Ladies and gentlemen, good morning, thank you for standing by, and welcome to the Buckle's 2021 First Quarter Earnings Release. Members of the Buckle's management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Senior Vice President of Finance, Treasurer and CFO; Kelli Molczyk, Vice President of Women's Merchandising; Bob Carlberg, Senior Vice President of Men's Merchandising; Brady Fritz, Vice President, General Counsel and Corporate Security, Secretary, excuse me. As they review the operating results for the first quarter, which ended May 1, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following safe harbor statement. Safe harbor statement: under the Private Securities Litigation Reform Act of 1995, all forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors, which may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in such forward-looking statements. Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. The company does not undertake to publicly update or revise any forward-looking statements even if experience or future changes make it clear that any projected results, expressed or implied therein, will not be realized. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its express written consent. Any unauthorized reproductions or recording of the call should not be relied upon as the information may be inaccurate. And at this time, I'd like to turn the conference over to our host, Mr. Tom Heacock. Please go ahead.

Good morning, and thanks for joining us this morning. Our May 21, 2021, press release reported that net income for the 13-week first quarter ended May 1, 2021, was $57.3 million or $1.16 per share on a diluted basis, which compares to a net loss of $11.8 million or $0.24 per share on a diluted basis for the prior year 13-week first quarter ended May 2, 2020. And net income of $15.1 million or $0.31 per share on a diluted basis for the first quarter of fiscal 2019. Net sales for the 13-week first quarter increased 159.2% to $299.1 million from net sales of $115.4 million for the prior year 13-week first quarter. Compared to the first quarter of fiscal 2019, net sales increased 48.6% from sales of $201.3 million. Online sales for the quarter were $53.7 million, an increase of 67.3% compared to $32.1 million in the first quarter of 2020, and an increase of 120% compared to $24.4 million in the first quarter of 2019. Again, compared to the first quarter of fiscal 2019, UPTs decreased approximately 0.5%, the average unit retail increased approximately 4.5%, and the average transaction value increased about 3.5%. Gross margin for the quarter was 49.3% compared to 23.2% in the first quarter of 2020, and 38.1% in the first quarter of 2019. The increase in gross margin compared to 2019 was the result of a 315-basis-point improvement in merchandise margins, coupled with significantly leveraged occupancy, buying and distribution costs as a result of the strong sales performance for the quarter. Selling, general and administrative expenses for the quarter were 24% of net sales compared to 37.2% for the first quarter of 2020, and 28.8% for the first quarter of 2019. The reduction compared to 2019 is the result of a 560-basis-point improvement in store labor-related expenses and a 50-basis-point reduction in travel costs, along with 190 basis points of leverage across several other SG&A expenses. These savings were partially offset by a 205-basis-point increase related to incentive compensation accruals, a 75-basis-point increase in shipping costs due to our continued strong e-commerce performance, a 20-basis-point increase in equity compensation expense, and a 20-basis-point increase in marketing-related expenses. Our operating margin for the quarter was 25.3% compared to negative 14% for the first quarter of fiscal 2020, and 9.3% for the first quarter of 2019. Our effective tax rate was 24.5% for the first quarter of each of the 3 years, bringing first quarter net income to $57.3 million for 2021 compared to a net loss of $11.8 million for 2020, and net income of $15.1 million for 2019. Our press release also included a balance sheet as of May 1, 2021, which included the following: inventory of $89 million, which was down from inventory of $121.7 million as of May 2, 2020, and $120.8 million as of May 4, 2019, and total cash and investments of $412.9 million. We ended the quarter with $100 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $4.6 million, and depreciation expense was $4.8 million. Year-to-date capital spending is broken down as follows: $4.1 million for new store construction, store remodels, and technology upgrades, and $0.5 million for capital spending at the corporate headquarters and distribution center. During the quarter, we completed 5 full remodels, all of which were relocations into new outdoor shopping centers, and we also closed 1 store. For the year, we plan on opening 1 new youth store, completing 6 additional full remodel projects, and also have 1 planned store closure later this month. Based on current store plans, we still expect our capital expenditures to be in the range of $10 million to $15 million, which includes both planned store projects and IT investments. Buckle ended the quarter with 442 retail stores in 42 states compared to 446 stores in 42 states at the end of the first quarter of fiscal 2020.

Thanks, Tom. I would like to start by highlighting the performance of our women's merchandise categories for the quarter. Please note that due to the disruption in the prior year, all sales comparisons will be against the first quarter of 2019. Women's merchandise sales for the fiscal quarter were up approximately 46.5% against the first quarter of fiscal 2019. For the quarter, our women's business was approximately 49% of sales, average denim price points for the quarter were $76.20 compared to $75.85 in the first quarter of 2020, and $76.70 in the first quarter of fiscal 2019. Overall price points for the quarter were $45.50 compared to $44 in Q1 of 2020 and $42.05 in the first quarter of 2019. In reviewing our first quarter results, we continue to be pleased with how the women's product is resonating with our guests and our teammates. Denim continues to perform nicely in a wide variety of fits, from traditional to fashion, finishes from clean to busted, fabrics from super stretch to rigid, and bottom openings from skinny to flare. Our full-length denim alternatives in crops and shorts also continue to perform well. As we all gradually transition to more out-of-the-home living, we saw nice upticks in our fashion top mix, our graphic tees, fashion and casual footwear, and accessories as guests look to step out with their best fashion foot forward. Our private label footprint continues to expand in all categories, creating one-of-a-kind product fit for our guests. Our regular price business continues to drive sales with our markdown inventory representing a smaller percentage of the total. The exclusive product mix, combined with more regular priced sales, have had a positive impact on our merchandise margins. In addition, with the enhancements to our omnichannel experience, we saw nice gains in our online business for the quarter. With the sales performance beating our plan, the team worked extremely hard throughout the quarter to fill in any gaps in product flow by chasing in-season available goods from our valued partners as well as working through early shipments where applicable. Those at once goods, in conjunction with the steady flow of new planned spring inventory, continue to set our stores up with fresh product for our guests. We continue to plan for a healthy flow of newness through the second quarter to prepare our stores for the back-to-school season.

Thank you, Kelli. Men's merchandise sales for the fiscal quarter were up 48.5% in comparison to the first quarter of fiscal 2019. For the quarter, our men's business was approximately 51% of net sales. Average denim price points for the quarter were $86.20 compared to $84.85 in the first quarter of 2020, and $86.70 in the first quarter of fiscal 2019. Overall price points for the quarter were $50.20 compared to $50.95 in Q1 2020, and $50.60 in Q1 2019. Q1 was a great quarter where all departments were up compared to 2019. Denim provided our largest growth in dollars, with footwear and youth showing the largest percentage gain. The strong denim performance was across the board with particular strength in BKE and Salvage, both of which are exclusive to the Buckle. Rock Revival also had an amazing quarter, and our street brands continued their growth as a percent of the total assortment. In accessories, hats, Oakley sunglasses, and fragrance led the way. The team has been working quickly to replenish our inventory position throughout Q1 and into Q2, given the incredible guest response to new receipts going all the way back to Q3 of 2020. Our team just did an incredible job of working with our brands and sources to get enough product to sustain an incredible quarter of growth. Our usual low level of markdown inventory is even lower, giving us the ability to manage risk while we work to add more inventory. Our strong partnerships with the branding sources put us first in line to get product made and delivered faster than our competitors. During the quarter, there were many challenges in the supply chain overall, but we have been able to deliver most products on time, with only a small percentage of products being more than two weeks late. Now turning to results on a combined basis. Accessory sales for the fiscal quarter were up approximately 50% against the first quarter of fiscal 2019. Footwear sales were up about 118.5%. These two categories accounted for approximately 8.5% and 11%, respectively, of first quarter net sales. This compares to 8.5% and 7.5% for each in the first quarter of fiscal 2019. Average accessory price points were up approximately 6%, while average footwear price points were down about 2% compared to the first quarter of fiscal 2019. Again, on a combined basis for the quarter, denim accounted for approximately 42% of sales and tops accounted for approximately 26%. This compares to 46% and 27.5% for each in the first quarter of fiscal 2020, and 42.5% and 30% in the first quarter of fiscal 2019. For the quarter, our private label business represented approximately 38% of sales. And with that, we welcome your questions. Thank you.

I'd just like to speak a little bit about the supply chain. You mentioned some places it's running about 2 weeks behind. Can you talk a little bit about maybe where it was at the beginning of the quarter, where it is now? And when you think the point of this year where we'll reach equilibrium?

Steve, thank you for the question. Bob, do you want to address the men's product first?

Sure. We've kind of moved, I think, quicker than others and had things on order earlier to kind of already take into account the fact that there would be some changes in shipping that we knew about ahead of time. So overall, I don't think it's going to have a material impact on our deliveries going forward, and we should be building inventory in the next couple of months.

Kelli, do you have anything to add?

No. I mean, I would echo what Bob said. We had very little impacts from the first quarter. A few partners ran into some challenges, but overall, we feel we fared fairly well, and we'll continue to do so as we move forward.

Steve, I might add that with the very strong fourth quarter as well as the huge gains in March and April, it's been a good problem for us to have. And the good news is, all the product we're bringing in now continues to be fresh. And we have good sales history in the past 6 months to develop product on.

That's helpful. Can you talk about your online penetration, maybe in its current form as latest as you can? I don't know if you want to take the whole quarter, or whether you want to take April as a proxy month, but where is it at this moment in time? Are you seeing more strength in bricks-and-mortar as retail is reopening? Or is, on a dollar basis, I'm assuming digital is holding its own? Maybe you could just talk a little bit about the puts and takes there.

Yes. I believe brick-and-mortar was up 38% in April. Is that correct?

I think for the whole quarter, and then that's part of the story. We've seen growth in both online and the stores. I mean, seeing guests really, really excited to be back in the stores for the whole quarter. In-store sales were up over 35%, which was incredible, and coupled with our online growth. We have some difficult comparisons for online growth to a year ago for the periods where the stores were closed. But for the whole first quarter, I mean, our online sales were about 18% of sales, and that's certainly a level we feel comfortable with and want to continue to grow. I think our best guess, and we're seeing a lot of growth, is omnichannel guests or guests that are shopping both in-store and online and are seeing nice growth there, along with, obviously, new guests and reactivated guests, so a lot of good things with our online business and in-store.

Speakers, I am not getting anyone else queuing up right now.

If there are no further questions, we will conclude the call and give everyone some time back. I hope you all enjoy the rest of the day and have a wonderful weekend. Thank you very much.

We did get 1 more person to queue up right at the end? Would you like to take that?

Sure.

Okay. Mr. Wang. Please go ahead, sir.

So many of your peers already talked about the big impact from the stimulus checks. Just wondering if you have a way of measure how big that impact is in March and April sales? And more importantly, going into the second half of the year, you mentioned back-to-school and there's a whole of this season 2. Assuming we are not getting any more stimulus checks, how do you think about the sales trend? Are they going to be continuing to going upwards compared to 2019? What are you thinking or planning to do to drive that up trend? Just want to get some thoughts from you guys.

I believe the trend is positive. We won't attempt to forecast the future, but since the fourth quarter of 2019, and even earlier, we have seen numerous positive developments in our company. Our merchandising teams have offered great products that received excellent feedback from our guests. Our sales teams have worked to create an outstanding experience. Our marketing efforts are steadily improving. The IT team has enhanced the online shopping experience for everyone. We are truly excited about what everyone has achieved over the past one and a half years and are optimistic about what lies ahead.

Our next question will come from the line of Kyle Kavanaugh, representing Palisade Capital.

I wanted to ask about the current environment and the benefits you're experiencing as a result. It seems like these are having a positive impact on your margins, particularly in merchandising margins and full price selling. Last time, you also mentioned that real estate negotiations have provided some advantages. While I understand you may not want to predict sales trends, I'm interested in the company's productivity and the potential to maintain margins moving forward. Are the benefits you're seeing now likely to continue, or should we expect some of them to reverse as we return to normal in the latter half of this year or into 2022? Could you elaborate on this?

Yes, that's difficult to determine, and I appreciate the question, Kyle. Regarding merchandise margins and markdown inventory at the end of the quarter, we're quite low, as noted by Bob and Kelli. We are consistently looking to improve merchandise margins and exploring sourcing options, but it's challenging to predict, which has been the case for several years. We've managed to maintain a high level of merchandise margin and aim to continue building on that. As for the overall cost structure, we are examining areas where we've benefited, including rent reductions over the past years, which you can see impacting us now and will do so moving forward. We're also seeking opportunities to relocate stores from underperforming malls to outdoor power centers and lifestyle centers, which has proven advantageous for both rent and product presentation in those locations. We completed five remodels in the first quarter, three last year, and we plan to maintain this strategy. Store labor has also been a significant focus for several years, and we have seen considerable improvements. However, I don’t expect to see the same level of progress in labor as we did in the first quarter. Our sales were quite close to holiday levels, but we weren't staffed for that. The teams have been actively hiring and working diligently to serve our customers, but we shouldn't anticipate the same level of efficiency in store payroll moving forward. Still, we will strive to maintain as much efficiency as possible and hope to see some continued improvement in that area.

Could you share the traffic levels for your in-line stores for the quarter? I know you provided some comparable store sales information, but I'm looking for specifics on traffic.

We don't have traffic counters in our stores. So it's difficult, and we don't have specific traffic metrics to share for our stores.

Got you. Regarding your vendors, are they experiencing any supply chain issues? I'm curious about what has been the situation. You mentioned having enough sales data to forecast your merchandise direction, but it’s still early. Is everything selling well due to low inventories and the novelty for customers, or are there various fashion trends influencing the dynamics?

I think it's pretty much product focused. I mean, as Kelli mentioned in her presentation, there's a lot of fun, exciting things going on in the gals' denim area with different silhouettes. Denim shorts are working well. The variety of tops and such has been very well received. That's been great. And the men's side, denim has been very good as well. The short business, their selection has been very well received as well as our net business in both categories have been excellent. The footwear has been on-trend. And so the team has just done a very good job, and our staff in the stores have been getting behind it. Our vendors, for the most part, will be helping us catch up. They have certain challenges naturally as the production goes. But overall, we think we'll be in good shape as we continue through the season.

Okay. And just 1 last question on the labor side. Would you characterize yourself as staffed well enough for today's environment? And then as we move throughout the year, do you need to increase staff within stores or online or both?

I'd say in the majority of our stores, they're in pretty good shape on the staffing needs. Certainly, as we go to the back half of the year, we're always looking to add people. And there might be certain markets that it's more of a challenge than others. So we've got a great working environment, an exciting company and can be competitive. So we don't see that as a huge problem.

Could I ask, are you paying minimum wage? Or have you moved your labor scales at all?

Yes, we have increased our base wage, and there is also a commission structure in place. This means that new teammates are either guaranteed a minimum or receive their base plus commission, whichever is more favorable. Additionally, more experienced staff will be compensated at higher levels.

We have a question now from Mr. Hillenbrand, a private investor.

I would just like to get some information on the growth of your online sales, and how your net margins online are compared to your sales in store? And just what the trends have been as far as that goes?

In terms of margins, they're pretty comparable. There's not a lot of difference in the product or the merchandise margins of the goods that we have online and what we have in-store. In terms of growth that we've seen, a big part of the story is the omni capabilities that we've added over the last several years, and exposing all of our in-store inventory to be available for sale online and so shipped from store has been a big part of our online growth and, again, really expanding the inventory, giving the guests a better selection of product, reducing stock-outs online, and that's been a big driver. That answers your question?

It does, yes.

Operator, do we have more questions?

And there's no other participants queued up at this time, gentlemen?

Thank you.

Would you like to conclude the call?

Now we'll wrap it up unless we get any more last minute questions. But thank you, everybody, for participating, and have a wonderful day.

Ladies and gentlemen, this does conclude your conference for today. Thank you for your participation using the AT&T Executive Teleconference. You may now disconnect.