Prepared remarks
Good morning. Thank you for joining us for Buckle's Third Quarter Earnings Release Webcast. Members of Buckle's management on the call today include Dennis Nelson, President and CEO; Tom Heacock, Senior Vice President of Finance, Treasurer, and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel, and Corporate Secretary. Before we begin, I want to reiterate that the company does not provide future sales or earnings guidance. All forward-looking statements made during the call are in line with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly due to risks and uncertainties outlined in the company's SEC filings. The company is not obligated to update or revise these statements publicly, except as legally required. Furthermore, the company does not permit the reproduction or sharing of transcripts or audio recordings of its quarterly conference calls without written consent. Unauthorized reproductions or recordings should not be relied upon, as the information may not be accurate. Please note that today's webcast is being recorded. I will now turn the conference over to your host, Tom Heacock.
Good morning, and thanks for being with us this morning. Our November 21, 2025, press release reported that net income for the 13-week third quarter ended November 1, 2025, was $48.7 million or $0.96 per share on a diluted basis compared to net income of $44.2 million or $0.88 per share on a diluted basis for the prior year 13-week third quarter, which ended November 2, 2024. Year-to-date net income for the 39-week period ended November 1, 2025, was $128.9 million or $2.55 per share on a diluted basis, compared to net income of $118.3 million or $2.35 per share on a diluted basis for the prior year 39-week period ended November 2, 2024. Net sales for the 13-week third quarter increased 9.3% to $320.8 million compared to net sales of $293.6 million for the prior year 13-week third quarter. Comparable store sales for the quarter increased 8.3% in comparison to the same 13-week period in the prior year, and our online sales increased 13.6% to $53 million. Year-to-date net sales increased 7.2% to $898.7 million compared to net sales of $838.5 million for the prior year 39-week fiscal period. Comparable store sales for the year-to-date period increased 6.3% in comparison to the same 39-week period in the prior year, and our online sales increased 11.6% to $142.9 million. For the quarter, UPTs decreased approximately 1.5%, the average unit retail increased approximately 4%, and the average transaction value increased about 2.5%. Year-to-date, UPTs decreased approximately 1%, the average unit retail increased approximately 3%, and the average transaction value increased approximately 2%. Our gross margin for the quarter was 48%, a 30 basis point increase from 47.7% in the third quarter of 2024. The current quarter margin expansion was a result of 40 basis points of leverage buying, distribution and occupancy expenses, partially offset by a 10 basis point reduction in merchandise margins. Our year-to-date gross margin was 47.4%, up 50 basis points from 46.9% for the same period last year. The year-to-date increase was the result of a 20 basis point increase in merchandise margin, along with 30 basis points of leverage buying, distribution and occupancy expenses. Selling, general and administrative expenses for the quarter were 29% of net sales compared to 29.1% for the third quarter last year. And year-to-date, SG&A was 29.5% of net sales compared to 29.6% for the same period in the prior year. The third quarter decrease was due to a 35 basis point reduction related to nonrecurring digital commerce investments made a year ago, a 35 basis point decrease in store labor-related expenses, and a 5 basis point decrease in certain other SG&A expense categories. These decreases were partially offset by a 50 basis point increase in incentive compensation accruals and a 15 basis point increase in G&A compensation-related expenses. Our operating margin for the quarter was 19% compared to 18.6% for the third quarter of fiscal 2024. And for the year-to-date period, our operating margin was 17.9% compared to 17.3% for the same period last year. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing third quarter net income to $48.7 million for fiscal 2025 compared to $44.2 million for fiscal 2024. Income tax expense as a percentage of pretax net income for both the current and prior year year-to-date periods was also 24.5%, bringing year-to-date net income to $128.9 million for fiscal 2025 compared to $118.3 million in fiscal 2024. Our press release also included a balance sheet as of November 1, 2025, which included the following: Inventory of $165.8 million, which was up 11% from the same time a year ago and $371.3 million of total cash and investments. We ended the quarter with $162.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $11.1 million and depreciation expense was $6.2 million. For the year-to-date period, capital expenditures were $34.5 million and depreciation expense was $18.2 million. Year-to-date capital spending is broken down as follows: $30.4 million for new store construction, store remodels and technology upgrades and $4.1 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened 2 new stores and completed 6 full store remodels, 3 of which were relocations in new outdoor shopping centers. Additionally, post quarter end and during November, we have opened 2 new stores and completed 2 store relocation projects in advance of the holiday selling season, which brings our year-to-date count through today to 6 new stores, 17 full remodels, and 3 store closures. For the remainder of the year, we anticipate completing 4 additional full remodeling projects. Buckle ended the quarter with 442 retail stores in 42 states compared to 445 stores in 42 states as of the end of the third quarter last year. And now I'll turn it over to Adam Akerson.
Thanks, Tom, and good morning. Our women's business continued its acceleration in year-over-year growth rate during the quarter, with merchandise sales increasing about 19%, which was on top of 3% same week growth a year ago. For the quarter, our women's business represented approximately 51% of sales, which compares to 47% last year. This growth continued to be led by the performance of our denim category with women's denim increasing approximately 17.5% and average denim price points increasing from $81.15 in the third quarter of fiscal 2024 to $86.95 in the third quarter of fiscal '25. This increase continues to be primarily the result of strong growth in our Buckle Black Label, which has outperformed the total denim business, along with strong growth of other higher price point national brands. Complementing our strong women's denim selection, our team continued delivering compelling trends and fashions for our guests, and for the quarter, we achieved growth across all women's merchandise categories with the most notable growth in knits and sweaters, casual and fashion bottoms, and accessories. In total, average women's price points increased about 6% from $49.95 to $53.05. On the men's side, we were pleased to see growth for the second consecutive quarter with men's merchandise sales up about 1% against the prior year, representing approximately 49% of total sales compared to 53% in the prior year. This growth was also led by our men's denim category, which was up about 1% for the quarter. Average denim price points increased from $88.10 in the third quarter of fiscal '24 to $88.15 in the third quarter of fiscal '25. In other categories, we saw nice performance in both our short and long sleeve tees business in a variety of lifestyles as well as strong selling of our vests, jackets, and accessories. For the quarter, overall average men's price points increased approximately 2.5% from $54.30 to $55.70. On a combined basis, accessory sales for the quarter increased approximately 7.5% against the prior year, while footwear sales were essentially flat. These two categories accounted for approximately 10% and 4.5%, respectively, of third quarter net sales, which compares to 10% and 5% for each in the third quarter of fiscal '24. For the quarter, average accessory price points were up approximately 3.5%, and average footwear price points were up 4.5%. Also, on a combined basis, our kids business continued its strong growth trend, increasing approximately 22% year-over-year. This continues to be a category where our teams are excited to keep building the business and selection for our guests. For the quarter, denim accounted for approximately 46% of sales and tops accounted for approximately 29%, which compares to 46% and 29.5% for each in the third quarter of fiscal '24. As previously mentioned, with strong selling and trends in many of our brand styles, our private label business decreased as a percentage of our total mix for the quarter. For the quarter, private label represented 47.5% of sales versus 48.5% for the third quarter of fiscal 2024. And with that, we welcome your questions.
Questions and answers
Our first question comes from Mauricio.
This is Mauricio Serna from UBS Research. First, could you share your observations on the overall health of the U.S. consumer as we approach the holiday season? There have been discussions about potential pressure on lower-income consumers, so I would like to hear your insights on that. Additionally, could you provide an update on the denim business? You mentioned that women's denim is experiencing a 17% increase. How do you view the sustainability of this growth? Also, could you comment on the demand for men's denim over the past quarter?
Thank you for the question. On the consumer, we haven't seen a big change in our stores. I mean the team and guests seem excited about our product response. There's probably a slight caution in some as our units per sale are off very slightly. But overall, we feel good about it. If the guest is excited about the product and the quality we have, it's been going pretty well. The ladies denim business continues to be excellent. There's still a lot of variety of styles and fits. We've added some of our branded sources to the mix, which has added some higher price points, and it has been good for the business. Our fashion brands and our private brands continue to sell well. So we're optimistic about the women's denim business throughout the rest of the year. On the men's denim, our private label brands are consistent and doing well, having good sell-throughs. We haven't seen as much from other brands adding to the private brands mix, but we feel our denim business is solid in men's as well.
There are no further questions in queue. Okay. It looks like we have another question from Mauricio.
Great. Just on the other thing that I wanted to ask was the merchandise margin. It was down 10 basis points. Maybe could you elaborate on what were the puts and takes behind the merchandise margin trend in this quarter?
Thank you, Mauricio. This is Tom. Merchandise margins were down 10 basis points for Q3 and up 10 basis points for Q2. Looking year-to-date, considering the ongoing tariffs, we feel very confident about our merchandise margin situation. We've maintained high merchandise margins for an extended period and have continued to make improvements. Q1 and Q2 were record highs for merchandise margins, and we saw a slight dip in Q3. Overall, I'm quite optimistic about our position. The primary factors contributing to this shift include a slight decrease in private label business, while certain brands, particularly in women's denim, have been performing exceptionally well. Additionally, there has been a slight rise in costs due to tariffs and other factors.
There are no further questions in queue. It looks like there are no further questions. I will now turn the call back over to Buckle for any closing remarks.
Thank you for your participation today. It will be a quick call, but I wish everyone a wonderful weekend and a wonderful holiday season. So thank you for joining us today.