Buckle Inc. Ari Lazar | Bi (Brian) Ge | Cindy Anggraini | Siwei (Lerissa) Li April 28th, 2016 RCMP – Spring 2016.

Presentation on theme: "Buckle Inc. Ari Lazar | Bi (Brian) Ge | Cindy Anggraini | Siwei (Lerissa) Li April 28th, 2016 RCMP – Spring 2016."— Presentation transcript:

1 Buckle Inc. Ari Lazar | Bi (Brian) Ge | Cindy Anggraini | Siwei (Lerissa) Li April 28th, 2016 RCMP – Spring 2016

2 AGENDA Introduction Company Overview Macro-Economic Analysis Financial Analysis Projection & Valuation Recommendation

3 INTRODUCTION

4 Screening Process The Buckle Inc. Sector Exposure in Portfolio Simple Business Model Profit Margin >10% ROE >10% Market Cap <4bn Low Debt- to-Assets Ratio

5 Market Information Key InfoDescription NameBuckle Inc. TickerBKE IndustryServices Sub-sectorApparel Stores Key InfoDescription Current Price$ 31.44 as of April 26, 2016 Market Cap$ 1.48 bn P/E9.67 as of April 26, 2016 Beta0.999 Source: Yahoo Finance

6 COMPANY PROFILE

7 Company History 19481977 1991 19921997 2009 Began as Mills Clothing in Kearney, Nebraska Women’s clothing introduced in first mall- based location Name changed to Buckle. Inc. Went Public on NASDAQ; 100 stores in 18 states Moved to NYSE, trading as BKE Reached 400 stores in 41 states; Revenue of nearly $900M

8 Business Overview Medium-to-Upper priced casual apparel Target: 15-30 years Men and Women 468 stores in 44 states Net sales of $1.2 bn in 2015 Products: Branded and private brands

9 Brands: Men

10 Brands: Women

11 Management Daniel Hirschfeld –Chairman of Buckle. Inc. –Son of David H. who founded Buckle. Inc. Dennis H. Nelson –CEO of Buckle. Inc. –Has been with Buckle since 1970 –Worked in all phases of operations

12 Revenue Breakdown Source: 10-K

13 SWOT ANALYSIS Strength: Strong Brand Image Wide Selection Flexible Shelving Constant Margins Strength: Strong Brand Image Wide Selection Flexible Shelving Constant Margins Opportunities Coming back to Fashion Development of Own Brand New strategic locations Opportunities Coming back to Fashion Development of Own Brand New strategic locations Weaknesses Out of Fashion Online Sales Weaknesses Out of Fashion Online Sales Threats Slow growth in target age group Shrinking Disposable Income Threats Slow growth in target age group Shrinking Disposable Income

14 MACROECONOMIC ANALYSIS

15 US Retail Sales – Clothing Sales Source: Census Bureau Statistics, FRED

16 Consumer Sentiment Source: FRED, National Cotton Council

17 Porter-5 Forces: Apparel Industry Threat of New Entrants Threat of Substitutes Supplier Bargaining Power Buyer Bargaining Power Rivalry APPAREL INDUSTRY Moderate Low High Threat of New Entrants: Ease of setting up new clothing companies Fashion flexibility Threat of Substitutes: Dominant players in market Plenty of choices Supplier Bargaining Power: Lots of suppliers Easy for business to switch Buyer Bargaining Power: Buyer preference and taste Rivalry: Some competitors have economies of scale and strong influence over retailers. High

18 FINANCIAL ANALYSIS

19 Liquidity & Profitability Ratios Source: 10-K, Group Calculation

20 Profitability Ratios (Part 2) Source: 10-K, Group Calculation

21 Activity Ratios Source: 10-K, Group Calculation

22 Dupont Analysis: ROE Ratio Source: 10-K, Group Calculation

23 Greenblatt Ratios Source: 10-K, Group Calculation

24 PROJECTION & VALUATION

25 Revenue Breakdown The average sales per store Same Store Sales Number of Stores Store Adjustment on new stores Sales of non new stores In-Stores Sales Expected to increase in the future Online Sales In Stores Sales Online Sales Revenue Source: 10-K, Group Calculation

26 Income Statement Projections Source: 10-K, Group Calculation

27 Other Projections Source: 10-K, Group Calculation

28 Discount Rate Source: Yahoo & Google Finance

29 Valuation: DCF

30 Comparable Company Description CompanyExpress Inc. The Cato Corporation Urban Outfitters Inc. Francesca's Holdings Corporation DSW Inc. TickerEXPRCATOURBNFRANDSW Business Description Specialty apparel and accessories retailer Specialty retailer of fashion apparel and accessories in the Southeastern United States. A lifestyle specialty retail company, engages in the retail and wholesale of general consumer products A chain of retail boutiques offering fashion apparel, jewelry, accessories, and gifts primarily for women between the ages of 18 and 35 A branded footwear and accessories retailer Source: Capital IQ

31 Comparable Company Ratios Source: Capital IQ, Group Calculation

32 Comparable Company Valuation Source: Capital IQ, Group Calculation

33 Implied Valuation Source: yahoo finance, Group Calculation DCF $32.85 COMP $34.97 WEIGHT Equally TOTAL PRICE $33.91 Current Price: $ 31.44 as per April 26, 2016

34 Technical Analysis “The last 5 years performance, the stock price declines and SMA 20 crosses down SMA 200”

35 RECOMMENDATION

36 Recommendation Industry Unfavorable current industry performance Weak consumer spending Company Margins are still high Growth of revenue is in downward trend Valuation Under-valued price for DCF and comparable Unfavorable pattern for technical Lower share price expectation Watchlist In conclusion: Undervalued stock does not necessarily lead to a “Buy” recommendation. Pay attention to the momentum of the industry.

37 Thank you!