The Buckle, Inc.
Q2 2017 Earnings Call Transcript

Published: 17 Aug 2017

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Buckle’s Second Quarter Earnings Release Call. At this time, all lines are in a listen-only mode. [Operator Instructions] And as a reminder, today’s conference call is being recorded. Members of the Buckle’s management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Vice President of Finance, Treasurer and CFO; Kelli Molczyk, Vice President of Women’s Merchandising; Bob Carlberg, Senior Vice President of Men’s Merchandising; and Kyle Hanson, Vice President, General Counsel and Corporate Secretary. As they review the operating results for the second quarter which ended July 29, 2017, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement. All forward-looking statements made on the company involve material risks and uncertainties and are subject to change based on factors which maybe beyond the company’s control. Accordingly, the company’s future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, those described in the company’s filings with the Securities and Exchange Commission. The company does not undertake to publicly update or revise any forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company’s quarterly conference calls without its express written consent. Any unauthorized reproduction or recordings of the call should not be relied upon as the information maybe inaccurate. I would now like to turn the conference over to Mr. Tom Heacock. Please go ahead.

[Tom Heacock:]

Good morning and thanks for joining us this morning. Our August 17, 2017 press release reported that net income for the 13-week second quarter ended July 29, 2017 was $11.5 million or $0.24 per share on a diluted basis compared with net income of $15.5 million or $0.32 per share on a diluted basis for the prior-year 13-week second quarter which ended on July 30, 2016. Year-to-date net income for the 26-week period ended July 29, 2017 was $27.8 million or 57% per share on a diluted basis compared with net income of $38.6 million or $0.80 per share on a diluted basis for the prior-year, 26-week-period ended July 30, 2016. Net sales for the 13 weeks second quarter decreased 7.8% to $195.7 million compared to net sales of $212.2 million for the prior year 13 weeks second quarter. Comparable store sales for the quarter were down 7.7% in comparison to the same 13 week period in the prior year and online sales decreased 4.5% to $19.5 million. Year-to-date net sales decreased 10.5% to $407.9 million for the 26 week fiscal period ended July 29, 2017 compared to net sales of $455.7 million for the prior year 26 week fiscal period ended July 30, 2016. Comparable store sales for the year-to-date period were down 10.3% in comparison to the same 26 week period in the prior year and online sales decreased 6% to $41.3 million. For the quarter, UPTs increased approximately 1.5%. The average unit retail decreased approximately 6% and the average transaction value decreased approximately 5%. For the year-to-date period, UPTs increased approximately 2%, the average unit retail decreased approximately 6.5%, and the average transaction value decreased approximately 4.5%. Gross margin for the quarter was 37.9%, up approximately 20 basis points from 37.7% for the second quarter last year. The increase was driven primarily by 100 basis point improvement in merchandise margin and by 100 basis point benefit as a result of the fiscal 2016 sunset of our old Primo card loyalty program under which rewards were recorded as the cost of goods sold at the time of redemption. These benefits were partially offset by de-leveraged occupancy, buying, and distribution expenses resulting from the comparable store sales decline. For the year-to-date period, gross margin was 38.2%, down approximately 10 basis points from 38.3% for the same period last year. The decrease was driven primarily by de-leveraged occupancy, buying, and distribution expenses resulting from the comparable store sales decline and were partially offset by a 90 basis point improvement in merchandise margins and 150 basis point benefit related the Primo card sunset. Selling expense for the quarter was 23.9% of net sales compared to 21.7% of net sales for the second quarter of fiscal 2016. For the year-to-date period, selling expense was 22.9% of net sales compared to 20.5% of net sales for the same period in the prior year. For both the second quarter and the year-to-date period the increase in selling expense as a percentage of net sales was the result of increases in store payroll, online marketing and fulfillment, and certain other selling expenses. General and administrative expenses for the quarter were 5.1% of net sales compared with 4.6% of net sales for the second quarter of fiscal 2016. For the year-to-date period, general and administrative expenses were 4.9% of net sales compared with 4.5% of net sales in the prior year. For both the quarter and year-to-date period, the G&A increase is due to an increased professional and consulting fees. Our operating margin for the quarter was 8.9% compared to 11.4% for the second quarter of fiscal 2016. For the year-to-date period, our operating margin was 10.4% compared with 13.3% for the same period last year. Other income for the quarter was $0.9 million compared with $0.6 million for the second quarter of fiscal 2016 and other income for the year-to-date period was $1.8 million compared to $1 million in the prior year. Income tax expense as a percentage of pretax net income was 37.3% for the second quarter of both fiscal 2017 and fiscal 2016 bringing second quarter net income to $11.5 million for fiscal 2017 versus $15.5 million for fiscal 2016. Year-to-date income tax expense was also 37.3% for both fiscal 2017 and fiscal 2016 bringing year-to-date net income to $27.8 million for fiscal 2017 versus $38.6 million for fiscal 2016. Our press release also included a balance sheet as of July 29, 2017 which included the following; inventory of $121.7 million which was down approximately 15.5% from inventory of $144.3 million at the end of the second quarter last year and total cash and investments of $262.1 million, which compares to $264.6 million at the end of fiscal 2016 and $234.9 million at the same time a year ago. As of the end of the quarter, inventory on a comparable store basis was down approximately 14.5% and total markdown inventory was up compared to the same time a year ago. We ended the quarter with $159.8 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $3.3 million and depreciation expense was $7.9 million. For the year-to-date period, capital expenditures were $7.2 million and depreciation expense was $15.8 million. Year-to-date capital spending is broken down as follows

[Kelli Molczyk:]

Thanks Tom. Good morning everybody. I would like to start by highlighting the performance of our women’s merchandise categories for the quarter. Women’s merchandise sales for the quarter were down approximately 13.5%. Average denim price point decreased from $87 in the second quarter of fiscal 2016 to $81.25 in the second quarter of fiscal 2017. For the quarter our women’s business was approximately 49.5% of net sales compared to 51.5% last year and average women’s price point decreased approximately 6.5% from $43.40 to $40.50. When these overall price points were down as a result of assortment in higher dollar branded products being off from a year ago in our denim and footwear categories. In regards to denim our total denim inventory as well as our inventory in markdown denim are down from a year ago. In addition the inventory changes we are facing the shift of our existing inventory to more entry level price points. Entry level price points in denim ranging from around $40 to $70, increased as a percentage of our total denim assortment with our higher price branded mix at denim being down as the percentage of our total denim inventory close to 50%. We continue to see nice turns on our higher price denim starting around $80 and we will have a bigger presence in that category moving into Q3 compared to the second quarter. Positive responses have been towards broadening our selection in different denim fits and bottom openings as well as offering unique details. We have also expanded our selection and offering in our private label brands like Daytrip and Buckle Black. First of all where we continue to perform well is spring type product further into Q2 than a year ago. We are seeing a nice response to footwear under $50 as well as better branded products in certain markets, with footwear as well as other fall categories of full length denim long sleeve knits, woven sweaters and outerwear. We strategically push back to earlier receipts of the traditional fall categories to a larger concentration in Q3 based on the continued shift in the buy now, wear now guest shopping pattern. The new product delivering has been well received by our stores and guests and with even the early deliveries of our heavier fall product having a nice start as the guest recognizes and values the unique and different product mix. We are seeing through early back-to-school reads that they are willing to move away from that buy now, wear now shopping pattern when the product is special. In relation, we continue to find success in our other sportswear private label brand offerings from Gilded Intent, Gimmicks and BKE Boutique. It’s important to also call out the nice quarter in our dresses, rompers and skirts with responses to one few statement outfits. The test introduced on denim skirts, have also been well-received in this category through Q3. And with that, I will turn over to Bob Carlberg, our Senior Vice President of Men’s Merchandising to discuss the performance of our men’s merchandise category.

[Bob Carlberg:]

Thanks, Kelli. Good morning, everybody. Men’s merchandise sales for the quarter were down approximately 5.5%. Average denim price point decreased from $92.80 in the second quarter of fiscal 2016 to $87.55 in the second quarter of fiscal 2017. For the quarter, our men’s business was approximately 50.5% of net sales compared to 48.5% last year and average men’s price point decreased approximately 5% from $50.25 to $47.85 and that will add little color to the numbers. Overall, men’s held up well in a continuing difficult environment. Inventories are well in line and most of the dollar loss came from targeted lower retails. Denim overall has had a good response to the new brands, fabrics and the aforementioned retail. We see denim price points to continue slightly down in Q3 as they have been, introduced these that continue to see expansion in our brands, Departwest and Outpost in all categories, with BKE continuing to do well. The fishing themes this spring and summer and screen print T-shirts have been good. The button fronts have been in a down cycle for a few years, but new fashion prints and solids are starting to impact our overall business there. As Kelli mentioned, the two summer categories were better in Q2 as expected with our guests in the buy now, wear now mode. As part of that trend, we moved sweaters and outerwear deliveries out to mid September to focus on lighter weight and easier to transition product during early Q3. Strong accessory categories continue to be hats, sunglasses both in our premium Oakley brand and also in our under $15 price points, with our fragrance cologne business growing again. On the marketing front, we continued our normal campaigns with us just finishing our 50 anniversary event, which was well received by our team and guests. We tried a new concept of getting our great sales people in front of new guests by putting a booth up that we best – with some of our best partners. The country event drew 130,000 people letting more people experience our great service to product. Now, going back to kind of the overall numbers on a combined basis, accessory sales for the quarter were down approximately 8.5%, while footwear sales were approximately up 1%. These two categories accounted for approximately 10.5% and 6.5% respectively of second quarter net sales which compares to 10% and 5.5% for each in the second quarter of fiscal 2016. Average accessory price points are down just slightly and average footwear price points were down approximately 3.5%. Again on a combined basis for the quarter, denim accounted for approximately 32% of sales and tops accounted for approximately 34% which compares to 33.5% and 32.5% for each in the second quarter of fiscal 2016. Our private label business was up slightly as a percentage of net sales and represented approximately 32.5% of sales. And with that, we welcome your questions. Thanks for being here.

[Operator:]

Thank you. [Operator Instructions] And our first question will come from the line of Simeon Siegel with Nomura Instinet. Your line is open. Julie Kim Hi, this is Julie Kim on for Simeon. Thank you for taking our question. So, it looks like this quarter saw online continued to decline. Can you give any color on what drove that in the quarter and if you expect continued deceleration moving forward? Thank you. Dennis Nelson Good morning, Julie. It’s Dennis. I believe the online in the second quarter outperformed the stores slightly. The lower retail price points and the reduced inventory in the company probably had some effect on there. We continue not to be promotional online, and I think that has the main effect of the results. Julie Kim Great. And do you expect any changes in that strategy moving forward or do you think that that’s working well with you and supplement to the stores currently? Dennis Nelson Well, we are continuing to review the marketing as well as the position of online. And I would expect to make improvements on there, so we would expect to do better in the future. Julie Kim Great. Thank you. Dennis Nelson Thank you.

[Operator:]

Thank you. Our next question will come from the line of Tiffany Kanaga with Deutsche Bank. Your line is open. Tiffany Kanaga Hi. Thanks for taking my questions. Would you dig into the drivers behind the merchandise margin increase in the quarter excluding the benefit of loyalty and if you think you are positioned to see further year-over-year increases in the back half of the year and additionally what’s driving the increase in markdown inventory and how does that compare to how you plan inventory levels heading into second quarter? Dennis Nelson On the markdown inventory, that’s more a timing issue of when we mark things down compared to a year ago. We feel very comfortable with our inventory level and do not see any changes to our original plans of continually provide new selection for the stores, and the first part of that question again Tiffany please? Tiffany Kanaga Yes. Just hoping to get a little more color around the drivers behind the merchandise margin increase in the quarter not counting the loyalty shift? Dennis Nelson I believe the kind of an increase in some of our private label, improved initial margins, and sell-throughs, and we feel good about our selection as we move into the third quarter. So it would be positive on our inventory at this point. Tiffany Kanaga And if I could ask a follow-up question, so we were surprised to see selling dollars up in the quarter for the first time in 2 years, I know you touched on it in the prepared remarks, but can you dig further into what drove the increase and how you are thinking about that line item ahead? Tom Heacock I think on the selling expense like we have called out there were really two place where we saw increases, it was store-level payroll, and I think we commented on the first quarter call that that’s something that we review with sales being down of just making sure that we are continuing to watch this as close as we can, but continuing to invest in our people and the people are really key to our success and they are going to be who drives the business and so we want to take care of those people and make sure that we retain that talent to be able to move the business forward. And so I think that’s strategic as how we are investing on people and we will continue to watch it and be as smart as we can with payroll, but again we want to invest and take care of our people. The second area we called out was marketing spend, I think that’s again a continued thing of making sure that we are investing in driving traffic to the stores, driving traffic to the website, driving the business but being as smart as we can. So it’s really across a lot of different categories that included loyalty as well and our loyalty related to our private label credit card. So I think the increase in marketing was pretty consistent first quarter and second quarter and probably would continue. Tiffany Kanaga Alright. Thanks so much. Dennis Nelson Thank you.

[Operator:]

Thank you. Our next question comes from the line of Carlton Getz with Winter Harbor. Your line is open. Carlton Getz Hi, good morning, how are you today? Dennis Nelson Good morning, good. Carlton Getz Few questions on the larger macro sense, looking at the balance sheet as of the end of the quarter, there is like you mentioned $262 million plus or minus on the balance sheet right now and relative to competitors that’s significantly higher percentage of revenues than most similar companies and about 40% of the company’s market cap right now as of today, so we are curious about the company’s justification for holding that level of cash and investments in the company on an ongoing basis despite the previous record relatively strong dividends and special dividends? Dennis Nelson That’s something we review at each Board meeting and we will continue to do so. We found it very advantageous to play from a very strong balance sheet in this type of market and with retail going through transition, so it works well with our business partners as far as landlords vendors and such to know they have a very strong and – experienced retailer to work with and so that is something that the Board will continue to review at each meeting. Carlton Getz Okay, And then relative to SG&A realizing the comments earlier about investing in employees and staff and the marketing, at the same time that number has essentially been unchanged since 2013, 2012 in terms of costs while revenue is obviously declined quite a bit, is the company’s plan to continue at roughly that rate and in light of the revenue declines or is that something that’s being closely looked at in terms of percentage and the growth in percentage of revenues over the last 5 years? Dennis Nelson Well, as all parts of our business we continue to review and look at our expenses and such and the – I think part of that is in – a few years ago we were not spending extra even though we had – the business was at a high point, it takes a certain level of investment and expense to maintain the quality of service in our stores and to manage the business and also with some increased IT investments in people and software has added to it. So in a combination I think we are overall looking what’s good for the business over a longer period of time and not just looking at it by quarter. Carlton Getz Okay. Thank you. Dennis Nelson Yes.

[Operator:]

Thank you. Our next question comes from Ujjval Dave with Ujjval Investments. Your line is open. Ujjval Dave Hi. Thank you. This is Ujjval from Ujjval Investments. First of all, congratulations to Tom for the CFO role. I have a couple of questions, so I will ask two and then go back to the queue, First -- I noticed that you guys have been cutting the cost of selected merchandise and there is more markdown. That must be playing the role towards lower comp in the quarter. The quarterly comp drop is nearly 7.8%. Would you be able to give the breakdown of how much was due to price decline and how much was attributable to transaction-volume decline during the quarter? Tom Heacock I think we gave that in the prepared remarks and for the quarter really we commented on those transaction metrics and in an average transaction value was down about 5% with average price points for the quarter being down 6%. So a good chunk of the comp is related to transaction value and actually price point. Ujjval Dave Okay. So a little. That seems to be an improvement over previous months. Though it is negative, it’s still an improvement -- would you also characterize that way? I mean, it’s not people are not buying stuff, people are buying stuff, but you guys are lowering the price point. So again, would you consider that as an improvement? Tom Heacock So I think like Bob and Kelly called out, we are seeing lot of positive trends in some of the categories, but continue to face the headwinds of lower price points as we change the fashion some of the brands and that was a tailwind a couple years ago as price points and especially in denim we are going up and now they are moderating a little bit. And so there has been a pressure and hopeful that eases as we move forward. Ujjval Dave We had quite recently seen some 23-24% comp down so hopefully latest number is a positive sign. It appears that you have been spending more on Facebook, Instagram and probably other social-networking sites. How do you measure the effectiveness of such marketing spend and how it has been working out so far? Dennis Nelson I think we view the return on investment as we do e-mails and look at our different social media investments and some of that is testing with the Instagram’s in different points. So we are trying to get a better handle on that and we will continue to do so. We feel we have room for improvement in the social marketing and so we will be continuing to work on that particular part of the business. Ujjval Dave But are you noticing that you have been getting more customers because of that approach or there is no clear way to measure that? Dennis Nelson That’s difficult to measure, I would say it would be in a small way at this point. Ujjval Dave Okay, yes. Anyway I have more questions, but I will go back to the queue. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Steve Marotta with CLK & Associates. Your line is open. Steve Marotta Good morning everybody, you mentioned earlier that the total markdown inventory as a percentage of the total is up year-over-year, could you quantify those proportions in each year? Tom Heacock I don’t know that we ever breakout and again like Dennis commented, it’s really a function of timing so it’s just as of that point in time and to the extent if we markdowns a little bit earlier one year or another, it affects that number but we have never broken that out in terms of what it is or how much it is, but it is higher year-over-year in terms of markdown inventory. Steve Marotta Okay. And my only call of the question is that is what online IT initiatives are scheduled for implementation right now and how do you see those rolling out please? Dennis Nelson We have been testing the ship to store pickup and we expect to have that all stores by the end of September. That’s probably the newest one. We continue to work with our mobile app to generate awareness of new product in our stores and this help to set up appointments and they can reserve product on the app to come in and pick up. So we would like to be moving a little faster, but that’s kind of the process right now. Steve Marotta Thank you.

[Operator:]

Thank you. Our next question comes from line of [indiscernible] with BOVA. Your line is open. Unidentified Analyst Thank you and good morning and thanks for taking my question. First of all it’s actually – it’s really great to see that you guys keep adding new stores and remodeling existing ones, because this is better in comparison to some of your competition such as Macy’s and JCPenney that’s closing store and my question is actually related to these other stores, how big of revenue impact do you see in your store that are nearby to Macy’s and JCPenney stores that have going out of business and clearance sales? Dennis Nelson I don’t know that we have a good read on the effect of their store closings. I mean both of those stores are for the most part pretty promotional and our product mix, it doesn’t really overlap with Penney’s at all and very little with Macy’s. So that would say it’s kind of a neutral effect. In certain markets we might gain a little and some markets it probably has no effect. Unidentified Analyst So it sounds like did you come up with any competition that has similar store closures that always have any impact on your revenue? Dennis Nelson That kind of varies by market. I mean there is certain West Coast vendors that if they leave in our men’s T-shirt short business might pick up in a season. A lot of these stores that are closing have been pretty weak or not doing a lot of business are pretty promotional, most of our guests are looking for new fashion, quality, a lot of newness, newness in style and fit is very important and the quality of the denim. So most of that our progress comes from just guests getting to know us that they can shop in our stores and see what great service and the variety of selection and fits we have for him. Unidentified Analyst Got it. I see so, is it fair to say that a decline in revenues is more related to general condition of retail in the United States? Dennis Nelson For the most part I would say yes. Unidentified Analyst Okay. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Mark Harris with Harris & Associates. Your line is open. Mark Harris Thank you for taking a call and good morning everybody. Dennis Nelson Good morning. Mark Harris As far as can you speak a little bit about the decline of earnings per share year-over-year in relationship to possibly share repurchases or just a sense of what kind of strategy you are going to take moving forward to maybe improve that number? And also is the special dividends safe as far as with earnings per share declining year-over-year? Dennis Nelson I mean, that’s something in both areas we just review on a continuing business – basis and it’s kind of futuristic, so I have no comment on that. Mark Harris Okay, thank you. Dennis Nelson Thank you.

[Operator:]

Thank you. We will go to the line of Kyle Kavanaugh with Palisade Capital. Your line is open. Kyle Kavanaugh Good morning, everybody. I have a few questions. So, the first one, could you just explain what the professional fees are? Dennis Nelson Combination of things and then some of that was related to the data incident that we had and disclosed during the quarter. Kyle Kavanaugh Okay, got it. Another question is on leases, could you describe kind of what’s going on with your leases, are you renegotiating everything that comes up every year, are you getting better pricing on leases? Dennis Nelson Yes. I mean, we have been reviewing our leases hard for several years now knowing the change of the mall landscape and what’s going on. And I think this last year we have seen landlords, they kind of understand what’s going on in retail and the difficulty and they seem very open to work with us and over the last couple of years we have renewed a lot of our leases. Some, we are still on month-to-month, year-to-year leases and so we have had good relationships. They know they have a quality tenant that offers a lot as well as a solid balance sheet to them. And so it’s worked out very well for us on our renewals and future leases. Kyle Kavanaugh Are you changing locations within the malls? And are you getting better locations in the malls? Dennis Nelson Yes, on occasion, those come up now, but over the last 10 years, I think we have repositioned what spaces we needed to and we had a lot of prime spaces to begin with. So, it’s more or less just getting the renewals and if we need to update our stores to a small amount, where 7, 10 years ago, we were doing a lot of full remodels and there is not as many of those needed it’s more smaller remodel updates for our existing stores. Kyle Kavanaugh I don’t know if you can answer this, but with better leases, could you leverage a flat comp? Could you leverage a minus 1 comp now? Dennis Nelson Yes, in certain places that has the potential too, yes. Kyle Kavanaugh Okay. And then I wanted to ask the share buyback dividend question in a different way, just from a purely math point of view and with the stock where it is does share buybacks make more sense in the dividend at this point? Dennis Nelson I mean, there is – I am not – I haven’t studied that to any extents at this point, but that is like we have said before that will be something we continue to review. Kyle Kavanaugh Okay. And then one just big macro question, I am curious about your view on – and I know you might not have any better crystal ball than anybody else, but you are closer to it in terms of mall traffic. I mean, do you see any stabilization in mall traffic in the near-term at all? Dennis Nelson But I think in certain markets, there is malls that are offering a good experience and good restaurants and some entertainment. And so in certain markets I think, especially if the economy is good, then I think you will see that level out and maybe progress a little bit in other markets. It’s going to be important to be a destination and that’s the way we have tried to set up our business in our stores is making those guests connects in a lot of appointments and personal service, where I think we see guests coming to see us and maybe they are not shopping the mall in total. So, I think there will be a combination of that going forward. Kyle Kavanaugh Alright, thank you very much. Appreciate it. Dennis Nelson Thank you.

[Operator:]

Thank you. Our next question will come from the line of John Deysher with Pinnacle. Your line is open. John Deysher Hi, good morning. Dennis Nelson Good morning. John Deysher I was just curious fairly new shareholders, so this is probably a basic question, but the decline in the denim category over the last few years, is that in your mind primarily from online competition or just a decline of demand for the denim product? Dennis Nelson Well, I think the denim demand had some decline with the athleisure that’s becoming popular, but in our case also we were able to maximize the higher priced denim and the detailed and what some people call the bling denim on certain styles and dominate and grow that business substantially. And now that business is – there is still a business there at a different level, but now there is the fashion details have gone to price points that are probably in general $50 to $70 with detail in competition. So, that’s what’s bringing down our total price points in the business and we have adjusted I think pretty well to that, but it’s a challenge when you are selling $70, $80 jeans compared to $120 to $150 in previous years. Yes, it’s just – it’s another cycle on the retail fashion trend and you just have to kind of deal with it and work for what’s next on the steps. John Deysher Okay. And so as the average sales prices have come down, you are more vulnerable to online competition it sounds like? Dennis Nelson Yes, I mean there is online competition, but it’s for – yes, I don’t know that it really affects the new styles and fits and such on there. So, there is is certainly some competition, but it’s not totally for that reason. John Deysher Okay. So, Amazon and Jet and those people are a threat to you or not so much in your denim category? Dennis Nelson I think there is always the risk of business that they can take on that, but what we do is with our private label brands and as well as our national brands as we work on a lot of exclusive styles and fits and so we offer something for the most part that, that they would not offer and we try to be ahead of the trends and what’s going in the marketplace and then the outfitting that our teams do in our stores is excellent as far as not only give them the right fit, but then put the outfit together as well. So, that’s the key to our business. John Deysher Yes, okay. That makes sense. And I guess finally, I took a look at some of the websites of your brands and a lot of them have direct to consumer link and I am just wondering if that’s a new phenomenon in terms of vendors going direct or has that been in existence or how do you view that exactly vendors going direct? Dennis Nelson Yes. Well, I mean there is some that do, but a lot of them treasure our business very much and we work with them and good partners. So even if they are direct to the consumer and that they would not offer our exclusive styles online. And so here again we have had a lot of 20 plus years of developing exclusive and special product in our stores, because we have always had people looking to carry the same brands we do and just try to offer it at a lower price. So, that’s not brand new, it’s just being done differently now and so we continue to try to give our guests something new each season and not just go back to the same thing. John Deysher Yes. Okay, that makes sense. Thanks very much. Dennis Nelson You are welcome.

[Operator:]

Thank you. We have a follow-up from the line of Tiffany Kanaga with Deutsche Bank. Your line is open. Tiffany Kanaga Hi, thanks for taking my follow-up question. I just wanted to ask much bigger picture. Do you see any requirement for any major shifts in strategy from where we are today in order to get back to positive comp territory in earnings growth or do you think you can eventually drive growth without any big changes and instead continuing to work along the lines of shifting the mix to lower price points, but keeping the same merchandising and store footprint, online platform etcetera? Dennis Nelson Well, I think a lot of the things we do to change and improve are somewhat subtle or happened – kind of evolve and they are not just overnight changes as we mentioned not only the higher priced denim, but we were selling more boots and leather boots footwear in the last couple of years and those were much higher price points. And now as Kelli mentioned earlier our price points, a lot of them are under $50 that are selling well. So, as the cycles change, we adapt to that and offer our guests what they are looking for not only in style, but price points and as the fashions and the products change and evolve I would guess there will be different qualities and fabrics that there will be some higher price points at some time, but we are always looking for new categories and brands and offering a selection not only of variety of price points, but lifestyles and our footwear business has been good and has grown over the last few years. So, we think improving on what we are doing and continuing to look for change will benefit us well. And I guess that would be our approach. Tiffany Kanaga Alright. Thanks, again. Dennis Nelson You are welcome.

[Operator:]

Thank you. We have a follow-up from the line of Carlton Getz with Winter Harbor. Your line is open. And Carlton, please check your mute button. Carlton Getz Yes, sorry about that. Thanks for taking the follow-up questions. Just a couple that touch on a couple of the earlier questions and hopefully expand on those a little. Relative to the denim which has driven sales for quite some time, there have been some indications recently that the athleisure trend maybe peaking or petering out a little and denim is coming back in somewhat into fashion. You touched a little on the trend over the course of the quarter, but I was curious to know if you have seen any pickup in that relative to what it’s been before as we entered the back-to-school season? Dennis Nelson Do you have the second quarter results on the units? Do you remember what those… Kelli Molczyk For what… Dennis Nelson Denim. I mean, the men’s denim has been very good and stabilized. On the ladies side, we have brought down the inventory substantially both in total inventory is down and markdown denim is down. And so we are trying to flow the product in the newness. So at this point, we can’t comment that we have seen a change in the ladies. Carlton Getz Sure. And then just on the format question and the macro change, what has Buckle’s thinking been recently about sticking with the mall-based concept versus looking at the possibility of stores that are not based in the mall type setting, has that been something that’s been on the company’s radar? Dennis Nelson Yes. I think we have always looked at not just malls, but what’s the best shopping center or shopping area in each market. So, the majority of our stores are in malls. We do have some stores in lifestyle centers. One of our remodels this year went to a strip center with some other tenants, that was a new development instead of staying in the mall. So, we review each situation of what is the best long-term for us in these markets. So, we are not opposed to moving out of malls, but in a lot of cases in the markets we are in, there is still the best shopping center for that particular community. Carlton Getz Okay, thank you. Dennis Nelson Yes.

[Operator:]

Thank you. We will follow-up from the line of Ujjval Dave from Ujjval Investments. Your line is open. Ujjval Dave Hi, thanks for taking my follow-up question. I think most of my questions have been answered, but I just want to extend more on that. On the calls, Dennis mentioned that by September you are planning to roll out "pickup from the store" -- you can order online and pickup from the store for free -- is that a confirmed change. I am asking because I think earlier it was planned in spring or summer then fall and now going to the end towards the end of the year. So I just want to make sure that that is the actually confirm timeline? Dennis Nelson Yes. We see no reason that it won’t be in effect by the end of September. I think there was hope that we would be able to may be do that sooner, but I don’t believe we had a confirmation date on that before. Ujjval Dave Okay. Yes, that’s good news for customers that you are meeting them midway. In the earlier questions, someone asked about your approach with lease price negotiation. I am wondering -- for the long term lease, do you renegotiate the terms in the middle of the period or you generally have to wait till the lease maturity? Dennis Nelson I am not sure I understood the question. Ujjval Dave For the renegotiating the rates, do you guys negotiate the rates in the mid-term for the lease during the middle of the lease term? Dennis Nelson I would say if you are in the middle of the lease it would be difficult or there might be some reasons to do that, but we also have situations where after a certain period of time we have some kick out options which give you the option to renew or negotiate the rate as well. So I think we are pretty well positioned in the majority of our leases on this. And we have a lot of great relationships with a lot of our key landlords, so things work out pretty well in most cases. Ujjval Dave Okay. Now as you might be knowing people are going to the Amazon as a preferred place to do their shopping. If understand right, most of your things are exclusive. Of course Buckle brand is your proprietary brand, but even for the private label, you guys go for the very exclusive merchandise. I believe you guys have tried working with Amazon in the past, but what are your thoughts on selling Buckle product on Amazon? Due to the exclusivity of your products, the items would be bargained away by the other sellers. Would like to know what are your thoughts on that, why that approach hasn’t been taken lately or what was your past experience on that? Dennis Nelson We find the expensive selling on Amazon that we don’t feel is necessary. And we feel that exclusive product in our stores in our online when the guests are familiar with it will drive the business without Amazon. So at this time, we have no plans to work with them. Ujjval Dave Yes. To your credit, from what I have inquired from a customer survey, following forums etc, you have a loyal customer base and customers are very pleased with the quality and durability of your merchandise. I think the only thing which is missing out is people are not coming to the mall. For the online store – online purchase is expensive because there is no free shipping and people are moving more on Amazon’s and few other online retailers. I think if you can meet them there and make it easy for them to purchase there it would be a reliable option, but of course, you need to consider the cost and the margin loss by working with Amazon. Just a comment on that. Now as far as the Board is concerned, I have been told that there will be some new nomination, younger Board members since most of the people are on the board for many decades now. Is there any update on any new nomination on the Board of Directors? Dennis Nelson Not at this time. And I don’t recall making comments on the Board or changes, but at this time we have no comments. Ujjval Dave Okay. Well, the comment has been made in the one-on-one call we had and I think in April, 2017. Then I have been told that there is going to be some shuffling, but okay. So I don’t have any for the question. Thank you.

[Operator:]

Thank you. [Operator Instructions]

[Kyle Hanson:]

As we come to top hour, if there is no further questions we would like to thank everyone for your participation today and then we will wrap it up. So, thank you very much.

[Operator:]

Thank you. And ladies and gentlemen, today’s conference call will be available for replay after 11 a.m. today until midnight August 31. You may access the AT&T teleconference replay system by dialing 1-800-475-6701 and entering the access code of 428167. International participants may dial 320-365-3844. Those numbers once again 1-800-475-6701 or 320-365-3844 and enter the access code of 428167. That does conclude your conference call for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect in one moment, speakers.