Not many people have heard of the Buckle, even though the Nebraska–based retailer of medium- priced casual apparel, footwear and accessories is crushing same store sale estimates the way kids crack pumpkins on Halloween. The Buckle, which has posted double digit top line growth in a battered economy, operates 371 stores in 38 states and is fetching roughly a market multiple even though it is growing earnings much faster than the overall market, paying a higher yield, and coughing up an 18% return on capital. Teen retailers posted an average 5.2% comp decline in March; BKE stood out like a nun in a brothel when it posted a 20.9% increase (more than double the Street’s estimate). Part of the company’s under-the-radar appeal is due to its limited sell side coverage: only 3 analysts follow the company, which gets 45% of its sales from denim, a concept that has for done quite well with investors if you consider companies like Zumiez (ZUMZ) and True Religion Apparel (TRLG).
The increasing wealth and spending power of Generation Y is a story plenty of investors are looking to get in front of: niche specialty stores put a lot of money behind efforts aimed at taking a larger percentage of teen disposable income. The best players define a unique and portray a certain lifestyle. BKE looks like its resonating with its customers' needs flawlessly for now and there should be more institutional interest in the name by the summer
