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There is a durable competitive advantage with this company, and it's something that's deeply ingrained in their corporate structure and culture. We will get into what this is, and how to identify it, after a short overview on the company.
Are you ready to be a fashion tycoon?
The Buckle is a (mostly) mall-based clothing retailer. Their main focus is on jeans, but they also sell a lot of tops, and then small amounts of other fashionable accompaniments. When you buy into this company you get a main office with a fulfillment center (owned), 431 retail stores in 43 states (leased), inventory on the shelves, a bunch of employees buzzing around, and what comes to a net cash balance of about $110m million*. In other words, this is a very simple company with a strong balance sheet.
Over the past 10 years their store count has done this:
Year Locations
2011 431
2010 420
2009 401
2008 387
2007 368
2006 350
2005 338
2004 327
2003 316
2002 304
They also have plans to continue opening more locations. A quick Google search pulls up that we have about 1,000 malls across America. Certainly, not all of the malls are going to meet their target consumer demographic profile, but they also open some locations in strip centers and lifestyle centers, then there is always Canada - so we can ballpark a location potential of about 1,000 into the foreseeable future.
Meanwhile, average sales per store, in thousands of $;
2011 2,314
2010 2,133
2009 2,129
2008 1,995
2007 1,668
2006 1,493
2005 1,474
2004 1,454
2003 1,350
2002 1,334
This is steadily increasing, surprisingly, through both good times and bad, at a CAGR of 5.66%. Their average sales per square foot metric is also steadily increasing, in a similar manner, with 2011 reporting $462 sales/sq ft.
It is with these numbers that we can project out into the future and come up with a very enticing estimation for investment returns. However, unless someone in the comments section wants to go crystal ball bowling into the future, let's leave such speculation out of this report for now. Instead, Price Earnings Growth Ratio, or PEGR, works great for situations like these.
Year EPS
2011 3.20
2010 2.86
2009 2.73
2008 2.24
2007 1.63
2006 1.24
2005 1.13
2004 .86
2003 .69
2002 .65
Average growth for the last 10 years is 20%, 19% for the last 5 years, and then 20% again if we subtract the high and low growth years and then reaverage the rest. This is a company that is growing at a pretty steady 20%. We can also see that they even grew earnings through 2008/2009/2010 while everything was turning ito pumpkins and mice. They must have missed the memo that we were in a severe recession. There is an endless list of things that can get in the way of future growth, but we can atleast surmise that they still have plenty of room left to expand. Let's give them a conservative 15% future long term growth rate, the numbers we need after that would be their current PE of 11.63, and their dividend yield of 2.10.
PEGR = PE (Estimated Growth + div yld) = 11.63 / (15% + 2.10%) = .68 =
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- 11 months ago
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