Members of The Buckle 's management on the call today are Dennis Nelson, President and CEO; Karen Rhoads, Senior Vice President of Finance and CFO; Kelli Molczyk, Vice President of Women's Merchandising; Bob Carlberg, Senior Vice President of Men's Merchandising; Kyle Hanson, Vice President, General Counsel and Corporate Secretary; and Tom Heacock, Vice President of Finance, Treasurer and Corporate Controller.

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As they review the operating results for the first quarter, which ended April 30, 2016, 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 Karen Rhoads. Please go ahead. .

Thank you. Good morning, everyone. Thank you for joining the call.

Our May 20, 2016, press release reported that net income for the 13-week first quarter that ended April 30, 2016, was $23.1 million or $0.48 per share on a diluted basis compared to net income of $33.6 million or $0.70 per share on a diluted basis for the prior year 13-week first quarter that ended May 2, 2015. .

Net sales for the 13-week first quarter decreased 10.2% to $243.5 million compared to net sales of $271.3 million for the prior year 13-week first quarter. Comparable store sales for the quarter were down 11.1% in comparison to the same 13-week period in the prior year, and our online sales decreased 2.8% to $23.5 million. .

As noted in this morning's press release, net sales for the 13-week fiscal quarter ended April 30, 2016, are net of a $3 million adjustment recorded as a reduction to revenue to accrue for estimated future rewards related to the company's new Guest Loyalty program. That program launched during the first quarter of this year.

Absent the impact of this adjustment for estimated future rewards, our total net sales for the 13-week period ended April 30, 2016, were down 9.1%, and comparable store net sales were down 10%. .

Gross margin for the quarter was 38.9%, down approximately 300 basis points from 41.9% for the first quarter last year.

The decrease was driven primarily by deleveraged occupancy, buying and distribution expenses, resulting from the comparable store sales decline, which had about a 190 basis point impact and by 120 basis point reduction in merchandise margins for the quarter, which were partially offset by a reduction in expense related to the incentive bonus accrual.

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Selling expense for the quarter was 19.5% of net sales compared to 18.1% of net sales for the first quarter of fiscal 2015 with increases as a percentage of net sales, in-store payroll, marketing and certain other selling expenses partially offset by a reduction in expense related to the incentive bonus accrual. .

General and administrative expenses for the quarter were 4.4% of net sales compared to 4.3% of net sales for the first quarter of fiscal 2015, with increases as a percentage of net sales across several expense categories partially offset by a reduction in expense related to the incentive bonus accrual. .

Our operating margin for the quarter was 15.0% compared to 19.5% for the first quarter of fiscal 2015. Other income for the quarter was $408,000 compared to $736,000 for the first quarter of fiscal 2015.

Income tax expense as a percentage of pretax net income was 37.3% for the first quarter of both fiscal 2016 and fiscal 2015, bringing first quarter net income to $23.1 million for fiscal 2016 versus $33.6 million for fiscal 2015. .

inventory of $138.8 million, which was up approximately 7% from inventory of $129.6 million at the end of the first quarter of fiscal 2015; and total cash and investments of $223.9 million, which compares to $231.5 million at the end of fiscal 2015 and to $202.5 million at the same time a year ago. .

As of the end of the quarter, inventory on a comparable store basis was up approximately 5%, and total markdown inventory was up compared to the same time a year ago. We ended the quarter with $172.4 million in fixed assets, net of accumulated depreciation.

Our capital expenditures for the quarter was $7.9 million, and depreciation expense was also $7.9 million. .

$6.6 million for new store construction, store remodels and store technology upgrades; and $1.3 million for capital spending at the corporate headquarters and distribution center.

We still expect our fiscal 2016 capital expenditures to be in the range of $31 million to $35 million, which includes primarily new store and store remodeling projects and certain IT investments. .

For the quarter, both UPTs and the average unit retail decreased slightly with the average transaction value down approximately 1%. Buckle ended the quarter with 468 retail stores in 44 states compared to 463 stores in 44 states at the end of the first quarter of fiscal 2015.

Additionally, our total square footage was 2.383 million square feet as of the end of the quarter compared to 2.345 million square feet at the same time a year ago. .

And now at this time, I'd like to turn the call over to Tom Heacock, our Vice President of Finance, Treasurer and Corporate Controller. .

Good morning, and thanks for being with us this morning. I'd like to start by highlighting the performance from our various merchandise categories for the quarter. .

Men's merchandise sales for the quarter were down approximately 4.5%. Average denim price point increased from $94.15 in the first quarter of fiscal 2015 to $95.85 in the first quarter of fiscal 2016. For the quarter, our men's business was approximately 45.5% of net sales compared to 43.5% last year.

And our average men's price points increased approximately 2% from $55.05 to $56.10. Women's merchandise sales for the quarter were down approximately 12.5%. Our average denim price points decreased from $97.85 in the first quarter of fiscal 2015 to $93.95 in the first quarter of fiscal 2016. .

For the quarter, our women's business was approximately 54.5% of net sales compared to 56.5% last year. And our average women's price points decreased approximately 1.5% from $51.05 to $50.20. For the quarter, combined accessories sales were down approximately 4.5%, and combined footwear sales were down approximately 5.5%.

These 2 categories accounted for approximately 8% and 6.5%, respectively, of our first quarter net sales, which compares to 8% and 6.5% for each in the first quarter of last year. Average accessory price points were up approximately 2%, and average footwear price points were down slightly.

For the quarter, denim accounted for approximately 43.5% of sales, and tops accounted for approximately 28%, which compares to 42% and 29.5% for each in the first quarter of last year. .

Our private label business was up just slightly as a percentage of net sales and represented approximately 1/3 of sales for the quarter. During the quarter, we did not open any new stores but completed 6 substantial remodels. As of the end of the quarter, 386 of our 468 stores were in our newest format. .

For fiscal 2016, we now anticipate opening 5 new stores, which includes 3 for back-to-school and 2 for holiday. And we also anticipate completing 19 full remodels, which includes 1 that has already moved back into its remodeled space in May, 2 additional for spring, 7 for back-to-school and 3 for holiday. .

And with that, we welcome your questions. .

[Operator Instructions] First question from the line of Tiffany Kanaga with Deutsche Bank. .

So looking broadly across retailers seeing the slowdown in apparel, how are you thinking about your strategy in a tough mall environment? And in particular, how do you think you can direct traffic and excitement and get the customer interested in shopping for clothes again, and in particular, with respect to your denim category?.

This is Dennis. Well, we are continually working hard on our product selection. We feel that the -- we're seeing a little bit of change of some of our brands that have been very strong for us for several years now, coming off their peak, still is a good brand for us. We are developing new fits.

We're seeing a selection from low to medium to high rise in the gal's denims, a variety of stretchy fabrics. And we're putting in more variety in our brands. So we feel that's a plus. For the spring season, that was probably encouraging too tight a rein on some of the gals' tops.

And so with our inventory down there, that has probably had a little effect. But the team has got a good plan and a great selection going forward starting within the next 30 days. So we think that will be exciting. Our men's product, again, looks strong. And the store teammates, the feedback is good on the product selection.

And we think with our specialty store approach to service and unique and exclusive product that that's going to win the guests back. And now I'll see if Kelli Molczyk, our VP of Ladies; and Bob Carlberg, our VP of Men's has any other comments. .

I'll just complement what Dennis said on the selection. I think we do have some good things going in the response on the newness from the stores, and the guests have been nice. So we're encouraged by what we have ahead of us, and we're optimistic. .

Yes. And for the men's denim is meaning more things to people. There's a lot of specialty fibers out there that we've been using for a long time that we're doing a better job of calling out whether that's stretch in men's, CoolMax, THERMOLITE and some of the soft fibers. So there's some newness in denim that the guests has had a good response to. .

And I have 1 more question.

Is there anything that you can call out from the quarter looking at the negative online sales growth? Or is that just part of the broader trends? And if you could discuss any plans around mobile sales?.

Okay. On the online business, I think it's mainly a part of the broader trend.

And then Kyle, do you want to comment on the mobile?.

Sure. Well, our website is optimized for mobile, but we are continuing to look at ways that our mobile can also encourage that in-store experience. .

And our next question is from Simeon Siegel with Nomura. .

This is Julie Kim on for Simeon. So I just had a question about your Guest Loyalty program.

How is that progressing? And any insights on how you think it will impact your margin and topline?.

Tom or Karen, do you want to take that one?.

I think we've been very pleased with the response. And like we talked about for a while, that something we've been working on. And we're very excited to have that launched in the stores. And the response from our -- both our teammates and our guests has been very positive.

We're seeing the majority of our transactions in the stores attributed to Guest Loyalty guests, and so we're very pleased by that. And what was the second part of question, just the impact going forward? I think we'll continue to monitor.

And while we're winding down our old Primo program and ramping up a new loyalty, there will be a little bit of an impact to margins, but that would dissipate. And going forward, it really -- as far as actual gross margins, it would not have an impact. .

[Operator Instructions] The next one from Jessica Schmidt with KeyBanc Capital. .

I guess just given the still difficult top line trends and dropping operating margin this quarter, what changes are you making to manage the cost structure? So I know that the first half usually needs a higher comp to drive margin expansion.

But I guess, should we expect this level of margin deterioration going forward? Or are there levers in the business that you could pull to maybe better manage the cost this year if the difficult environment does continue?.

We continually monitor our costs, and obviously, try and be as efficient in categories where we can be, especially in some of the discretionary spend. We watch that during the year. But you're correct, in the first 2 quarters of the year, the leverage points are much different than in the back half. .

Okay, great.

And just as a follow-up, can you talk about some of the changes that you're making to the women's assortment? And I guess, what are you seeing in some of the initial testing that you're doing, I think, for I think it was some of the new merchandise for back-to-school?.

We're definitely going after just keeping new ways to keep it fresh, whether that's new brands or new looks within our product assortment. We've introduced some new brands over the last -- over the quarter, which have been favorable to the guests and the stores.

So we'll just continue to react that way as well as impacting the trends through buy now, wear now, so it might be impacting it on more of a consistent basis with newness. .

Next from the line of Doug Drummond with Wolfe Research. .

Just a thought on weather. Do you guys see anything worth noting in the quarter? I know Texas, Eastern Texas had some pretty harsh flooding going on.

So was there any impact to traffic or comp in the quarter from that?.

We try not to use weather as part of the factor. I know throughout the middle part, from Texas straight on up north, we had record rain in April here in Nebraska. And it feels like it's been much wetter and cooler than a normal spring. So if that's true elsewhere, that would be part of the factor, yes. .

Great.

And also, just in regards to CapEx spending and IT, can you elaborate a little more, I guess, what you're targeting on that?.

As far as the range for this year, it's 31 to 35. And the majority of that would be store projects, which would be the 5 new stores and the 19 remodels. And then as far as how much of that is IT spending, I don't know that we specifically broken that out. The biggest project, we're in the process of transitioning to a new web platform.

And hopefully, we'll do that by the end of the second quarter. So that's the biggest IT project, and then there will be other ones, but that's the first and probably most important. .

Next question from the line of Paul Alexander with BB&T Capital. .

Dennis, a really big picture question, maybe the biggest picture question here. It sounds like you see some opportunities to do a better job of merchandising or buying.

But a lot of retailers out there are talking about bigger fee changes in retail related to weak traffic, e-commerce, competition from other draws on spending, like athletic, tech, beauty, dining, et cetera.

So a number of competitors are talking about making bigger changes to their business model, like changes in real estate, efforts to grow in mobile and e-commerce more. One's even bought a small restaurant group.

So how do you see the world right now? Do you agree with some of the other retailers out there that things are fundamentally changing? And to the extent that you do, what are you adapting in your business model?.

Well, there certainly is a lot of change going on. On the real estate side, we watch and work hard with our real estate program, and then we evaluate our assets and leases continually. And in some cases, we have them on shorter-term leases to give us flexibility.

We still are focusing on the best place to shop in good communities and still see value there. As Kyle mentioned, we're working on a new web-based platform, so we want to make our shopping experience better there.

And it doesn't happen overnight, but we're continually trying to involve our stores and Internet where it's very good for our best customers wherever they want to shop and still using -- we have very talented staff in our stores, managers promoted from within and a lot of key teammates and stylists there that were working for -- not only fit appointments in the store but how we can help them when they are too busy to shop the store, how we can be in touch with them and get them outfits and what they need for events.

So we will continue to evaluate what's the best way our guests wants to shop and how we can help them, put the outfits together and give them great unique product and exclusive product. I don't see our niche venturing into restaurants or some of the other things. We feel that we can just continually improve on what we do and make that better.

So we'll win our guest over. There's still a lot of people that might think us as a younger store. And we actually probably sell more product to guests over 25 and maybe even 30 as we go forward. And so just getting a better job of getting that word out and how happy they'd be to shop us is kind of one of our goals. So thank you. .

Thank you, that's helpful. If I can just follow-up on one point, you spoke a little bit about your real estate program.

With trends as they are, do you foresee needing to increase store closures at any time or maybe reaching an equilibrium point in the chain where closures, balance openings, like at 475 stores or 400, 500 stores or something like that?.

Well, we haven't put a number on it. And the different communities change quite a bit in shopping areas, so we just continually reevaluate.

And if the economics makes sense and we have the people to manage, we're willing to stay at a location even if it's not at a company average of sales if the economics are right and we already have everything in place. But we think it's a great time to position our best stores, remodel in stronger situation.

There's a lot of good centers out there and works well for us. But with the changes and if the economics are not right, we will certainly be open to closing stores in the future. And we've also opened some in some very good markets that could affect existing stores, but we'll just see how it plays out and make those decisions when the time comes. .

[Operator Instructions] And now to the line of Steve Marotta with CL King & Associates. .

Could you please go over the denim? I think I missed it as a percent of the total mix this year versus last. .

I believe they called out that the denim was at 43.5% this year and compared to 42% in the first quarter last year. .

And then as because that increased, what was the category that was most negatively affected in the quarter?.

Probably our tops. I think the tops accounted for 28% this year and last year, it was 29.5%. .

Also, could you talk if there was a material comp differential in energy-related markets?.

Well, we've certainly had an effect in the very heavy oil markets. We have not broken that out on how much a difference there is. But it might not -- North Dakota or certain areas that are very dependent on oil, it's certainly has had a difference. .

Just one last question.

Could you speak to roughly what percent of your sales come from markets you would consider heavy in energy?.

I don't think we have that number, do we? No, I'm sorry, we don't. .

[Operator Instructions] And there are no further questions in queue at this time. .

With no further questions, we really would like to thank everyone again for joining the call. And at this time, that will conclude our conference call. I'll let you play -- read the playback information. .

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