The Buckle's 2026 Q3: Contradictions Emerge on Merchandise Margins, Consumer Sentiment, and Tariff Impacts

Date of Call: November 21, 2025

Financials Results

• Revenue: $320.8M, up 9.3% YOY (vs $293.6M prior year)
• EPS: $0.96 per diluted share (net income $48.7M), up from $0.88 ($44.2M) prior year
• Gross Margin: 48.0%, up 30 basis points vs 47.7% in Q3 2024
• Operating Margin: 19.0%, up from 18.6% in Q3 2024

Business Commentary:

* Revenue and Sales Growth: - Buckle reported net sales of $320.8 million for Q3 2025, an increase of 9.3% compared to the prior year's Q3 sales of $293.6 million. - The growth was driven by a 8.3% increase in comparable store sales and a 13.6% rise in online sales.

• Denim and Apparel Growth:
• Women's denim business saw a significant increase with sales up 17.5% and average denim price points rising from $81.15 to $86.95.
• The growth was primarily due to strong performance in the Buckle Black Label and other higher price point national brands.

• Operating Margin Improvement:
• Buckle's operating margin increased to 19% for Q3 2025 from 18.6% in the prior year's Q3.

• This was driven by a 40 basis point increase in leverage buying, distribution and occupancy expenses, partially offset by a 10 basis point reduction in merchandise margins.

• Strong Consumer Response to Products:

• Despite slight cautiousness in some consumers, there was overall enthusiasm for the quality of Buckle's products, with unit per sale showing a slight decline.
• The positive consumer response was attributed to the variety of styles and fits in the ladies' denim business and the consistent performance of the men's private label brands.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Net sales rose 9.3% to $320.8M; gross margin 48%, up 30 bps; management said they 'feel good' about customer demand; women's sales up ~19% and online sales up 13.6%, supporting constructive commentary on momentum and margins.

Q&A:

• Question from Mauricio Serna Vega (UBS Investment Bank, Research Division): What are you seeing on the health of the U.S. consumer coming into the holiday season, and how sustainable is the momentum in women's denim and what did you see in men's denim demand over the quarter?
  Response: Demand is stable with slight units-per-transaction softness; women's denim momentum is strong and sustainable driven by broader styles and higher-priced branded/private-label mix; men's denim is solid, led by consistent private-label sell-throughs.

• Question from Mauricio Serna Vega (UBS Investment Bank, Research Division): Merchandise margin was down 10 basis points — can you elaborate on the puts and takes behind the merchandise margin trend in this quarter?
  Response: Q3 merchandise margin down 10 bps (after Q2 highs) but YTD margins remain strong; primary drivers were mix shift away from private label toward higher-priced brands (notably women's denim) and modest tariff-related cost increases.

Contradiction Point 1

Merchandise Margin Trends

It involves changes in financial forecasts, specifically regarding merchandise margin trends, which are critical indicators for investors.

What factors influenced the 10-basis-point decline in merchandise margin this quarter? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2026Q3: Merchandise margins were down 10 basis points for Q3 and up 10 basis points for Q2. Year-to-date, we feel really strong about where we're at from a merchandise margin perspective. - Thomas Heacock(CFO)

What are the drivers behind the merchandise margin expansion, and has there been any impact from tariffs on your margins? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2025Q2: The expansion of merchandise margins was achieved by maintaining strong full regular price selling. The decrease in private label's percentage of the mix and the strong selling of nationally branded products contributed to this growth. - Thomas B. Heacock(CFO)

Contradiction Point 2

Consumer Health and Store Performance

It involves differing views on the health of the U.S. consumer and its impact on the company's store performance, which directly affects revenue and operational strategies.

What's your assessment of U.S. consumer health heading into the holiday season? - Mauricio Serna Vega(UBS Investment Bank, Research Division)

2026Q3: On the consumer, we haven't seen a big change in our stores. The team and guests seem excited about our product response, although there's slightly caution noted in units per sale. - Dennis Nelson(CEO)

How might a recession affect store traffic? - Jonathan Braatz(Oppenheimer)

2025Q4: Although we don't have traffic counters, our sales numbers suggest we've been flat in terms of traffic. - Dennis Nelson(CEO)

Contradiction Point 3

Tariff Impacts on Margins

It involves changes in financial impacts, specifically regarding the effects of tariffs on merchandise margins, which are critical for cost analysis.

Can you explain the factors behind the 10-basis-point decline in merchandise margin this quarter? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2026Q3: The biggest drivers are the decrease slightly in private label business with some of the brands performing really well, especially in women's denim, which is the biggest driver of the shift this year, especially Q2 compared to Q3, and a slight increase in costs with tariffs and other flow-throughs. - Thomas Heacock(CFO)

Can you explain the merchandise margin expansion drivers, especially the deceleration compared to last quarter, and any tariff impact on margins? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2025Q2: There is currently a low to mid-single-digit average cost increase due to tariffs, with some vendors showing no increase and others showing higher single-digit increases. - Thomas B. Heacock(CFO)

Contradiction Point 4

Impact of Tariffs on Pricing Strategy

It demonstrates how the company is managing pricing and cost strategies in response to tariffs, which could impact their financial performance and competitive positioning.

What were the key factors driving the 10-basis-point decline in merchandise margin this quarter? - Mauricio Serna Vega (UBS Investment Bank, Research Division)

2026Q3: We have vendors and brands where we have had no increases in our costs. As we look even forward to the second quarter, as well as we've had others that have low to mid-single-digit increases. So we think we're working with our vendors, managing the tariffs and our product has worked out well. - Thomas Heacock(CFO)

How are you factoring China and other tariffs into gross margin expectations for upcoming quarters? - Mauricio Serna (UBS)

2025Q1: We are working closely with our vendors. They are sourcing other countries as well as wanting to maintain our business and long history of working with the key vendors and helping us out on holding price and working ahead. - Adam Akerson(VP of Finance & Corporate Controller)

Contradiction Point 5

Merchandise Margin Trends (different drivers)

It involves differing explanations for the drivers behind merchandise margin trends, which are critical financial indicators.

Can you explain the factors behind the 10-basis-point decline in merchandise margin this quarter? - Mauricio Serna Vega(UBS Investment Bank, Research Division)

2026Q3: The biggest drivers are the decrease slightly in private label business with some of the brands performing really well, especially in women's denim, which is the biggest driver of the shift this year, especially Q2 compared to Q3, and a slight increase in costs with tariffs and other flow-throughs. - Thomas Heacock(CFO)

What drove your Q4 gross margin? - Mauricio Serna(UBS)

2025Q4: Gross margin improvements were driven by increased private label penetration and better merchandise margins, along with favorable leverage on distribution and occupancy costs. The merchandise margins improved by 40 basis points in the quarter and 55 basis points year-to-date. - Thomas Heacock(CFO)