On 6th of October, I had published a ‘BUY’ recommendation on Buckle Inc. It was trading at a price of $26.53 per share. My previous report on Buckle Inc. is available here. The Company announced a whopping $2.50 special dividend in November 2010 and a regular quarterly dividend of $0.20 in December 2010. Current market price of BKE’s stock is $37.78, which means an overall return of 51.8% since October 6th, 2010. This is one company that gives out over 90% of its net income in dividends and still managed to grow its business in the last five years.
BKE’s steady flow of brand merchandise and store expansion will go a long way to increase brand awareness and attract new customers. Buckle is supported by strong management along with strong financials. Currently they have zero debt, current ratio of 3.4 and a quick ratio of 2.0. The company’s PEG ratio has increased from 1.00 in October 2010 to 1.35 December 2010. The Company’s Price to earnings ratio has increased from 9.8X to 13.9X over the same period, which is lower, compared to its competitors namely American Eagle, Urban Outfitters and Abercrombie & Fitch. Buckle’s Price to earnings ratio is higher compared to GAP and Aeropostale.
The Buckle’s sales per square foot has increased by about 40% in last five year period, which shows that the management is able to utilize store space efficiently and able to allocate resources effectively. Over the last five years, BKE’s had a very good organic growth, which shows that the company’s strategy is working well and its merchandise is fresh. Adding to this they have strong ROE and ROA of 35% and 26%. Buckle insiders hold 43% of the company showing they believe in its long-term growth potential. This long-term growth will be strengthened now that the Buckle is planning on expanding into the Northeast for the first time. The management’s plan to open 20 new stores is expected to drive sales up. Management has been conservative and strategically opened new stores when the time is right. In doing so, they have been able to achieve strong margins and have been consistently increased gains. The company had 401 stores as of December 26th, 2010.
I like BKE due to their shareholder friendly and experienced management, overall sales appeal, and high dividend payout. Based on price multiples, Buckle share looks appropriately priced. Hence, I am changing my recommendation from a ‘Buy’ to ‘Hold’ on Buckle’s stock.
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|OCTOBER 6TH, 2010||DECEMBER 26TH, 2010|
|Enterprise Value (millions)||$1,104.90||$1,601.30|