Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Vice President of Finance and CFO; Pat Whisler, Vice President of Women's Merchandising; Bob Carlberg, Vice President of Men's Merchandising; and Tom Heacock, Treasurer and Corporate Controller. .

As they review the operating results for the second quarter, which ended August 3, they would like to reiterate their policy of not giving future sales or earnings guidance and have the following Safe Harbor statement..

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors which may be 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 expressed written consent. Any unauthorized reproductions or recordings of the call should not be relied upon as the information may be inaccurate..

I would now like to turn the conference over to host, Karen Rhoads, Vice President of Finance and CFO. Please go ahead. .

Thank you. Good morning, everyone, and welcome to the call.

Our August 22, 2013 press release reported that net income for the 13-week second quarter that ended August 3, 2013, was $25.1 million or $0.52 per share on a diluted basis and that's compared to net income of $23.2 million or $0.49 per share on a diluted basis for the prior year 13-year second quarter that ended July 28, 2012.

Year-to-date, our net income for the 26-week period that ended August 3, 2013, was $62.7 million or $1.31 per share on a diluted basis, and that is compared to net income of $61.0 million or $1.28 per share on a diluted basis for the prior year 26-week period that ended July 28, 2012..

Net sales for the 13-week second quarter increased 7.9% to $232.5 million compared to net sales of $215.5 million for the prior year 13-week second quarter. Comparable store sales for the quarter were up 3.2% in comparison to the same 13-week period in the prior year.

And our online sales, which are not included in comparable store sales, increased 5.3% to $16.8 million. Net sales for the 26-week year-to-date period increased 4.8% to $502.2 million compared to net sales of $479.2 million for the same period in the prior year.

Comparable store sales for the year-to-date period were up 2.2% in comparison to the same 26-week period in the prior year. And our online sales, which are not included in comparable store sales, increased 5.7% to $37.7 million. .

Gross margin for the quarter was 40.6%, an improvement of approximately 50 basis points from 40.1% for the second quarter of last year. The improvement was driven by deleveraging of certain occupancy, buying and distribution costs, given the comparable store sales increase and a shift in the weeks for the fiscal period.

For the year-to-date period, gross margin was 42.1%, an improvement of approximately 20 basis points from 41.9% for the same period last year. The improvement was driven primarily by an improvement in merchandise margins..

Selling expense for the quarter was 19.3% of net sales compared to 19.2% for the second quarter of fiscal 2012. Increases in expense related to the incentive bonus accrual and health insurance claims expense were partially offset by reductions as a percentage of net sales in Internet order fulfillment and certain other selling expenses.

For the year-to-date period, selling expense was 18.4% of net sales compared to 18.3% for the same period in fiscal 2012. Increases in store payroll expense and health insurance claims expense were partially offset by reductions as a percentage of net sales, in Internet order fulfillment and certain other selling expenses..

General and administrative expenses for the quarter were 4.4% of net sales compared to 4.0% for the second quarter of fiscal 2012, driven by increases in legal expenses, equity compensation expense and certain other general and administrative expenses.

For the year-to-date period, general and administrative expenses were 4.1% of net sales compared to 3.9% for the same period in fiscal 2012. And this increase was driven by increases in equity compensation expense, as well as certain other general and administrative expenses. .

Our operating margin for the quarter was 16.9% for the second quarter of both fiscal 2013 and fiscal 2012. For the year-to-date period, our operating margin was 19.6% compared to 19.7% for the same period last year. .

Other income for the quarter was $0.5 million compared to about $400,000 for the second quarter of fiscal 2012 and other income for the year-to-date period was $0.9 million compared to $2.2 million last year.

Income tax expense as a percentage of pretax net income was 37% for the second quarter of fiscal 2013 compared to 36.8% in the second quarter of fiscal 2012, bringing our second quarter net income to $25.1 million for fiscal 2013 versus $23.2 million for the fiscal 2012, an increase of 8.3%.

Year-to-date, income tax expense was also 37.0% for fiscal 2013 and 36.8% for fiscal 2012, bringing our year-to-date net income to $62.7 million for fiscal 2013 and that is compared to $61.0 million for fiscal 2012, an increase of 2.7%..

inventory of $133.6 million, which was up approximately 7% from inventory of $124.5 million at the end of the second quarter of fiscal 2012; and our total cash and investments were $168.3 million, and that compares to $179.8 million at the end of fiscal 2012 and also compares to $233.4 million at the same time a year ago.

As of the end of the quarter, inventory on a comparable store basis was up approximately 3.5% and total markdown inventory was down compared to the end of the second quarter last year..

$11.7 million for new store construction, store remodels and store technology upgrades; and $7.2 million for capital spending at the corporate headquarters and distribution center and that number includes $5.4 million for the purchase of a new airplane to replace a plane that was sold last fiscal year..

We now expect our fiscal 2013 capital expenditures to be in the range of $30 million to $34 million. For the quarter, UPTs increased approximately 3.5%, the average transaction value increased approximately 5.0%, and the average unit retail increased approximately 1.0%.

For the year-to-date period, our UPTs increased approximately 3.5%, the average transaction value increased approximately 4.5% and the average unit retail increased approximately 1%. .

Buckle ended the quarter with 452 retail stores in 43 states and that is compared to 439 stores in 43 states at the end of the second quarter of fiscal 2012. Additionally, our total square footage was 2.267 million square feet as of the end of the quarter compared to 2.196 million square feet at the same time a year ago.

And at this point, I'd like to turn the call over to Tom Heacock, our Treasurer and Corporate Controller. .

Good morning, and thanks for joining us. I'd like to start by highlighting the performance from our merchandise categories that led to our net sales increase of 7.9% for the quarter. .

Men's merchandise sales for the quarter were up approximately 8% with strong categories including denim, knit shirts, shorts and accessories. Average denim price points increased from $87.80 in the second quarter of fiscal 2012 to $89.95 in the second quarter of fiscal 2013.

For the quarter, our men's business was approximately 42% of net sales compared to approximately 42% last year, and average men's price points increased approximately 1.5% from $49.25 to $50.10..

Women's merchandise sales for the quarter were up approximately 7.5% with strong categories, including denim, woven tops, shorts, skirts and dresses and footwear. Average denim price points increased from $94.45 in the second quarter of fiscal 2012 to $97.15 in the second quarter of fiscal 2013.

For the quarter, our women's business was approximately 58% of net sales compared to approximately 58% last year, and our average women's price points increased approximately 2% from $42.10 to $42.90..

For the quarter, combined accessories sales were up approximately 1% and combined footwear sales were up approximately 10%. These 2 categories accounted for approximately 9.5% and 6%, respectively, of second quarter net sales, which compares to approximately 10% and 6% for each in the second quarter last year.

Average accessory price points were down approximately 6% and average footwear price points were up approximately 16% for the quarter..

For the quarter, denim accounted for approximately 37.5% of sales and tops accounted for approximately 32%, and that compares to approximately 36% and 34% for each in the second quarter last year. Our private label business was up slightly as a percentage of sales for the quarter and represent approximately 32% of sales. .

During the quarter, we opened 9 new stores and completed 2 substantial remodels. As of the end of the quarter, 339 of our 452 stores were in our newest format. For the full fiscal year, we still anticipate opening 13 new stores, which includes 1 remaining to be opened for holiday, and plan to close 1 store at the end of August.

We also still anticipate completing a total of 9 substantial remodels during the year. And with that, we'll welcome your questions. .

[Operator Instructions] And we'll go to the line of Paul Alexander, Bank of America. .

How do you feel about long-term operating margins? For the last 2 quarters, operating margin has been flat year-over-year.

Is that where you think the business should ultimately run or do you see operating margins begin to grow again? Do you think that can happen? And if so, what kind of initiatives might help you to do that? And as you open new stores, you get leverage or should it be more about private label or something? How should we think about that?.

Well, as for several years now, our margin has been very good and we haven't promised more, but we've been able to grow it. And I think the teams continue to work on the private label and development product, where that gives us an opportunity to improve on that, but that's something that we can't forecast.

We also will continue to look at other efficiencies throughout the company to improve on that. And we will continue our remodel program and such that also helps us deliver better sales product.

And I think we'll plan on maybe 15 of those again next year, so just an -- kind of an all around part of our business to look for a little improvement everywhere. So hopefully, we can improve on that. .

Great. And then just one follow-up. A number of retailers have seen a real deceleration in July and even a little bit in August. It seems like you're not seeing that.

What helps you buck that trend?.

Well we take a true specialty store approach, where not only the selection of the product of continuing to flow new product in to create the excitement, but we really have a high quality sales management team throughout the company that supports our managers who are promoted from within.

And they do a very nice job of developing teams that can help the guest and really benefit them in finding the right fits and the outfits. And that's a real key part of our business as our team in the stores and our sales management team that helps develop them and keeps them looking for the next level. .

And we do go to the line of Lee Giordano of Imperial Capital. .

Can you talk some more about the denim business and the trends you're seeing there and if you see opportunities to continue to see price points go up in that category?.

I would say the price points to be pretty consistent with third quarter a year ago. We continue to have a very nice selection of -- on the lady's side, we've added DayTrip label and expanded that, as well as our BKE, as our price points. So they run in the -- DayTrip is in the $50 range. The BKEs are usually high 60s and the 70s.

But we still have the brands. They're doing nicely anywhere from $100 to $150, $160. So we have a wide selection of brands. We have a great selection of fits and finishes. And so we are able to service a wide range of guests and a wide range of ages.

Pat, do you have anything else to add on that?.

I would just say that our brands continue to be really strong. Our Miss Me, Rock Revival, Big Star Vintage were all very good. And as Dennis mentioned, our private label brands, BKE and DayTrip, have both continued to be strong, so just a nice mix and a collaboration on the styling details throughout brands and private label. .

Bob, do you want to comment on the men's?.

Yes. Like Pat, the Rock Revival's been good for us. And those price points are $148 and $158, and then we took a markdown later just because of how well the denim was going that helped contribute to that. .

[Operator Instructions] And we'll go to the line of John Kernan of Cowen. .

So, I guess, thematically, we've seen some real volatility among small-based teen retailers recently.

Have you noticed anything differently about how your younger customer is shopping or any of the changes in the competitive landscape within that younger consumer that might be shopping your store?.

Well the young customer shopping our store, I think, is brand-focused and always looking for new colors, new ideas, new fabrics. And we're able to show them quite a wide selection of product. We're not narrowing deep. We show a lot of SKUs in all of the categories and give them a lot of options to work with.

And I think that seems to be hitting well with our guests. .

Okay.

And then, I guess, finally, how do you -- how do we think about merch margin in the back half of the year and, I guess, maybe unit cost going forward? Are you seeing any variance there? And can we continue to see ongoing merchandise margin expansion into the back half of the year and into next year?.

Well I think our costs going forward should be pretty consistent where we've been either slightly off or up slightly. I mean, that seems to be under control.

The margins -- we have outstanding teams working with our product, and they're continually looking to improve not only the product, the quality and the selection but -- and when opportunity arises to be able to add to the margins.

So -- but we want to keep a focus on new product for the guests and items that they're looking for, but I think the team will do well.

Bob or Pat, do you have anything to add on that?.

I'd just say that we sold through really well on our summer and spring product, and the guest is responding well to our new products, so it seems like with the combination of the newness and the sell-throughs that we would continue to do well. .

And from where we're at right now, it looks like, as Dennis mentioned, that the costs are under control. And from what we've bought so far, I don't see much of a change going forward. .

And there is no one else in queue at this time. Please continue. .

All right. Well if there is no further questions, we want to thank everyone for being a part of the call today, and we will conclude the call at this point. Thanks, everyone. .

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