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Buckle Co., Ltd. (New York Stock Exchange:B.K.E.) is a specialty retail stock that we have traded many times. It trades with some volatility, making it ideal for quick scalping trades. That said, for investors, we see it as The stock is gradually rising as the stock market rises, so it’s worth holding. All of this comes with a tough macro environment for retailers. Consumer wallets are being crushed by inflation, but confidence is holding up. In this column, we’ll take another look at the company and Recently Announced First Quarter Earnings.
Buckle 2024 Q1 Earnings Briefing
Specialty retail is a tough sector to invest in because it’s so competitive, and inflationary costs are eating into the profit margins of many of these companies. That said, those cost pressures are starting to ease, and stocks are looking attractively priced. On the surface, growth is lacking, but in its recently released first quarter, the company Analyst consensus Estimate both sales and profits.
First quarter sales were down 7.2% year over year, with revenue of $262.5 million, $1.7 million below expectations. We believe the most important metric for a retailer is comparable sales. We rarely buy into retailers with declining comparable sales, and comparable sales were weak here as well. Comparable store sales were down 9.0% year over year.
That’s a terrible statistic. It’s surprising the stock is holding up the way it has. And it’s not just about brick-and-mortar stores. At the same time, online sales fell 13.4% to $44.4 million in net sales, down from $51.3 million a year ago.
We expected profits to decline due to the decline in sales. Despite all our efforts to expand our margins, our margins declined due to the decline in sales. Gross margins decreased to 46.0% from 47.1% last year. Gross profit was $120.7 million, down from $133.3 million last year.
With declining sales and tighter margins, it’s not surprising to see net income fall to $34.8 million, or $0.69 per share, from $42.9 million, or $0.86 per share, a year ago. Not only were earnings per share lower than last year, but the results also missed consensus by $0.05 per share. This is a classic example of cheap getting even cheaper, price-wise. Stock valuation. Valuations are attractive, but if earnings decline, multiples will likely widen.
Folks, no matter how good the economy looks, there is still a risk of recession and risk to the consumer. Stocks should not be bought or sold here. Currently, stocks are in the middle of a range, so it is up to the move to see if they go up or down. There will be trading opportunities in the low $30s and selling in the low $40s. Traders can take advantage of these ranges if they want to make tactical moves, but for now, the move is on hold.
Final thoughts
Buckle has a strong cash position, which we like. Cash and cash equivalents totaled $267 million at the end of the quarter. Debt remains at a fairly reasonable level, which is good news. Balance sheet At least being relatively clean here is a plus. For 2024, I expect EPS to be at least $3.70, which puts the stock at just over 10x FWD earnings. This looks like good value, but could get even less cheap if earnings continue to fall each year.
With a nearly 4% dividend for patient shareholders, we still think this is a trader’s stock; however, anyone who bought during or just before the COVID pandemic has done well. We think this stock has benefited from a strong stock market, but in covering this stock, we’ve seen earnings and sales decline despite efforts to cut costs and improve margins.
In our opinion, The Buckle, Inc. remains a stock to trade and new funds should wait until the price drops below $35. If you would like more high-conviction trading ideas, check out the group below.
