The Buckle, Inc. (NYSE:BKE) is a specialty retail stock that we have traded a number of times. It trades with some volatility, making it great for quick scalp trades. That said, for investors, we rate it a Hold, as shares have slowly crept higher over time with a rising market. All of this comes with a tough macro environment for retailers. Consumers’ wallets are being crushed by inflation, though confidence has held up. In this column, we check back in on the company and cover the just-reported Q1 earnings.
Buckle Q1 2024 performance discussion
Specialty retail is a tough place to invest with all the competition, and the fact of the matter is that inflation costs hurt margins for many of these. That said, such cost pressures have started to subside. Shares are at an attractive value on the surface, but there is a lack of growth. Turning to the just reported Q1, the company missed analyst consensus estimates on both the top and bottom lines.
The sales in Q1 were down 7.2% from last year as revenue came in at $262.5 million, and this missed estimates by $1.7 million. We believe the most critical metric to focus on with retailers is comparable sales. We will rarely issue a buy on a retailer that is seeing declining comparable sales. And comparable sales suffered once again here. Comparable store sales were down 9.0% from a year ago.
That is an ugly statistic. It is surprising to see the stock hold up like this. This was not just in physical stores, either. At the same time, online sales decreased by 13.4% fell to $44.4 million from net sales of $51.3 million a year ago.
With these lower sales, we expected earnings to fall. Despite all the work that has been done to expand margins, we saw lower margins on these lower sales. We saw gross margin decline from 47.1% a year ago to 46.0%. Gross profit was $120.7 million, falling from $133.3 million last year.
With lower sales and a decline in margins, it comes as no surprise that net income fell to $34.8 million, or $0.69 per share, down from $42.9 million, or $0.86 per share a year ago. Not only are earnings per share down from a year ago, but these results missed consensus by $0.05 per share. This is a classic example of how cheap can get cheaper in terms of the valuation of the stock. Valuation has been attractive, but with fewer earnings coming in, you will see multiple expansion.
And folks, despite how positive the economy may seem, we still have the risk of recession, and the risks to the consumer. Shares are not a buy nor a sell here. Currently, shares are in the middle of a range, and so we could see the action carry shares higher or lower. We would see a trading opportunity in the low $30s, and would see shares as a sell in the low $40s. Traders can use those ranges if they wish to make tactical moves, but right now, the move is a hold.
Final thoughts
We like The Buckle, Inc. cash position, which is strong. At the end of the quarter, cash and equivalents totaled $267 million. Liabilities remain quite reasonable as well, so we see the balance sheet at least being relatively clean here, which is a plus. For 2024, we were looking for $3.70 in EPS at minimum, putting shares at just over 10X FWD earnings. That appears as good value, but cheap can get cheaper if earnings continue to fall each year.
There is a near 4% dividend here for patient shareholders, but we still think this is a trader’s stock, though anyone who got in during or shortly before the COVID pandemic has done well. We think that the stock has benefited from a strong stock market, but in covering the stock, we have seen earnings decline, as well as sales, despite efforts to save costs and boost margins.
In our opinion, The Buckle, Inc. remains a trading stock, and new money should wait for a sub-$35 price. For more trade ideas, with higher conviction, please check out our group below.
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