The Buckle’s Earnings Miss Is A Buying Opportunity (BKE)

May 22, 2015 - fall Denim

On Thursday, The Buckle Inc. (NYSE:BKE) announced an 8-cent miss on gain for a initial entertain of 2015. The skip was a outcome of a 2.2% year-over-year diminution in same-store sales, that combined a bit to a company’s offered losses as a commission of sum profits.

BKE Chart

BKE information by YCharts

As we can see, a marketplace was not kind, pushing a already diseased batch to new 52-week lows. That creates this a ideal time to inspect this niche retailer, a prospects, and either these new low prices are a shopping opportunity.

All Buckle, no Brass
Founded in 1948 as Mills Clothing, Buckle has left from a singular store in Kearney, Nebraska to 463 stores in 44 states nationwide, providing infrequent garments for immature group and women.

It’s a flattering elementary model, though Buckle has proven remarkably skilful during it, rebranding as Brass Buckle in 1967 and focusing on denim sales. In 1991, a association rebranded again, dropping a “Brass” and apropos simply “The Buckle.”

To this day, a denim-heavy indication that done it a success is still a company’s bread and butter, and as of a many new 10-K, it’s mostly denim and infrequent tops.

The Buckle deals both in code names and a possess private labels, with about 65% of a company’s annual income entrance from name-brand merchandise.

More and some-more stores
The Buckle’s graduation from one store to 463 didn’t occur overnight, of course, though investors will be meddlesome to know that a company’s expansion also isn’t a thing of a past, with estimable increases in a series of stores in a past decade.

That a same-store sales didn’t do good in Q1 of this year is disappointing, though it’s frequency a trend, and notwithstanding a partially tiny distance as a retailer, a association has shown conspicuous fortitude both in sales and sum margins over a years. The 2.2% drop should give us pause, though not means us panic, as one bad entertain is not a trend, and Buckle beat a street by a penny a entertain prior.

By a numbers, a dark division gem
In 2014, The Buckle had diluted EPS of $3.38, putting a association as of tighten on Thursday during a medium 12.75 P/E ratio. That’s a good value proposition, and EPS was within usually a integrate of commission points of this over new years. Likewise, estimates for FY2015 and FY2016 are both right in this vicinity. That’s a flattering fast set of earnings.

But let’s speak dividends. The genuine value in The Buckle is that it has not usually paid decent, flourishing dividends over a years, currently during 23 cents per quarter, though also has a prolonged story of dogmatic special dividends during a finish of a year, that spike a produce substantially. This year, it was a special dividend of $2.77.

So, on paper, a division produce is 2.1%, though a company’s trailing 12-month division is 8.5%. That’s a disproportion between a plain division and a outrageous one, and while we naturally can’t count on a special division being that large each year, they’ve tended in new years to be some-more than a whole typical division for a year, during times almost so.

Conclusion
What we’re looking during is a batch with a fast P/E in a 12s, a delayed though suggestive rate of growth, and an capricious though estimable dividend.

Given all of this, a one-off 8-cent skip is reduction a problem than a shopping event for income expansion investors, and a good approach for someone to variegate their income portfolio into a small, though remarkably stable, niche.

Disclosure: The author has no positions in any bonds mentioned, though might trigger a prolonged position in BKE over a subsequent 72 hours. (More…)

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