Popular dividend stock, Buckle (BKE 0.38%), reported better-than-expected second-quarter earnings on August 20. However, despite beating analysts' estimates for its quarterly profit, the retailer -- like many of its teen-centric apparel peers -- is struggling to grow same-store sales and it's stunting growth.
Men's Buckle Apparel. Image source: Buckle.
The results
Buckle reported second-quarter earnings of $0.49 per share and revenue of $236.1 million. These results compare to a consensus analyst estimate for EPS and revenue of $0.47 and $241 million, respectively.
Notably, and consistent with the company's first quarter, Buckle's business failed to serve up any growth. Both revenue and EPS were about flat compared to the same period last year, when the retailer reported revenue and EPS of $235.7 and $0.51, respectively.
The closely watched retail metric, same-store sales, or comparable sales of stores open more than one year, was down 1.7%, year over year. Though investors should note that the retailers same-store sales in its most recent full month of sales were much worse than same-store sales for the 13-week second quarter; Buckle's monthly same-store sales in the month of August decreased 8.1%.
Buckle's online sales helped offset some of the negative effect of its same-store sales decline. Online sales were up 17% from the year-ago period. However, representing just 8.5% of Buckle's total sales, this better growth rate for online stores has little impact on the company's overall business.
Strengths and weaknesses
The company's gross margin of 40.1% in Q2, while down slightly from 40.3% in the year-ago quarter, can actually be interpreted as a positive sign. The primary driver for the year-over-year decrease in gross margin was "deleveraged occupancy by distribution expenses, resulting from the comparable store sales decline," as Buckle CFO Karen Rhoads explained during the company's second quarter earnings call. But this year-over-year decline would have been bigger if it wasn't for a notable 55 basis point improvement in its merchandise margin during this period.
Further, Buckle is performing well in men's merchandise. The category was up 5%, driven by casual bottoms, knit shirts, shorts, accessories, and a 1.8% higher average price for its men's denim. Men's merchandise accounted for 46% of Buckle's second-quarter net sales, up from 44% in the year-ago quarter.
On the other hand, Buckle's women's merchandise sales were a disappointment. Women's sales were down about 3.5% compared to the year-ago quarter. A competitive environment for women's pants drove Buckle's average women's denim price down from $98.65 in the year-ago quarter to $95.45. Subsequently, Buckle's women's merchandise as a percentage of revenue fell from 56% in the year-ago quarter to 54%.
There was no mention of Buckle's dividend -- a hot topic among Buckle investors. Since the company has historically paid out a special dividend about once every year in addition to its regular quarterly dividend, investors are always on the lookout to glean information on how large (or small) the special dividend may be next time it is paid out. Buckle's special dividend amount has failed to stick to a predictable pattern.
Buckle currently pays a quarterly dividend of $0.23 per share, up 4.5% from its quarterly dividend in 2013. At today's share price, this dividend gives Buckle a dividend yield of 2.3%. The company's most recent special dividend, which isn't taken into consideration when calculating dividend yield, was a cash dividend of $2.77 per share, paid on January 15.
