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November 2013 Sales

The Buckle, Inc. (BKE) released its November 2013 net sales figures on December 5th, 2013 and there was both good and bad news. The bad news is that the net sales in November for comparable stores opened at least one year, declined .6%. This is consistent with the chatter I have been hearing on Bloomberg and other financial news sources about in-store holiday sales in general. As such, the decline does not appear to be specific to BKE, and in fact, BKE may be doing better than at least some of its competitors. Guess? Inc. (GES) just released its 3rd quarter results (ending November 2, 2013), which showed a 5% drop in its North American comparable store sales, as well as a overall drop in revenue of 3%. GES did not state its November sales numbers, but did slightly reduced it full year guidance on revenue.

The good news for BKE is that its total net sales were up 4.6%, which means that its new stores and online sales were more than enough to overcome its comparable store sales decline. This bodes well for its growth strategy. In 2012 BKE opened ten new stores bringing its total to 440. It planned to open thirteen stores in 2013, and so far twelve have been opened. BKE has had an online store since 1999.

On another positive note, the news release stated that its comparable store net sales for the 43-week period ending November 1, 2013 increased 1.1%, and its total net sales for that period was up 3.5%. Although these figures are not strong, they do show continued growth, in what may be a week year for holiday sales. Current Yahoo Finance analysts average estimate indicates a 2.5% increase in BKE's 2013 full year sales.

The Business

For those of you who are unfamiliar with BKE, it is an apparel retailer that caters to young adults. It is an American success story that began in 1948 when David Hirschfeld opened a men's store named Mills Clothing, in the small college town of Kearny, Nebraska. In 1965, Dave's son Dan took over the business. Dan changed its name to the Brass Buckle, and it became a denim store. In 1977, it started selling women's apparel, and in 1991 it went public as The Buckle, Inc.

Conclusion

BKE's shares are currently selling at $51.00 (December 5, 2013), which is close to my fair value estimate of $52.00. For those of you that would like to see how I calculated this price, you can look at a previous article I published on Seeking Alpha on September 9, 2013. I am of the opinion that the share price may go down some from here, especially if the Christmas season continues to be weak. Also, BKE traditionally pays a large end of year special dividend. The dividend could be substantially lower this year because of BKE's weak growth and also because it paid out and exceptionally high special dividend in 2012 ($4.50 per share), when there was speculation of a possible adverse tax change to dividends. If BKE does decide to substantially reduce its special dividend, it could trigger a sell-off that could be a buying opportunity. I'll be looking to add to my position if the share price goes below $50.00.

Source: Slow Growth Continues For The Buckle