in the second quarter of fiscal 2008 compared to $11.8 million in the second quarter of fiscal 2007, an increase of 88.9%. For the first half of fiscal 2008, income tax expense was 37.0% of pre-tax income compared to 36.8% for the first half of fiscal 2007, bringing net income to $41.0 million for the first half of fiscal 2008 compared to $24.0 million for the first half of fiscal 2007, an increase of 70.9%.
Karen Rhoads - Vice President of Finance and Chief Financial Officer
Thank you and good morning. Our August 21, 2008 press release reported that our net income for the second quarter that ended August 2, 2008 was 22.3 million or $0.72 per share on a diluted basis and compares to 11.8 million, or $0.38 per share on a diluted basis for the prior year second quarter that ended August 4, of 2007.
Our year-to-date net income for the 26-week period ended August 2, 2008 was 41 million, or $1.32 per share on a diluted basis and that compares to 24 million, or $0.78 per share on a diluted basis for the 26-week period ended August 4, of 2007.
Please note, that as we highlighted in this morning's press release, our current year general and administrative expenses for both the quarter and year-to-date period have been reported net of a $3 million gain that was from the involuntary conversion of one of our Company's corporate aircraft to a monetary asset upon receipt of our insurance proceeds. The aircraft was destroyed by a tornado that hit the Kearney airport back in May. And the gain had a $0.06 per share after-tax impact on reported basic and diluted earnings per share for both the quarter and year-to-date period.
Our net sales for the 13-week second quarter increased 36.6% to $169.8 million, compared to net sales of $124.3 million for the prior year second quarter. Our comparable store sales for the quarter increased 27.8% and that's compared to the same period of the prior year.
Net sales for the 26-week year-to-date period ended August 2, 2008 increase 34.5% to $330.1 million compared to net sales of $245.4 million for the prior year 26-week period ended August 4, 2007. Our comparable store sales for the period increased 26.7% compared to the same period of the prior year.
Our gross margin for the quarter improved approximately 400 basis points to 41.4% and this improvement was driven by an increase in merchandise margins, which had about a 95 basis point impact, and then also by the leveraging of our buying and occupancy costs, which had about a 295 basis point impact. And then, these improvements were partially offset by an increase in expense related to the incentive bonus accrual.
For the year-to-date period, our gross margin improved approximately 300 basis points to 41.2%. This improvement was driven by an increase in merchandise margins which had about a 90 basis point impact on the year-to-date period and by the leveraging of buying and occupancy costs, which had about 295 basis point impact. These improvements were partially offset by an increase in expense, related to the incentive bonus accrual.
Our selling expense for the quarter was 19.7% of net sales, which was a reduction of approximately 50 basis points from the second quarter of fiscal 2007. The reduction was driven primarily by a decrease as a percentage in net sales in the store payroll expense and by leveraging certain other selling expenses. The reductions were partially offset by an increase in expense related, again, to that incentive bonus accrual and also to a lesser extent to an increase in Internet related fulfillment and marketing expenses.
For the year-to-date period, selling expense was 19.7% of net sales, which was a reduction of approximately 2 basis points compared to the same period of fiscal 2007. This reduction was driven primarily by a reduction as a percentage of net sales, in-store payroll expense, and by leveraging of certain other selling expenses. And, again, these reductions were almost equally offset by an increase in expense related to the incentive bonus accrual and, to a lesser extent, to an increase in the Internet-related fulfillment end marketing expenses.
Our general and administrative expenses for the quarter were 2% of net sales, which was a reduction of approximately 190 basis points from the second quarter of fiscal 2007. But if we exclude the gain related to the involuntary conversion of one of the company's corporate aircraft, general and administrative expenses were 3.8% of net sales, which was a reduction of about 10 basis points compared to the prior year second quarter. This reduction was driven by the leveraging of certain general and administrative expenses, which was almost equally offset by an increase in expense related to the incentive bonus accrual.
For the year-to-date period, general and administrative expenses were 3.1% of net sales, which was a reduction of approximately 90 basis points from the same period in fiscal 2007. Again, if we exclude the gain related to the involuntary conversion of the company aircraft, our general and administrative expenses were 4.0% of net sales for both the current year and prior year. An increase in the expense related to the incentive bonus accrual was offset by leveraging certain other general and administrative expenses.
Our operating margin for the quarter was 19.6% compared to 13.2% for the second quarter of fiscal 2007, and for the year-to-date period, our operating margin was 18.4% compared to 13.7% in the prior year. Excluding the $3 million gain on our aircraft, our operating margin for the quarter and year-to-date periods were 17.9% and 17.5%, respectively. Other income for the quarter was $2.1 million, which compares to $2.3 million for the second quarter of fiscal 2007. And other income for the year-to-date period was $4.4 million in both fiscal 2008 and fiscal 2007.
Our income tax expense as a percentage of pre-tax net income was 37% for the second quarter of both fiscal 2008 and fiscal 2007, bringing second quarter net income to $22.3 million for fiscal 2008 versus $11.8 million for fiscal 2007, an increase of 88.9%. Year-to-date, our income tax expense was 37% of pre-tax net income compared to 36.8% for the same period in the prior year; and that brought our year-to-date net income to $41.0 million for fiscal 2008 versus $24 million for fiscal 2007, an increase of 70.9%. Our press release also included a balance sheet as of August 2, 2008. It included some of the following categories.
Inventory was $103.4 million, which was up about 7.5% from inventory of 96 million at the end of the second quarter of fiscal 2007. Our total cash and investment were $258.8 million, which compares to $248.4 million at the end of fiscal 2007 and also compares to $187.1 million at the same time a year ago.
As of August 2, 2008, total cash and investments included $54.2 million of auction rate securities which compares to $145.8 million of auction rate securities as of February 2, 2008. The auction rate securities are reported at fair market value and at the end of the second quarter, we reported the investment amount is net of a $1.5 million reserve to account for a temporary impairment of certain securities from their stated par value. This reserve has resulted in reporting of an accumulative other comprehensive loss of $5 million in stockholders' equity as of August 2, 2008. There no such reserve as of February 2, 2008.
Of the $54.2 million in auction rate securities as of the end of the quarter, $8.3 million have been included in our short-term investments and $35.9 million has been included in long-term investment.
We also ended the quarter with $97.8 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $7.5 million and depreciation expense was $5.2 million.
For the quarter, our units per transaction increased approximately 3%. The average transaction value increased about 7.5% and the average unit retail increased approximately 4.5%.
The Buckle ended the quarter with 381 retail stores in 39 states, compared to 368 stores in 38 states at the end of the second quarter of fiscal 2007. With the opening of one new store subsequent to the end of the quarter, we currently operate 382 retail stores in 39 states.
And with that, I would like to turn the call over to Dennis Nelson, our President and CEO.
Dennis Nelson - President and Chief Executive Officer
Good morning. I would like to start by highlighting the performance of our various merchandise categories that led to our 36.6% net in sales increase for the quarter. Men's merchandise sales for the quarter increased approximately 30%, highlights were denim, woven and knit shirts and active apparel, each of which experienced strong double-digit sales growth. Average denim price points increased from $74 in the second quarter of fiscal 2007 to $79.35 in the second quarter of fiscal 2008.
For the quarter, our men's business is approximately 46.5% of net sales compared to approximately 35.5% last year. And the average men's price points increased approximately 9.5% from $28.50 in the second quarter of fiscal 2007 to $32.20 in the second quarter of fiscal 2008.
Women's merchandise sales for the quarter increased approximately 33%. Highlights were denim, knit tops, active apparel and accessories, each of which experienced strong double-digit sales growth. The average denim price points increased from $78.50 in the second quarter of fiscal 2007 to $80.55 in the second quarter of fiscal 2008.
For the quarter, our women's business is approximately 53.5% of net sales compared to approximately 34.5% last year. And the average women's price points were increased approximately 1% from $35.35 in the second quarter of fiscal 2007 to $35.75 in the second quarter of fiscal 2008.
For the quarter, combined accessories sales were up approximately 32% and combined footwear sales were up approximately 7.5%. These two categories accounted for approximately 8% and 5%, respectively, of second quarter net sales, which compares to approximately 8% and 6.5% for each in the second quarter of fiscal 2007. The average accessory price points were up approximately 2.5% and average footwear price points were down approximately 2.5%.
For the quarter, denim accounted for approximately 35% of our sales which compares to approximately 37.5% in the second quarter of last year. Tops accounted for approximately 31% of the second quarter sales which compares to approximately 36.5% last year.
Our private-label business was down slightly as a percentage of net sales for the quarter, due to the strength and variety of selection in our branded merchandise and represented approximately 25% of sales.
As Karen mentioned total inventory at the end of the quarter was up approximately 7.5%. But our total markdown inventory at the end of the period was down compared to the same time a year ago. During the quarter we opened seven new stores and completed four substantial remodels. At the end of the quarter 167 of our stores were in our newest format.
For the full fiscal year, we now anticipate opening 21 new stores, including one store during fiscal August and six stores for holiday. We also still anticipate completing 13 substantial remodels in total during the fiscal year. And based on this, we now expect our fiscal 2008 total Cap Expenditures to be in the range of $43 million to $44million, which has been updated to include the anticipated purchase of a new corporate aircraft during the third quarter.
And with that, we welcome your questions. Thank you.