Why Right Now Is the Perfect Time to Buy Buckle

Every investor loves to watch a pet pick do well, and Buckle (NYSE: BKE  ) has been making me happy for the past few months. This last quarter was no exception, with the denim retailer handily beating expectations. The announcement came out yesterday, and the stock was up 1.5% by the end of the day. The company has had a solid rise since the end of summer but is still shy of its 52-week high. So is this last release a sign of good things to come, or is there still a lot of work to be done?

The earnings highlights
Third-quarter revenue increased 4% to $284 million. Buckle also managed to turn in a 23% operating margin, which is 2 percentage points higher than its year-to-date position, and 1 percentage point above its position from the same period last year. That growth helped income and earnings per share both grow 9%. Income was up to 41.9 million, while EPS came in at $0.88. The EPS position beat analyst expectations of $0.83, and helped the stock inch upward.

On the sales side, same-store sales were up a modest 2.4%, which is respectable if not a record. Competitor -- and next item up for bid -- True Religion (Nasdaq: TRLG  ) turned in a 4.7% decrease in same-store sales over its last quarter. Buckle's small in-store increase was paired with a slightly larger online sales increase of 3.8%. Those online sales still make up only a small percentage of total sales, accounting for 7% in the most recent quarter.

What comes next
Buckle's spring fall came in slow steps, with the market taking three months to finally push it to its lowest point in 2012. The successive drops came after poor monthly sales figures, including May's meager 0.2% same-store sales increase. But the newest figures confirm that those weak days are behind the company. Same-store sales growth has continued to rise at a more acceptable rate, due less to anything Buckle has done and more to the slow recovery of confidence among buyers. Buckle has also benefited from its strong private label, which accounted for 33% of denim sales in the last quarter.

That sets it up well to ride into a good-looking Christmas season. While some retailers are worried about the unknown effect of the fiscal cliff, Buckle is not one of them. The company has finished the remodel of 323 of its stores to the newest format, and has seen good sales increases in those newly outfitted stores. It has also completed its new store program for 2012, with an additional 13 stores now planned for 2013. But for the holidays, it's sitting in a comfortable and prepared spot.

On its earnings call, management said that it is not preparing any extraordinary special markdowns for the holiday season, and that it expects average unit retail price to continue on the pace set in the third quarter. Unit costs are expected to fluctuate little, if at all. That should lead to another quarter of strong margins and sales.

The bottom line
Buckle continues to be a strong performer, as it has been since the middle of this year. With a P/E of only 14.5, Buckle seems pretty cheap compared to others in the space, like Gap (NYSE: GPS  ) , which is trading at a P/E of 18.6. Buckle has the added advantage that it's effectively on sale for the next few weeks: The company announced its seemingly annual special dividend earlier this month, and shareholders of record on Dec. 7 will receive a $4.50 cash dividend in addition to the quarterly dividend of $0.20.

Buckle has continued to move from strength to strength, in part because it is a well-paced company. Store growth has been moderate, and management doesn't reach beyond their means in order to move things ahead. I love Buckle's long-term prospects, and it's one of the few stocks that I currently recommend everyone take a deeper look into. With the special dividend coming up, now is the time to get in, if you're interested.

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