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 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.
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. The author wrote this essay themselves, and it expresses their possess opinions. The author is not receiving remuneration for it (other than from Seeking Alpha). The author has no business attribute with any association whose batch is mentioned in this article.