The Buckle (BKE): Strong Long-Term Growth Stock

The Buckle, Inc. (BKE) is one of the leading retailers for casual apparel, footwear and accessories for fashion–conscious young men and women. Currently they operate over 400 stores in 41 states, under the names Buckle and The Buckle. Its market share ranges from a wide selection of brand names and private label casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company emphasizes personalized attention to its customers and provides individual customer services such as free alterations, layaways, and a frequent shopper program.

What BKE Has Done

Buckle is a very conservative run company with strong management. In the past ten years sales have grown over 140%. To put this in comparison Wal-Mart sales for the past decade have been 146%. The key difference between the two however is that Wal-Mart has increased its number of stores by 115% during that time while Buckle has only increased its number of stores by 64%. This shows how management has been very successful at making each individual storeprofitable. Per store sales have gone up from $1.32 million to $2.19 million in the last 7 years, a net growth rate of 66%. When your analyzing retail stocks you have to put them in perspective at a per store basis not the company all together. Looking at Buckle overall what has made them so successful is the fact they have not overextended themselves. 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.

Why I Like BKE

I like BKE due to their strong brand management and overall sales appeal. Long-term growth prospects are bullish heading into 2010 as I expect sales double-digit sales for a third consecutive year followed by strong earnings estimates. Adding to this, I see the advancement of the company with the expansion of 21 new stores driving sales numbers. BKE’s steady flow of brand right merchandise and store expansion will go a long way to increase brand awareness and attract new customers. I have stressed that BKE is supported by strong management along with strong financials. Currently they have $3 a share in cash, zero debt, and a current ratio of 3.70. Moving on they have a PEG of 0.98, which is a bullish indicator. Adding to this they have strong ROE and ROA of 31% and 23%. Plus Buckle insiders hold 43% of the company showing they have believe in its long-term growth potential. This long-term growth will only be strengthened now that Buckle is planning on expanding into the Northeast for the first time, hiring 2,776 new employees and opening numerous new stores. If they implement the same business model there is nothing to doubt that it won’t be as successfully as the 41 states it already operates in.

Overall

Overall I believe Buckle will be a strong long-term investment. Incorporating all factors together I value BKE at $42 12-months from now.