Note: BKE’s fiscal year ends in January
Buckle stock (NYSE: BKE), a specialty retailer of medium to high-end casual apparel, footwear, and accessories, despite a recent 5% year-to-date plunge to about $48 (Jan. 17), remains almost 18% higher since the beginning of 2024 compared to growth of 25% in the S&P index. Also, one of its peers Gap Inc. stock (NYSE: GAP) is up 14% during the same period. See What’s Happening with Gap’s stock?
Buckle is characterized by a strong balance sheet with sizable cash and investment reserves of $350 million and no debt, yet tempered by increasing costs and declining sales. For the first nine months of 2024, Buckle’s revenue fell 5% year-over-year (y-o-y) to $838 million. The company suffered as a result of a 5.4% contraction in comparable store sales, with online sales plummeting 9.2%. However, the impact of these declines was partially offset by a 4% increase in the average retail price per piece of merchandise sold during the period. Despite this, transaction volumes fell by 5.3%, and units per transaction decreased by 2.6%, ultimately impacting the company’s profitability. The retailer’s net income declined by 16% y-o-y to $118 million in the first three quarters of 2024, primarily due to increased selling expenses, general and administrative costs, and an 80 basis points decline in gross margins to 46.9% y-o-y. Meanwhile, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Buckle’s limited store count expansion to 445 locations by September 2024 (from 440 in 2021) has had a minimal impact on revenue growth, which is instead driven primarily by comparable store sales. Although the company has faced challenges with weak comparable sales in 2024, there are signs of improvement. Notably, the decline in comparable sales has slowed significantly, with a 9% drop in Q1 2024, followed by a 6.6% decline in Q2 2024, and a more modest 0.7% decrease in Q3 2024. This trend suggests that the company’s efforts to stabilize its sales performance may be gaining traction.
The retailer’s diverse brand portfolio encompasses a range of popular labels, including BKE, Buckle Black, Salvage, and Daytrip, among others, catering to varied tastes and preferences within the young adult demographic. So is Buckle stock worth a look at current levels of about $48 per share? Buckle’s stock is trading at about 12x consensus 2025 earnings. However, this compares to Gap which trades at about 10x forward earnings. While Buckle’s shares appear attractively priced on an absolute basis, they may be relatively expensive compared to peers.
BKE is one of a handful of stocks that have increased their value in each of the last 4 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 70% in 2021, 11% in 2022, 15% in 2023, and 17% in 2024. The Trefis High Quality Portfolio, with a collection of 30 stocks, is much less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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