Apparel retailer the Buckle
The Buckle has proven adept at turning high single-digit sales growth into double-digit earnings and cash flow growth. 2006 was a case in point, as the company announced today that full-year sales advanced nearly 6% and diluted earnings grew 10%. The bottom-line results were below the 17% annual growth the company has been able to post over the previous three fiscal years, but speak to the consistency of management's operating philosophy.
Growth going forward looks wide open as well. The company currently operates only 350 stores in 38 states, up 10 stores from a year ago. Management plans to open 20 stores in each of the next two years and remodel another eight. You guessed it -- that represents high-single-digit expansion. During the earnings conference call, CEO Dennis Nelson didn't provide specific earnings guidance, but did mention he is "optimistic" about results going forward.
In other words, expect more of the same from the Buckle. It believes it can support up to 400 stores with its current infrastructure and is seeing success in selling branded and private-label denim at its stores. Branded merchandise accounts for two-thirds of sales, with private-label making up the rest, and the company is testing new private-label jeans to increase its mix of the higher profit category.
As I mentioned, the Buckle's conservative approach to running its business has worked out well for shareholders recently. The stock price has moved up significantly, but still trades at under 20 times expected 2007 earnings. That's not a bad multiple if earnings can keep growing in the double digits.
In looking at the competitive landscape, you also have to commend the Buckle for its consistency. It's found a compelling merchandise mix and has been able to benefit from the high-priced denim fad, something that Gap
Being held hostage to a particular market segment makes for more volatile results. Look no further than Chico's
For related Foolishness:
- Gap's Long and Winding Road
- Fool on the Street: Enlightened by PacSun
- Buckle: A New Fool Favorite
- Buckle Down
Fool contributor Ryan Fuhrmann is long shares of PacSun but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.