Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter earnings release conference call. [Operator Instructions] As a reminder, I would like to let you know that today's conference is being recorded. 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; and Tom Heacock, Vice President of Finance, Treasurer and Corporate Controller. As they review the operating results for the fourth quarter and fiscal year ended on January 28, 2017, they would like to reiterate that their policy of giving -- 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 Security (sic) [ 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 your host, Ms. Karen Rhoads. Please go ahead.

Thank you. Good morning, everyone. We appreciate you joining the call this morning. Our March 10, 2017 press release reported a net income for the 13-week fourth quarter that ended January 28, 2017, was $36 million or $0.74 per share on a diluted basis. And that is compared to net income of 54 -- excuse me, $54.3 million or $1.13 per share on a diluted basis for the prior year 13-week quarter that ended January 30, 2016. Net income for the 52-week fiscal year that ended January 28, 2017, was $98 million or $2.03 per share on a diluted basis. And that compares to net income of $147.3 million or $3.06 per share on a diluted basis for the prior year 52-week fiscal year that ended January 30, 2016. Our net sales for the 13-week fourth quarter decreased 15.7% to $280 million compared to net sales of $332 million for the prior year 13-week fourth quarter. Comparable store sales for the quarter were down 16.1% in comparison to the same 13-week period in the prior year, and our online sales decreased 8.8% to $32.2 million. Net sales for the 52-week fiscal year decreased 12.9% to $974.9 million compared to net sales of $1.12 billion for fiscal 2015. Comparable store sales for the full year were down 13.5% in comparison to the same 52-week period in the prior year, and online sales decreased 5.4% to $99.8 million. As noted in this morning's press release, our net sales for the 13-week and 52-week fiscal periods that ended January 28, 2017, were reported net of the impact of both reward redemptions and accruals for estimated future rewards that are related to the company's new Guest Loyalty program. The Guest Loyalty program launched during the fiscal quarter that ended January 30, 2016. Absent the…

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 both the quarter and the full fiscal year. Men's merchandise sales for the quarter were down approximately 9%. Our average denim price points decreased from $92 in the fourth quarter of fiscal 2015 to $87.70 in the fourth quarter of fiscal 2016. For the quarter, our men's business was approximately 53% of net sales compared to 49% last year, and our average men's price points decreased approximately 5% from $58.85 to $55.80. For the full year, men's merchandise sales were down approximately 7% with average denim price points decreasing from $93.05 in fiscal 2015 to $90.80 in fiscal 2016. For the year, our men's business was approximately 48.5% of sales compared to 45.5% last year, and our average men's price points decreased approximately 2.5% from $55.65 to $54.40. Women's merchandise sales for the quarter were down approximately 21%, with our average denim price points decreasing from $95.70 in the fourth quarter of fiscal 2015 to $87.35 in the fourth quarter of fiscal 2016. For the quarter, our women's business was approximately 37% of sales compared to 51% last year, and our average women's price points decreased approximately 10% from $51.15 to $46.10. For the full year, women's merchandise sales were down approximately 16.5%, with average denim price points decreasing from $96.15 in fiscal 2015 to $88.95 in fiscal 2016. For the full year, our women's business was approximately 51.5% of sales compared to 54.5% last year, and our average women's price points decreased approximately 7% from $50.30 to $46.80. For the quarter, combined accessories sales were down approximately 12.5%, and combined footwear sales were down approximately 20.5%. These 2 categories accounted for approximately 10% and 5.5%,…

[Operator Instructions] And our first question comes from the line of Tiffany Kanaga with Deutsche Bank.

Several of your peers have discussed expectations for gross margin declines in the first quarter. And as I look at your February results, I see average price points falling at an accelerated rate. So how are you thinking about your gross margin for the first quarter? And also, where do you think you might settle as you work through your denim strategy and try to stabilize comps?

Well, one of the -- the February -- in the past, we have had a lot of our guests who wanted to buy the more expensive denim at that time. And with -- as you noted, the tax refunds made [ph] later, we saw a definite drop-off on that during February. And so, I think, going forward, we will still see probably some denim retail prices come down a bit for us in the first quarter. But our gross margins, we don't make forecast on that. And we think we have our inventories managed well and in good shape and continue to focus on the -- as the guest is looking to buy now, wear now, have a continued flow of new product and exciting new merchandise as the season goes forward. So we think we will manage the business as we have consistently this past year.

You mentioned tax refund delays. As we look back on February, how much of the comp decline do you attribute to tax refund delays or weather or other macro factors? And additionally, have you seen any sort of pick up into March?

I think we would be part of -- what I've heard in the general retail response is that, that toward the end of the month, we've seen some improvement in that. And -- I'm sorry, I forgot the first part of the question.

I just wanted to know how much of your February decline do you attribute to tax fund -- refund delays or weather or other macro factors?

We haven't looked that up.

If I may ask one more on SG&A?

Sure.

So as you work to revive the top line, in the meanwhile, where do you see opportunity to rationalize your SG&A expense? And could we expect some sort of formal cost cutting program with a target dollar amount? Or would you at least help us think through where you might focus your efforts? And what kind of magnitude of savings you could achieve?

Well, I think, we've always been conservative on our expenses, and we'll continue to review all our general expenses from supplies, travel and various things like that. We also are reviewing our renewals very closely on our leases to make sure we have the appropriate economics on our locations. And -- but we do not have a formal cost-cutting plan. We continue to want to invest in our business that makes sense and that will provide our future opportunities going forward.

And our next question comes from the line of Simeon Siegel with Nomura Instinet.

This is Julie Kim on for Simeon. Can you just give some color on what occurred in the online channel during the quarter as sales continued to decline? And should we expect further deceleration in that channel moving forward? Or any detail on what that channel should look like?

Well, I think, on part of that, our markdown on our denim compared to a year ago probably had some impact on the online sales as well as some of our clearance on tops was not as efficient as the year before. We will be continuing to audit and review our marketing and our digital to see what improvements we can do there. And we think that we will be able to make a change on that in the near future.

And if I could add one more. It looks like this was the first year that you had net store closures. Can you give color on what we should expect the store fleet to look like both in the next year and further out in the longer term?

We've continued to -- as renewals come up, we look at each one on its own merits, and sometimes we set them up on a month-to-month basis. We have some renewed at -- on a yearly basis. So we continue to watch that and make sure that we have the right economics on that. We would expect probably a few more closings over the year. But we don't see any large change in our store base.

The next question will come from the line of Chris Gasson [ph] with Faircourt Valuations.[ph]

I just have a general question. When you sit here and you read all this stuff about Amazon and online and all that stuff. I'm just wondering your general strategy when you look at this. Do you view this whole online trend as a tsunami that's going to overtake the retail industry? Or is it -- do you view it as something of a temporary phenomenon? And how are you guys in general putting together your strategy going forward with this? Is this -- I'm just wondering your general comments on this whole thing.

Yes. We understand the online e-com is here to stay and will have certain growth, and we intend to continue to improve and do a better job there to get more of that business. But we also still feel that for specialty stores, that we offer a great shopping experience with our talent we have in the stores. And also focus on unique exclusive special product that cannot be found, in most cases, elsewhere. And we think that with our talent as far as putting outfits together and doing the fits that we -- with a lot of appointments and the relationship our stores have, that we will be able to have some excellent stores going forward to maximize that as well. And for example, we put to -- we work with one of our partners on putting together a deal with the Fast and Furious casual clothing line where we have an exclusive on that we're working with, and we started testing last fall, and we have that in the stores now. And when the movie comes out in mid-April, we'll have 2 weeks of trailers at the cinema to introduce that to more guests and create some opportunities for the stores. So we feel that we'll review our marketing going forward and take more of an aggressive approach to create the excitement for our business. I think for several years there, being in the best locations and having the best talent and product -- we didn't have to overspend on marketing. And now we're reviewing that to see where we can invest and make it a better opportunity for our guests going forward.

When I -- I'm going to ask you a little bit of a follow-up. Can you give me a sense, and this is just a sense [indiscernible] , when you look at our locations in these shopping malls, here in the Detroit area, we've got some newer ones that are the -- the newer outdoor ones, and we've got some upscale ones, and we've got some ones like right near my house here that are like, on their last leg. I mean, they are, like, really in bad shape. I don't know how you would categorize these, A, B, C or whatever they would talk about the desirability of the properties. When you look around the country at where Buckle is, how would you categorize our real estate in terms of where we're located in terms of the desirability of the malls?

Well, I think, our overall real estate, we feel like we have a very good situation. As you mentioned, some of the malls that are becoming weaker, and that's where you've seen some of our closings this past year where we've either been on a month-to-month, year-to-year, where it made sense to -- the economics made sense in the past to have a store there and as they continued to deteriorate -- in a lot of cases, we have stores that are in reasonable shopping distance of the ones we're closing that we feel will be able to create a better shopping experience than putting money into old stores where the mall isn't keeping up. That's how we look at it. And there will be continue involvement there. There's -- in some of those markets, there is new areas where the growth is where we'll [ph] create some opportunities. And there are certainly going to be certain malls that don't make sense going forward.

Approximately, of the -- I don't know how many malls we're in. Approximately, what percentage would you say are in crappy malls, to use a very sophisticated real estate term?

Well, I don't -- we don't necessarily look at it that way. We look at our economics, so if what a mall developer might see as a C mall, might be a B store for us, because it has the -- it's the best shopping experience for that community, and we have the right setup to do business.

Well, if you're a B store in a C mall, is the outlook -- I mean, are you just kind of living on borrowed time with something like that?

Not necessarily.

Not necessarily. Okay. Okay.

[Operator Instructions] We'll open the line of Bruce Galloway [ph] with Granite Lake Capital [ph] .

Can you just talk about how you strategize to improve sales. Because it seems like that the sales have been trending down, and it doesn't seem like it's turning. I mean, what kind of strategy do you have in place to increase traffic? And I know it's pretty tough, because the mall traffic is down so much.

Well, I think, we have to look in -- I want to say that, I think, the last year has been a situation where it's more about managing the business than trying to generate extra sales like, where the trend has become, for several years, we were selling the denim that was well over $100 to $150. You know, there's still a market for there, and I think we've managed the inventory for the right level of that sales, but we're now selling probably more jeans in the $75, $80 area than we are at $120 to $150. So that has an impact. And then as you see in the gal's footwear, the fourth quarter, our dollars were down 20%. And a lot that's due to the year and 2 before, we were selling fashion boots, leather boots, western boots that were at $250 to $300 and more. And as that trend goes away, we're selling more $70 to $80 boots. So you have some big retail dollars to replace. But when the fashion isn't there, it would be the wrong thing to do to try to force higher dollars on guests that want to move on to something else. So sometimes you have more opportunities than others, but I think, our teams have put out a great flow of product and did well as you've seen the margins have held in there very well. With sales down and everything else going on, I think that's a compliment to our team as far as managing the business, and they've been doing that for a number of years, and I feel that they will continue to work with our sales team on getting a great presentation and putting the right product out there. And I would guess, at some point, the price points will turnaround, and that will also give us a little better opportunity.

And we will open the line of Ujjval Dave with Ujjval Investments.

I have a bunch of questions and most of the questions targeted towards long-term future of the company. But just to be fair, I will ask one question at a time and then go back to the queue. So the first question I have is about the recent comp job. As I have iterated in earlier calls, negative comp growth isn't a new thing for Buckle. To put things in perspective, during 2015, you had negative 3.5% comp on average that worsened to 12% negative in '16. And during first 2 months, if we use it as an average, it's now negative 20%. I'm sure you guys must be analyzing all the known and some unknown forces behind that. So could you please share your analysis on how you're planning to address each of the known forces, at least? And material [ph] reply would be very helpful.

As I think I mentioned that in the last question with the retail prices coming down, that's had a big effect on our comp sales. And -- so we are continuing to look at ways to introduce product and build multiple units per sale to make up the difference at retail dollars as well as with the traffic in the malls down, I think, the -- has also had an effect. And Internet, those -- they're all combinations, but I think that what has also compounded the problem is the economics of a great majority of the areas we're in, from the oil industry, the ag industry, what's going on in the West Virginia-type areas, the Canadian dollar, discouraging them to come across to shop. So I think there's a lot of combinations there that were good for us for a number of years have kind of all hit at the same time. That's had an impact on our business. So by keeping our best people and working with our guests and building stronger teams and a better product selections and reviewing our marketing to see how we can help our sales going forward, that's how we feel we'll get back on top of business.

And we have a follow-up from the line of Chris Gasson.

Can you give me a sense of the store-level economics? And I was actually pleasantly surprised that given the sales figures for this year, that you guys were still able to earn $2 a share, given that. And how much of the -- how much flexibility do you have to maintain current levels of profitability with -- if sales were to continue to decline?

Karen or Tom, you want to take this?

In other words, if we -- we've got more problems with mall traffic and you hear this or that or whatever, pricing in denim doesn't pick up. In other words, if comps are down, continued -- maybe not 25%, 30%, but if it just continues, do you have enough flexibility to maintain profitability?

[indiscernible] Dennis mentioned earlier, we really try and always be very conservative and look at ways to be smart with our dollar spending. It's a pretty fine line between like even in the stores, you know [ph] managing payroll. We want the stores to manage payroll, but we also want the stores to have enough people on the sales floor to really service the guests when they're in the store. We're known for -- our mission is to provide the most enjoyable shopping experience possible for our guests. And if we cut staffing too lean, we're not going to live up to our mission statement. So it really is kind of that fine line between making sure that we are investing in our stores, investing in our people for future growth as well as making sure we're saving dollars where we can. So we certainly are aware of that and look for ways that make sense business-wise.

Yes. What I was -- given the nature of the leases that we're in, we're making -- we get sales $1.9 million per store. Is there a level of sales per store where the alarm button really goes off and says, okay, now we really got some trouble here? Because the store-level economics are such that we have to have certain levels before we got real problems.

Well, I think, what we look at is each store, because we have a lot of different situations. We're in smaller communities in the Midwest, we're in the cities. So we could have a $1 million store in a smaller community that you'd be very happy with and -- we just look at each situation on its own merits and go from there.

And we'll go back to the line of Ujjval Dave.

This is Ujjval. In general, the apparel industry is facing very tough patch as the caller also mentioned. And I've heard various reasons and justifications behind negative growth rates given by many other CEOs. But lately, lot of things are going positive in the economy, including the higher wages, employment is getting better, higher consumer confidence. But the apparel industry isn't getting any break there. The telltale signs are that mall-based apparel retails are having secular decline, and I think Dennis confirmed that as well. People change their habits, how they shop, where they shop. And this is even trickier among the younger generation. Basically they just stopped coming to the malls, either they are shopping online or going to the discount stores. And in the case of Buckle, I think, they are targeting this young generation. So since Buckle is making most of the revenue from brick-and-mortar stores and very limited transaction online, are you guys awarding [ph] online or reducing or not very enthusiastic about online [indiscernible] to low margin business. So if you concur with what I am understanding about your industry and consumer habits, my question is, how are you planning to connect with the elusive younger customer base?

Well, I think, with some of our newer product brands that the merchandisers are bringing in, that is going to appeal to the younger guest and some of the newer price points will be helpful as well. And as I mentioned earlier, we're going to do an audit of our brand and see if there is a better way to market our brand to our guest.

That is fair. If consumers are coming to the stores and you have great customer service in the store and you can convince them or appeal them towards impulsive purchase, but if they don't come to the store, how are you going to increase your sales? How are you going to sell the products or new quality stuff to them?

I think that's what we just referred to as looking at our social media, our branding of the business as well as looking to improve our digital to all those phases to help build our business.

So relative to that, in last conference call, you conveyed that you are having iOS-based Buckle app. I found that app quite unique and helpful, but using that app, consumer can reserve the item which is in the nearby store. And I don't see any -- so far I don't see any way to buy items on buckle.com and get it shipped to the local store for free. You mentioned that you might be considering or incorporating such features in few months. So do you have any update on this omni channel initiatives?

The site-to-store, they're working on presently and hope to have hopefully by fall, maybe sooner.

So whenever you guys are going to implement, I can purchase the item, make the payment online and then go to the store without any charges, I can pick it up from there, is that right?

Yes.

And we will open the line of Chris Gasson.

When you read a lot in the paper about some of the various retailers trying to do more in online because of the trends, how tough is that business in terms of the -- of getting the systems in place to be able to manage that properly?

Well, I think, we have a pretty good system in place. It still comes down to marketing, but also part of it is to be able to do so profitably where people are not giving out big sales, huge discounts and then do free shipping back and forth. We've seen quite a bit in the press about that being a negative to a lot of retailers. So it's probably not so hard to generate more sales, if you don't care about the bottom line.

Is it -- do you need a lot of extra IT people? Do you get vendors to take care of that for you? How does that -- from somebody who's not experienced with any of this, what -- how difficult is it to get this thing up and running? Can you just call a vendor and say, hey, we want to do some online, put together a website, manage a warehouse for us or is it...

We already have an online e-comm business going where we fulfill from our sales. We have an IT department, and we've been running e-comm business now since the early 2000s.

Tricia [ph], are there any more calls?

There are no other questions in queue at this time.

Well, if there are no other questions at this time, we again just want to thank each one of you for joining the call today, and we appreciate you listening in and appreciate the questions. So thanks and have a great weekend.

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