Marketing and Merchandising
Buckle Inc’s marketing and merchandising strategy are designed to create customer loyalty by offering a wide selection of key brand names and private label merchandise and providing a broad range of value-added services. The Company believes it provides a unique speciality apparel store experience with merchandise designed to appeal to the fashion-conscious 15 to 30-year old. The merchandise mix includes denim, casual bottoms, tops, sportswear, outerwear, accessories, and footwear. Denim is a significant contributor to total sales (41.5% of fiscal 2017 net sales) and is a key to the Company’s merchandising strategy. The Company believes it attracts customers with its wide selection of branded and private label denim and a wide variety of fits, finishes, and styles. Tops are also significant contributors to total sales (32.3% of fiscal 2017 net sales). The Company strives to provide a continually changing selection of the latest casual fashions.
The percentage of net sales over the past three fiscal years of the Company’s major product lines are set forth in the following table:
Brand name merchandise accounted for approximately 64% of the Company’s sales during fiscal 2017. The remaining balance is comprised of private-label merchandise from exclusive brands including BKE, Buckle Black, BKE Boutique, Red by BKE, Daytrip denim, Gimmicks, Gilded Intent, Outpost Makers, Departwest, and Veece. The Company’s merchandisers continually work with manufacturers and vendors to produce brand name merchandise that they believe is exclusive in terms of colour, style, and fit. While the brands offered by the Company changed to meet current customer preferences, the Company currently offers denim from brands such as Miss Me, Rock Revival, Buffalo Jeans, KanCan, Flying Monkey, and Levi’s. Other key brands include Hurley, Billabong, Affliction, American Fighter, Oakley, Fox, Puma, Obey, RVCA, Salvage, 7 Diamonds, Nixon, Free People, White Crow, Salt Life, Corral, Reef, Kustom, Timberland, UGG, TOMS, SOREL, Hey Dude, SAXX, Stance, Lokai, Ray-Ban, and Fossil. The Company expects that brand name merchandise will continue to constitute the majority of sales.
Management believes the Company provides a unique store environment by maintaining a high level of personalized service and by offering a wide selection of fashionable, quality merchandise. The Company believes it is essential to create an enjoyable shopping environment and, in order to fulfil this mission, it employs highly motivated employees who provide personal attention to customers. Each salesperson is educated to help create a complete look for the customer by helping them find the best fits and showing merchandise as coordinating outfits. The Company also incorporates specialized services such as free hemming, free gift wrapping, layaways, a guest loyalty program, the Buckle private label credit card, personalized stylist services, and a special order system that allows stores to obtain specifically requested merchandise from other Company stores or from the Company’s online order fulfilment centre. Customers are encouraged to use the Company’s layaway plan, which allows customers to make a partial payment on merchandise that is then held by the store until the balance is paid. For the past three fiscal years, an average of approximately 2.7% to 3.7% of net sales have been made on a layaway basis, which is recorded as revenue upon delivery of the merchandise to the customer.
Merchandising and pricing decisions are made centrally; however, the Company’s distribution system allows for variation in the mix of merchandise distributed to each store. This allows individual store inventories to be tailored to reflect differences in customer buying patterns at various locations. In addition, to ensure a continually fresh look in its stores, the Company ships new merchandise daily to most stores. The Company also has a transfer program that shifts certain merchandise to locations where it is selling best. This distribution and transfer system helps to maintain customer satisfaction by providing in-stock popular items and reducing the need to mark down slow-moving merchandise at a particular location. The Company believes the reduced markdowns justify the incremental distribution costs associated with the transfer system. The Company does not hold store-wide off-price sales at any time.
The Company continually evaluates its store design as part of the overall shopping experience and feels its current design continues to be well received by both guests and developers. This store design contains warm wood fixtures and floors, real brick finishes, and an appealing ceiling and lighting layout that creates a comfortable environment for the guest to shop. The Company has been able to modify the store design for specialized venues including lifestyle centres and larger mall fronts. The signature Buckle-B icon and red colour are used throughout the store on fixtures, graphic images, and print materials to reinforce the brand identity. To enhance selling and product presentation, the Company continues to update the fixtures in its stores. New tables and fixtures have been added to the Company’s signature store design in each of the last several fiscal years. The new tables and fixtures were also rolled out to certain existing stores to update their looks as well.
Rooted in denim, Buckle provides a wide selection of styles, brands, fits, finishes, and price points to cater to a diverse customer base. Each store receives new merchandise on a daily basis to ensure newness and excitement for every guest experience. Through collaborative partnerships with our suppliers, we continue to grow our proprietary brands as a strong complement to exclusive styles from third-party brands. Including private label, which accounted for approximately 36% of total sales, more than three-quarters of our 2017 revenues resulted from the sale of products exclusive to Buckle.
To achieve solid financial results in Fiscal 2017 and position the Company for profitable growth in the future, the executive leadership team successfully executed our strategic initiatives. Specific achievements included making significant improvements to the merchandise assortments, introducing new product categories, creating new marketing campaigns, investing in talent, launching an improved loyalty program, executing a fleet optimization strategy, and fueling our digital sales which rose over 20% for the year. We believe the executive compensation-related decisions made during a challenging year for the retail industry and the outcomes we achieved by taking quick action to strengthen our business and executing our initiatives highlight our ongoing commitment to pay our executives for performance and align their interests with those of our stockholders.