Why Buckle Has Soared to All-Time Highs

Tomorrow, Buckle (BKE -0.61%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

Buckle occupies an interesting niche in the teen retail industry, with a slightly upscale focus that nevertheless provides somewhat less expensive apparel than its truly top-priced competitors. After having produced stronger growth in past years, though, Buckle's sales gains have started to decelerate. Let's take an early look at what's been happening with Buckle over the past quarter and what we're likely to see in its quarterly report.

Stats on Buckle

Source: Yahoo! Finance.

Can Buckle buck the weather trends this quarter?
Analysts have gotten more optimistic in recent months about Buckle's earnings prospects, raising estimates for the most recent quarter by a penny per share and adding a nickel to their full-year earnings-per-share consensus. The stock has reacted even more favorably, climbing more than 27% since mid-February.

We've already gotten a sense of the challenges that Buckle has faced, as the company's monthly same-store sales figures have shown a struggle to maintain growth. Buckle's comps fell 1% in February, remained flat in March, and managed to climb 6.2% in April, bringing the total comps for the quarter to a gain of 1.2% overall. Those patterns are fairly consistent with what many retailers saw, as unfavorable weather compared to last year's winter and early spring months took its toll on the retail sector broadly.

But one big piece of news that has sent Buckle's shares rising came earlier this month, when private equity firm TowerBrook announced a going-private acquisition of high-priced jeans retailer True Religion (NASDAQ: TRLG) for $32 per share. With merger and acquisition activity having risen dramatically throughout the market in recent months, investors are hoping that greater attention to apparel retailers could raise interest in Buckle, which sports strong operating margins and has also paid substantial special dividends on a consistent basis.

One of the biggest assets that Buckle has is its core of career employees at the highest levels of management. With experience in bringing the company through up-and-down fashion cycles, these leaders give shareholders confidence that they'll be able to handle any economic environment well.

One area where Buckle could improve, though, is in e-commerce. Analysis of sales-per-square-foot figures from Fool contributor Andrew Marder showed that Buckle gets 93% of total sales from their stores, leaving just 7% for direct channels. That 7% figure compares to 45% for Fifth and Pacific's (KATE) Lucky Brand, which is a closer competitor to Buckle than True Religion in assessing sales per square foot.

In Buckle's report, watch for comments on how the company expects to respond to the changing M&A environment in the industry. Whether the company decides to become an acquirer, a target, or continue on its own, taking advantage of the strategic climate could help bolster Buckle's future prospects.

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