Are the glory days of double-digit comparable-store gains a thing of the past for teen retailer The Buckle Inc.?
This story first appeared in the July 22, 2010 issue of WWD. Subscribe Today.
Once the golden child of specialty retail, Buckle startled analysts earlier this month with a 7.3 percent drop in June comps, far worse than estimates ranging from a small gain to a low-single-digit drop.
The Kearney, Neb.-based firm, which is normally used to taking top honors on comp day, turned in the worst performance of any of the companies reporting, although Limited Brands Inc.’s Bath & Body Works division slipped 8 percent.
Buckle’s chief financial officer, Karen Rhoads, told WWD that the disappointing results were attributable to the “economy” and the “strength of some of the numbers the company is going up against.” Buckle’s long-standing aversion to price promotion may have also played a role.
Still, lower numbers are an unwelcome new experience for Buckle, which ratcheted up 40 successive months of positive comps, many of the double-digit variety, between August 2006 and this January, when it reported a 1.2 percent decline. Before June’s decline, Buckle was down 5.7 percent in April and 5.4 percent in May.
Why the slipup now?
“No promotions were held in June this year, as was the case last year. The firm has just begun to try on denim promotions this week similar to last year,” offered Sterne Agee retail analyst Margaret Whitfield, who said the retailer’s comps would improve starting next month as comparisons become easier. Last year, comps had double-digit increases through May, eased to 9.6 percent in June before coming in at 2.8 percent in July and 3.6 percent in August.
Nonetheless, in light of what is shaping up to be another price-sensitive year in retailing, a scarcity of promotions from Buckle could account for the dent in sales.
“Typically, our promotions are more event-driven,” added Buckle’s Rhoads, who explained her company has never positioned itself as a “value retailer.”
“We’ve never held any storewide sales,” she said. Markdowns are taken when sell-throughs are low and items have been on the shelf too long.
But Buckle’s palpable success during the height of the recession, a time when consumers were arguably more value-centric, made some analysts wonder if the recent results had more to do with fashion missteps than the company’s promotional cadence.
“The question is if the store is too edgy, too rock ’n’ roll and urban. Has the trend changed?” Cowen & Co. analyst Laura Champine said. “I think it’s too early to call, because they are still comping positively on a two-year basis.”
Providing a simpler explanation, MKM Partners analyst Linda Tsai said, “The record heat probably hurt their denim sales, which were a little over 40 percent of their sales and a higher percentage of gross profits. So yes, albeit disappointing, June might not be representative of the underlying trend because of the unusually hot month.”
Tsai, who rated Buckle’s stock “neutral,” reduced her second-quarter estimates from a profit of 52 cents a share to 48 cents a share after the company missed her comp projection of up 2 percent.
“We expect Buckle to remain under pressure near term, with the best possibility of any upside coming from an improved second-half outlook for the industry,” she said.
Overall, analysts are looking for earnings of 54 cents a share, according to Yahoo Finance. Buckle does not provide future sales or earnings guidance.
Shares closed Wednesday at $28.21, down 24 cents, or 0.8 percent. Since peaking this year at $40.35 on April 23, they have dropped 30 percent. In the same time span, the S&P Retail Index has dropped 20.5 percent.