The Buckle: A Significant Slamdown

Fashion footware and casual-clothes retailer The Buckle, Inc. reported 2Q '09 earnings that were not only above expectations, but were also about 12% above 2Q '08's. That growth didn't come from cost-cutting, either. Revenues were up 18% in the same period, and comparable same-store sales were up smartly too. Other details can be found in this write-up.

With an earnings report such as this one, common sense says that Buckle should have gained today. Instead, it dropped 3.90% in today's trading. The reason given in that write-up was disappointing July same-store sales.

Today's performance doesn't give all of the story: The Buckle's stock was up 3.02% yesterday, closing at $27.93, and the earnings news kicked it up to about $29 in early-morning trading. Today's close of $26.84 still puts it above last Monday's close of $26.52.

Still, the later-day plummet suggests that The Buckle is a company that's expected to have no blots on its reports in order for the effect of good news to stick. That says the company is being watched by people looking for something to go wrong, whose influence swamps optimists.

One company does not an industry make, but The Buckle is a pretty good one, comparatively. Their boots and clothes aren't intended to be discount items, and they've avoided the fate that all-too-many full price stores have endured. It's only a single indicator in and of itself, but the stock indicates that retail is out of favour. The bad-news crowd is getting the better of the good-news optimists.

Of course, industries that are out of favour can stay that way for years: some are outright value traps. The Buckle's dividend is only 2.98%, even though it's been raised smartly since October 2003. It's selling at more than three times book, according to GuruFocus, and about 1.4 times sales. As of 1Q '09, its 12-month trailing free cash flow was well in the red. Based on its year-to-date chart pattern, a technical analyst would say "avoid." It being out of favour does not necessarily make it a good value or a good buy at this time.